The European fixed-income market is undergoing a radical transformation as major banks adjust their business models to new regulations and strict new capital requirements. However, these dramatic changes have yet to impact the competitive positioning of Europe’s leading fixed-income dealers, as Barclays, Deutsche Bank and J.P. Morgan maintained their places atop the list of Greenwich Associates Share Leaders in European Fixed Income in 2012.
Barclays leads the market with a 13.3% market share, followed by Deutsche Bank at 11.9%, J.P Morgan at 8.5%, and a group of four dealers — BNP Paribas, Citi, The Royal Bank of Scotland and Morgan Stanley — essentially tied for fourth place with market shares between 6.0% and 6.2%. These banks are the 2012 Greenwich Share leaders in Overall European Fixed Income.
Barclays is also the 2012 Greenwich Quality Leader in all categories covered by Greenwich Associates, including Overall European Fixed Income, Sales, Research, and Trading. Greenwich Quality Leaders receive quality ratings from institutional clients that top those awarded to competitors by a statistically significant margin.
Rates, Credit and Emerging Market Products
- In rates products, Barclays claims the top spot in market share, followed by Deutsche Bank and then by J.P. Morgan and The Royal Bank of Scotland, which are tied for third place.
- In credit products, Deutsche Bank leads in market share followed by J.P. Morgan and Barclays.
- The composition of the top tier changes a bit in emerging markets, with leaders Deutsche Bank and J.P. Morgan joined by Citi and HSBC, which are tied for the third spot.
Big Changes Now Unfolding
Global and European banks spent last year reassessing their business models in light of the major changes being enacted by new regulations and capital requirements. “Over the coming year, the market will begin to see the results, with some major banks electing to continue pursuing strategies of scale, and others pulling back and focusing resources on businesses in which they have some competitive advantage,” says Greenwich Associates consultant Peter D’Amario.
Generally, Greenwich Associates foresees the pace of change accelerating as a result of regulatory implementation and capital requirements. These changes have forced dealers to pare fixed-income inventories in products that are more costly to hold, and will likely reduce liquidity in markets for corporate bonds and other products. “E-trading will see more investment from the sell-side and may even facilitate changes in market structure as investors look for sources of supplemental liquidity,” says Greenwich Associates consultant Woody Canaday.
New derivatives regulations also will soon begin affecting dealers’ strategies and competitive positioning. “There could be a real reshuffling as the dynamics of the derivatives industry change with the move to execution through SEFs and central clearing and a potential shift of some interest rate exposure to the futures market,” says Greenwich Associates consultant Andrew Awad.