The report titled “” provides a comprehensive analysis of the financial brokerage market. The report covers various aspects including introduction, issues and challenges, trends and developments, investor profile, SWOT analysis, competitive landscape and government regulations. The report concludes with market projection and analyst recommendations highlighting the major opportunities and cautions.
The US currently has the largest financial market in the world with the highest market capitalization, representing the majority of the world’s market capitalization. It is by far the most regulated and sophisticated financial market in the world. Owing to high competition in the brokerage industry, the existing companies and incumbent players have devised strategy related to lowering down the brokerage fees and expanding financial services towards asset management, mutual funds, wealth management, algorithmic trading, top picks and other services that can lure the customers. The industry grew at a positive CAGR during this period. In 2018, the majority of the revenue from a registered broker-dealer came from dealership activities such as portfolio management services, advisory services, and research support. The overall revenue in the financial brokerage industry witnessed a rising trend on account of a reduction in corporate tax for businesses and a falling rate of unemployment.
U.S Financial Brokerage Market Segmentation
By Type of Trading Activity: In the financial brokerage market, the equity segment has dominated the overall market in terms of transaction volume throughout 2013-2018 which was supplemented by higher liquidity in equity, issuance of bonus shares in few instances thereby justifying the considerable share of equity in the overall market. Commodities on the other side have been the second the largest category in the financial market, in terms of transaction volume over the years resulting from an attractive risk/return ratio. Currency the market is considered to be as the least volatile segment since the variations in the currency rates tends to be extremely lower.
By Entity: The share of dealership revenue in the overall revenue from financial brokerage market has been steadily increasing between 2013 and 2017, which is on account of increased demand for portfolio management services and advisory services by the investors. In 2018 the dealership has dominated the financial brokerage market in terms of revenue share and accounted for more than half of the share in the market. On the other hand, brokerage accounted for the remaining share.
By Exchange: In 2013, ICE acquired NYSE Euronext, the parent company of the New York Stock Exchange, as a result of which ICE got the privilege to run NYSE’s trading floor and the highest number of contracts executed in 2018 in the exchange was recorded for gas, while coffee witnessed the highest growth in the number of contracts, growing at a double-digit CAGR during the period 2013-2018. The exchange suffered a decline in transaction volume at a single digit CAGR during the period 2013-2018 as its market share was being absorbed by CME.
By Type of Commodities: In the US, the commodities market has been dominated by nonagricultural commodity trades as they consistently comprised over 90% of the total contract volumes every year between 2013-2017. Amongst the nonagricultural commodities, equities, interest rates, and energy contracts have dominated the segment. The primary reason behind the dominance of nonagricultural commodity contracts is due to the nature of the US economy, as it is more inclined towards industries than agriculture.
The U.S Financial Brokerage market is highly concentrated in nature and is consolidating at the moment. LPL Financial is the market leader and has the highest market share in the Financial Brokerage market in the US on the basis of revenue in 2017. This was followed by Ameriprise Financial Services Inc, Raymond James Financial Services Inc., Interactive Brokers, Commonwealth Financial Network, MML Investors Services, and others. These market players compete in the brokerage market in the USA on the basis of commissions charged, quality of supplementary services and technology and reputation.
U.S Financial Brokerage Market Future Outlook
The total revenue from US Financial brokerage Industry is expected to rise at a positive CAGR during the period 2018 - 2023E. This is mainly supported by the projected rise in dealership revenue as its contribution to the overall revenue is expected to rise at a positive CAGR during the same period. There are many reasons behind this growth, with the first one being a rise in financial inclusion of the overall population as technology will be leveraged to expand the area of operations. Moreover, improvements in technology will lead to a reduction in operational costs, the benefit of which can be passed on to the consumers as brokerage firms compete to stay relevant in the market. It is also estimated that an increase in market volatility resulting from the rise of new industries such as renewable energy, switch to electric mobility along with massive fluctuations in crude oil prices, US-China trade war, global warming and so on combined with global political uncertainties such as Brexit and unrest in the middle east is expected to drive up the contract volumes of F&O contracts, which is expected to rise at a positive CAGR during the period 2018 - 2023E.