Securities Brokerages

Securities Brokerages

Brief Excerpt from Industry Overview Chapter:

Companies in this industry broker deals for buyers and sellers of securities. Major companies include Charles Schwab, Edward Jones, and brokerage units of Citigroup, Goldman Sachs, and Morgan Stanley (all based in the US), as well as Credit Suisse (Switzerland), Deutsche Bank (Germany), Macquarie Group (Australia), and Nomura (Japan).

The global securities brokerage industry generates about $2 trillion in underwriting activity each year. Many large US-based brokers, particularly those affiliated with major banks and financial services companies, operate internationally.

The securities brokerage industry in the US includes about 7,500 companies with combined annual revenue of about $140 billion. High growth is forecast for the next two years. Key growth drivers include improving economic conditions and increased transaction volume.

COMPETITIVE LANDSCAPE

Demand is driven by the returns on securities relative to alternative investments. The profitability of individual companies depends on efficient operations and good marketing. Large companies have economies of scale in operations and high name recognition. Small companies can compete effectively by offering better customer service. The industry is highly concentrated: the top 50 companies account for more than 80 percent of revenue.

The traditional brokerage industry that sold stocks to individual investors has largely evolved into companies that either broker large stock trades for institutional investors or sell a variety of investment products to individuals. Instead of buying individual securities, many individuals now invest in mutual funds....