Greenwich Associates Announces 2015 Share and Quality Leaders in Canadian Equities

RBC Capital Markets leads the Canadian equity brokerage space by an extent rarely seen in other markets around the world.

As part of the 2015 Canadian Equity Investors Study, Greenwich Associates interviewed 60 institutional portfolio managers and 59 institutional traders about the brokers they use for Canadian equities and the results show RBC Capital Markets captured 15.2% of institutional trading commissions in Canadian equities last year, far surpassing its nearest competitor, BMO Capital Markets, which achieved a share of 12.5%.

The commanding leadership positions of the “Big Five” Canadian full-service brokers rest heavily on their franchises in equity research/advisory services. While some brokers capture incremental trading business above and beyond that generated by their research functions, buy-side trading desks allocate about 60% of their U.S. equity trade commission payments to compensate providers of research/advisory services, including analyst service, sales, corporate access, and other services.

“All of the leading brokers complement full-service trade execution, investment banking and capital markets capabilities with a robust, high-quality research component,” says Greenwich Associates consultant Jay Bennett. “Brokers and research providers in the market’s second tier are a mix of regional Canadian banks, foreign brokers and specialist research providers often focused on the energy, metals & mining and financial companies that make up such a big part of the Canadian market.”

Electronic Trading
Electronic trading is influencing the competitive positioning of Canadian brokers. Electronic trading accounts for about 8–10% of the overall annual institutional pool of commissions collected by brokers on trades of Canadian equities.

Although that amount falls far short of the 15% of total institutional commissions now generated by electronic trades in the United States, brokers realize that e-trading is becoming an ever more important driver of trade volumes and commissions.

ITG is widely seen as having been the “first mover” in electronic trading and is used by 79% of institutions for electronic execution. RBC Capital Markets is next with a market penetration score of 64%, followed by Liquidnet at 45%, and Credit Suisse, CIBC and Bank of America Merrill Lynch, which are tied with market penetration scores of 28–34%.