New York, NY, USA
April 1, 2008
Evolution of
the Interdealer Broker Industry: Smells Like
e-Spirit
Report Published by Celent
The interdealer broker industry is in the midst
of a structural change bought about by product standardization, liquidity
consolidation, and electronification. These forces will shape the industry
into an exchange-like structure in terms of its size, volumes, quality,
and costs of execution and technology.
In a new report, Evolution of the Interdealer
Broker Industry: Smells Like e-Spirit, Celent examines the interdealer
broker (IDB) industry’s structure, growth drivers, product and customer
portfolio, technology, and competitive dynamics. It examines three trends
affecting the industry (product standardization, liquidity consolidation
and electronification) and analyzes the implications of these trends in
detail.
Celent finds that the industry is big and growing.
Already US$7 billion in size in 2007, Celent expects it to reach US$9.3
billion in revenues in 2009. Furthermore, the industry displays
characteristics of a mature market, with five players controlling over 90%
of the market.
Source: Annual reports of IDBs, industry
sources, Celent
The industry has been undergoing structural changes
over the past five years. It is consolidating into four to five major
players. The top three players command about 70% of the total industry
revenue, up from less than 50% in 2001. Product standardization of major
asset classes is a continuing trend in the capital markets. This results
in volume growth but is also accompanied by margin pressures. Product
standardization and margin pressures invariably lead to increasing
electronification due to the superior quality and efficiency of execution
that is characteristic of electronic trading. Electronification of the
industry is growing at a fast pace. Celent estimates revenues from
electronic brokerage to account for 65% of the overall IDB revenues over
the next two-three years, up from 5% in 2004.
“Electronification of this once predominantly
voice-based industry promises to alter it significantly,” notes Sandeep
Hebbar, Celent analyst and author of the report. “Although a sizable
market opportunity exists for new entrants, they will have to toil hard if
they choose the organic path for growth,” he adds.
The 32 page report contains 22 figures and 4 tables.
A table of contents is available
online.
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