Sometimes there is only one way to go when things hit rock bottom. Up.
That’s the view on U.S. equity trading commissions and volume this year, as one consultancy forecasts commissions will rise 9 percent and volume up 6 percent.
In its latest report, “U.S. Equities Market: 2013 State of the Industry,” Tabb Group analysts wrote that after three straight years of falling commission levels things will rebound this year. While the total dollar amount of commissions is expected to be lower at $13.7 billion than in its heyday of 2009 ($17.3 billion), it is up versus 2012 when total commissions were $12.7 billion.
In 2012 commissions were down 8 percent versus 2011, 2011’s off 6 percent when compared to 2010 and 12 percent lower in 2010 when viewed against 2009’s level.
The report attributes the increase in commissions and volumes to three factors. One, equities are expected to outperform fixed income securities in 2013. Secondly, the U.S. economy has stabilized and companies are reporting modest to strong earnings. Lastly, a reduction in quantitative easing and increase in interest rates will cause more portfolio turnover and cash to flow into equities.
U.S. institutional execution-only commissions are also expected to rise about 12 percent in 2013 to $4.4 billion versus 2012. Last year ex-only commissions were down 17 percent at $4.0 billion compared to 2011.
Also, Tabb projects high-frequency trading will generate $2.2 billion in trading revenues in 2013, up from 2012’s $1.8 billion. However, this is down from $4.1 billion in 2011 and $5.7 billion in 2010.
As a percentage of overall trading volume, HFT is expected to hold at 52 percent this year versus 51 percent in 2012 and 55 percent in 2011. It was at an all-time high of 61 percent in 2009, according to Tabb data.
