Investment behemoth Fidelity Investments plans to offer discount institutional brokerage and custody services in Germany in an effort to break the lock held by German universal banks.
Fidelity executives believe they can knock 20% to 70% off of the price of transacting stocks, bonds and funds for German regional banks, insurance companies and midsized institutional clients.
Because of the lack of adequate trade data, it's hard to cite exact trading costs. Still, international trading expert Laszlo Birinyi Jr. president of Greenwich, Conn.-based Birinyi Associates, thinks Fidelity's new service "could help lower trading costs in Germany and make it a more transparent and efficient market. Frankfurt is more of a club than the New York Stock Exchange!"
Pending regulatory approval, Fidelity Brokerage Services hopes to be up and running by mid-1996, said Hugh Humfrey, managing director of Fidelity Investment Adviser Group, Tadworth, England.
He and European sales head Andrew Garai will oversee the project, which will cover Frankfurt, Hamburg, Munich and Berlin. Fidelity now is recruiting staff for the operation.
In Germany, the major universal banks - led by Deutsche Bank AG, Commerzbank AG and Dresdner Bank AG - dominate trading. Some smaller banks would like to farm out custody and trading so they can focus on asset management activities.
In the past year, a half-dozen German discount brokerage operations have opened their doors - but strictly for retail business. Players range from industry giant Deutsche Bank to Quelle, a mail-order firm that has started a brokerage arm.
But so far no one has tackled the institutional marketplace. Recent moves by German pension funds, including that of Hoechst AG, indicate the market is starting to move toward unbundling services and reducing what some view as excessive brokerage costs.
Fidelity executives say they will offer execution-only brokerage, cutting out unwanted research costs. Mr. Humfrey emphasized Fidelity focuses on quick, transparent trades on large liquid stocks and bonds in major markets.
Fidelity also will offer online custody services to customers, and is considering creating an online bulletin board.
"What we're looking to serve is the professional investment manager segment of the market. We will provide the ability to transact orders in any sensible market in the world and to provide custody and reporting and everything on-line from orders to balancing," Mr. Humfrey said.
Fidelity also will offer custody for client portfolios through its network of subcustodians in local markets.