Securities Brokerages

Securities Brokerages

Brief Excerpt from Industry Overview Chapter:

Companies in this industry broker deals for buyers and sellers of securities. Major companies include Charles Schwab, E*TRADE, and brokerage units of Citigroup and Wells Fargo (all based in the US), as well as Deutsche Bank (Germany), Macquarie Group (Australia), and Nomura (Japan).

COMPETITIVE LANDSCAPE

Demand is driven by the returns on securities relative to alternative investments. The profitability of individual companies depends on efficient operations and good marketing. Large companies have economies of scale in operations and high name recognition. Small companies can compete effectively by offering better customer service. The US industry is highly concentrated. Four firms (ranked by customers and assets) -- TD Ameritrade (owner of Scottrade), E*Trade, Fidelity Investments, and Charles Schwab -- dominate the business in the US. Discount brokerage firms, which originated in the mid-1970s when stock-trading commissions were deregulated, have become major industry players.

PRODUCTS, OPERATIONS & TECHNOLOGY

Major sources of revenue are investment advice and management; brokerage of stocks, mutual funds, and other financial products; and fiduciary fees for trust services.