GREENWICH, Conn. — A new survey of European institutional investors and traders indicates that while equity trading commissions have remained low — and on par with their U.S. counterparts — proposed regulations to unbundle trading from research could hurt small and midsize managers because of the costs unbundling would entail.
The survey by Greenwich Associates, Greenwich, Conn., found that European institutions paid out more in overall commissions in the 12 months ended March 31 than in the previous year, while average commission rates were flat at 18 basis points per share. Greenwich analysts said the overall increase in paid commissions was likely a result of the 23% increase in equity assets under management.
Greenwich consultant Jay Bennett said in the report that increasing use of electronic and portfolio trading could drive average commission rates lower. "Many European institutions expect to further increase their use of electronic and portfolio trades, which suggests to us that there will be more downward pressure on average commission rates in coming months," he said.
European institutions currently execute about 25% of their overall trade volume electronically but expect to increase that to 35% within the next year, according to Greenwich. The average commission rate for electronic trades fell to nine basis points in the 12 months from 11 basis points in the prior period.
In addition, more than 75% of those same institutional investors use portfolio trading, according to Greenwich.