Bank of America Merrill Lynch, Goldman Sachs and J.P. Morgan had the highest market share for U.S. cash equities trading, according to the latest Greenwich Associates survey, with Morgan Stanley and Credit Suisse close behind. Divergence between the Greenwich trading market shares and research rankings reflect the reality that commission flows do not always follow research value. The Greenwich results generally correspond with reported equities revenues from the investment banks, but the first quarter rankings differ.
U.S. Cash Equities Market Share
According to the Greenwich survey, Bank of America Merrill Lynch had 8.5% U.S. cash equity trading market share followed by 8.3% market share for Goldman Sachs and J.P. Morgan, yet Greenwich assigned a first place tie to all three firms. Greenwich said that Morgan Stanley and Credit Suisse each had trading market shares of 7.8%.
The Greenwich survey was conducted between December 2013 and February 2014, incorporating interviews with 225 U.S. equity portfolio managers, 815 buy-side equity analysts, and 316 U.S. equity traders. The survey is primarily focused on large long-only asset managers. Greenwich’s summary results can be found here: https://www.greenwich.com/greenwich-research/research-documents/awards/2014/jun/usei-2014-qsl.
Divergence from Research Rankings
The Greenwich trading market shares differed from the research rankings assigned by portfolio managers and analysts. This is not an uncommon result for asset managers which conduct internal broker votes. Success in the internal broker vote does not always translate into commensurate commission volume.
In the case of the Greenwich survey, J.P. Morgan topped the research rankings from both portfolio managers and analysts, yet did not have the highest trading share according to the poll.
The research rankings also differed between portfolio managers and analysts, with PMs ranking Credit Suisse’s research fourth, but analysts not ranking Credit Suisse research in the top seven at all. Not surprisingly, the PM research rankings have a greater correspondence with the ultimate trading share.
Ranking Reported Equities Revenues
The survey results correspond to our own league rankings for reported equities revenues, although for the first quarter Morgan Stanley, Goldman Sachs and Credit Suisse were the top three firms for reported equities revenues, followed by J.P. Morgan and Bank of America Merrill Lynch.
Reported equities revenues are global, not U.S. specific and they include revenues from derivatives trading, prime brokerage, and equity securities lending. For those few firms which provide detail on cash equities results, cash equities is the largest component, representing 40%-50% of total equities revenues.
Comparing results from the prior year, Morgan Stanley’s equity sales and trading revenues grew 16% from the first quarter of 2013, reflecting increased client activity across all equity products and “particularly strong performance in prime brokerage.” Conversely, Goldman Sachs declined 17% from the prior year, but much of that decline was explained by the sale of their Americas reinsurance unit in 2013.
Global equities revenues for the top ‘bulge’ investment banks represented $11.2 billion in revenues, down -4% from the prior year.