In Fast-Changing Market, Four Firms Battle for Top Spot in U.S. Fixed-Income Trading

Stamford, CT - 24 July 2013

Greenwich Associates Announces 2013 Share and Quality Leaders J.P. Morgan, Credit Suisse, Citi, and Deutsche Bank Tie for Lead in Market Share

New bank capital rules, financial regulations and other fallout from the global financial crisis continues to reshape the U.S. fixed-income market, with some of the largest dealers refocusing their efforts and smaller firms once again aiming to capitalize on resulting new opportunities just as they did with varying degrees of success in the aftermath of the 2008 credit crunch.

A number of the big global fixed-income dealers have responded to new capital reserve requirements and other changes to market structure by scaling back their commitments to products in which they are not a market leader and by concentrating the capital they do deploy among a smaller and more narrowly focused group of large institutional clients.

For many institutional investors, these strategic shifts have resulted in disruptions in sell-side coverage and a reduction in market liquidity as dealers pull back capital, consolidate desks, reduce headcount, and replace senior fixed-income professionals with younger, less experienced and cheaper talent. Greenwich Associates research shows that investors are responding in part by expanding the number of dealers with whom they trade. “It can be costly and inconvenient to maintain a long list of dealer relationships, but institutions need the liquidity,” says Greenwich Associates consultant Frank Feenstra.

Institutions’ willingness to add trading relationships with firms from outside the Bulge Bracket has created opportunities for ambitious domestic banks like Wells Fargo and for foreign banks like Nomura. “There are definitively countervailing forces at work in this market, as some firms reduce their exposure to fixed-income trading in the face of new rules and other firms move to carve out a new or expanded presence,” says Greenwich Associates consultant Woody Canaday. “The result is a market in transition.”

Pull backs on the part of some of the world’s largest fixed-income dealers have also caused a flattening of the competitive landscape at the very top of the U.S. market, with market share being distributed a bit more broadly among this leading group. Four firms are now tied at the top of the market: J.P. Morgan, Credit Suisse, Citi and Deutsche Bank—all of which have markets shares between 10.9% and 11.4% of overall U.S. institutional trading volume. Goldman Sachs ranks fifth with a market share of 10.4%. These firms are the 2013 Greenwich Share Leaders in Overall U.S. Fixed Income.

A Crowded Market Top

In credit products, the 2013 Greenwich Share Leaders are J.P. Morgan and Bank of America Merrill Lynch, which are locked in a dead heat, each with 13.8% market shares. The 2013 Greenwich Share Leaders in U.S. fixed-income rates products are Credit Suisse, Deutsche Bank, J.P. Morgan, and Citi, which are tied with markets shares between 10.8% and 11.8%. In the trading of securitized products, the 2013 Greenwich Share Leaders are Barclays, Credit Suisse and Bank of America Merrill Lynch, all three of which have markets shares between 12.4% and 13.1%. Sharing the top spot, Citi and J.P. Morgan are 2013 Greenwich Share Leaders in emerging markets fixed income, and Citi leads as a 2013 Greenwich Share Leader in U.S. municipal bonds and derivatives.

Greenwich Quality Leaders

Greenwich Quality Leaders are firms whose institutional clients award them with quality ratings statistically higher than those received by competitors. The 2013 Greenwich Quality Leaders in U.S. Fixed-Income Sales are Bank of America Merrill Lynch and Citi, the 2013 Greenwich Quality Leader in U.S. Fixed-Income Research is J.P. Morgan and the 2013 Greenwich Quality Leader in U.S. Fixed-Income Trading is Bank of America Merrill Lynch.

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