Skip to footer

The end of the small brokerage firm

The era of the small brokerage firm is gradually coming to a close as several of the most well-regarded boutique brokers call it quits.

|
Dario Cantore/AP/NYSE/File
Traders gather at a post on the floor of the New York Stock Exchange Wednesday, Feb. 8, 2012. As their services become less and less relevant to the stock trade, several small brokerage firms are going under.

It's been over for the small broker-dealer model for awhile, but a hundred-year-old industry doesn't merely go away quietly and all at once.  There were companies manufacturing typewriters and word processors into the late 90's and I'm sure the toga weavers were hard at work for decades after the fall of the Roman Empire.

And so it goes here in the early dawn of 2012 as two of the most well-regarded boutique broker-dealers have been extinguished against the backdrop of a raging bull market for everyone else...

From CNNMoney:

The 2012 surge in the stock market hasn't been positive for everyone on Wall Street: Hundreds of small brokerage firms on death watch.

Trading volumes and commissions are at their lowest levels since 2007. And so far this year, three small but well-known brokerage firms have already had to call it quits.

The swift unwinding of WJB Capital Group, Ticonderoga Securities and Kaufman Brothers has left investors to wonder who's next. Representatives from WJB, Ticonderoga, and Kaufman did not return calls for comment.

Trading is now done at fractions of a penny, often with little or no research exchange between institutional brokers and their clients.  Buyside shops have brought research in-house at very little cost (unemployed analysts are practically swinging from the rafters here in NYC).  In addition, single stock selection has been de-emphasized a great deal as fund flows have turned from the open end actively managed fund complex to the passively managed ETF snackbar.  When the average holding time for a security is measured in water drips from a faucet, why should anyone bother to care about how this quarter's free cash flow stacks up against next quarter's estimate?

And if the research isn't generating trades, and the trades that are getting done are subject to commission deflation (2 cents a share!) and on top of all that the firms can't supplement by making markets at a decent margin thanks to decimilization - well, what exactly is it...ya do here?

There are 4066 smaller brokerage firms left.  I'm rooting for you guys, but it won't be easy.

You've read  of  free articles. Subscribe to continue.
Real news can be honest, hopeful, credible, constructive.
What is the Monitor difference? Tackling the tough headlines – with humanity. Listening to sources – with respect. Seeing the story that others are missing by reporting what so often gets overlooked: the values that connect us. That’s Monitor reporting – news that changes how you see the world.
editor@csmonitor.com
Subscribe
Mark Sappenfield
Editor

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

Subscribe to insightful journalism

QR Code to The end of the small brokerage firm
Read this article in
https://www.csmonitor.com/Business/The-Reformed-Broker/2012/0209/The-end-of-the-small-brokerage-firm
QR Code to Subscription page
Start your subscription today
https://www.csmonitor.com/subscribe