Hedge Funds continue to play a big role in driving the growth of U.S. equity trading commissions, according to new research from Greenwich Associates. The commissions paid by the typical U.S. institution increased to just more than US$26 million in 2007-2008 from roughly USD 24.7 mn in 2006-2007. According to them, HFs generated nearly 30% of U.S. institutional equity commission payments in the year ending February 2008, up from 24% in the prior year. Meanwhile, equity commission payments by traditional investment managers increased by nearly 30% year over year and now account for some 47% of the market-wide total. Meanwhile, mutual fund commission payments declined for at least the third consecutive year, dropping by roughly 19% from 2007 to 2008 after slipping almost 10% the prior year.

Greenwich reported that the increasing influence of HFs as a generator of U.S. equity trading business has helped Merrill Lynch and several other firms solidify their positions as leading U.S. brokers in terms of market share in institutional trading. Its research reveals that across the entire U.S. equity market, Merrill Lynch and Lehman Brothers have built the biggest trading franchises, with market shares between 8-9%. Goldman Sachs, Credit Suisse, Morgan Stanley, and Citi are close behind in the 7-8% range, and UBS leads the next tier at mid-6% share. U.S. institutions give the highest ratings for overall sales trading & trading quality to Merrill Lynch and Lehman Brothers, Greenwich said. The next tier is led by Credit Suisse and Morgan Stanley.

 

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