Securities Brokers

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 9,300 investment banking and securities brokerage companies in the US generate revenue through securities underwriting and origination, managing securities markets, brokering securities for clients, and buying and selling securities on their own accounts. Firms charge asset management fees, earn commissions and transaction fees on client trades, and earn net interest revenue (difference between interest earned and brokerage interest expense) and fees for providing financial planning and advisory services. Firms may also receive “payment for order” for directing trades through a particular exchange or channel.

Regulated Environment

Investment banks and securities brokerages are highly regulated at the federal and state level.

Cyclical Performance

The investment banking and securities brokerage industry is cyclical with performance tied to the stock markets and influenced by domestic and global economic factors.

Growth in Self-directed Investors and Online Brokerage

The popularity of self-directed and online trading continues to grow, driven by investors’ increasing desire for control.

Industry size & Structure

The average investment banking and securities brokerage firm operates out of two to three locations, employs 45 workers, and generates $29 million annually.

    • The investment banking and securities brokerage industry includes 9,300 firms that employ about 435,100 workers and generate about $271 billion annually.
    • The industry is highly concentrated; the top 50 companies account for over 85% of industry revenue.
    • Large investment banking companies include Morgan Stanley, Goldman Sachs, JP Morgan Chase, Bank of America, and Vanguard. Large securities brokerage firms include Charles Schwab, TD Ameritrade, StoneX, and Merrill Lynch. Large firms may have a global presence.
                                  Industry Forecast
                                  Securities Brokers Industry Growth
                                  Source: Vertical IQ and Inforum

                                  Recent Developments

                                  Mar 20, 2024 - Firms Raise Fees
                                  • Investment bankers and securities brokers significantly increased their prices during 2023, according to the US Bureau of Labor Statistics (BLS). Industry employment and average wages for nonsupervisory employees increased slightly during the period, according to the BLS.
                                  • The price of Bitcoin reached a record high in early March, continuing its rapid resurgence that began in late 2023. The digital token rose to $68,818 on March 5, well above its $44,000 valuation at the start of the year. Cryptocurrency watchers told CBS News that Bitcoin is soaring in part because demand is rising on so-called spot exchange traded funds (ETFs). The US Securities and Exchange Commission approved 11 spot Bitcoin exchange-traded funds in January 2024. A spot Bitcoin ETF allows investors to gain direct exposure to Bitcoin without holding it, according to CBS News. Unlike regular Bitcoin ETFs, in which Bitcoin futures contracts are the underlying asset, Bitcoins are the underlying asset of a spot Bitcoin ETF. Each spot Bitcoin ETF is managed by a firm that issues shares of its own Bitcoin holdings purchased through other holders or through an authorized cryptocurrency exchange. The shares are listed on a traditional stock exchange. Investors have deposited some $7.35 billion into the 11 different funds available since January, according to Bloomberg. Bitcoin's rapid rise has also helped push up the price of ether, Solana, and other popular cryptocurrencies.
                                  • Global investment banking revenue decreased 16% in the third quarter of 2023 from a year earlier, according to Dealogic, but major Wall Street firms say that a dismal year of dealmaking appears to have hit a trough. Mergers and a revival in initial public offerings (IPOs) may bolster investment banking revenues in 2024 as a result, according to Reuters news service. Morgan Stanley's newly appointed CEO Ted Pick said in late October that the "forward pipeline has gotten sequentially bigger with each passing month." He added that mid cap and large-cap M&A across industry groups were "seen as the most interesting part of the next cycle."
                                  • The US Securities and Exchange Commission (SEC) issued a notice of proposed rulemaking that would require SEC-regulated investment advisers, investment companies, and broker dealers to notify individuals affected by certain types of data breaches, along with other related requirements. The SEC currently does not require covered entities to notify affected individuals in the event of a data breach. Covered entities generally respond to data breaches according to applicable state data breach notification laws. The proposal would also require covered institutions to develop, implement, and maintain written policies and procedures for an incident response program that is reasonably designed to detect, respond to, and recover from unauthorized access to or use of customer information. A response program would include procedures to assess the nature and scope of any incident and to take appropriate steps to contain and control the incident to prevent further unauthorized access or use.
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