Brokerages Firms 2013 Resolution - Let's Adapt or Be Broke

Jan 15, 2013, 08:00 ET from

LONDON, January 15, 2013 /PRNewswire/ --

Brokerages and money managers, which include E*Trade Financial Corp., The Charles Schwab Corp., Morgan Stanley and TD Ameritrade Holding Corp., have roared out of the gates thus far in 2013, propelled by renewed investor confidence in the direction of the global economic recovery. Volumes are still lagging behind though as average investors still appear hesitant to jump completely back into trading. According to the NYSE Euronext, trading volumes in both the European and U.S. equities markets fell on both a year-over-year and sequential basis. These declines were also confirmed in independent market researcher ITG's latest volumes report.  The company reported December U.S. trade volumes of 3.6 billion shares with an average daily volume of 182 million shares. These figures fell from November's total of 4.0 billion shares with an ADV of 188 million. However, ITG did report that these figures were a slight improvement over the year ago period. See how these companies in this industry performed in the past years and how they are expected to perform in 2013. Talk to our analysts, sign up now for free at      

Broader volumes may have declined but some brokerages managed to see some gains in the past few months. E*Trade Financial Corp. (NYSE: ETFC) recently released its daily average revenue trades (DARTs) data for the month of November. DARTs came in at 130,202 for the month of November marking a 5% improvement from the month prior but a year-over-year decline of 8%. Sign up today and get insight from our financial experts on E*Trade at

Despite a better economic outlook, several brokerages have been anything but complacent through the first two weeks of the year. Renewed emphasis on innovating and taking new approaches to trading could lift the industry even higher. TD Ameritrade (NYSE: AMTD) provides a good example of this trend. Today it will introduce a new behavior-based index to better track investor sentiment. The novel index will track all trades to get a better sense of investors' moods while buying, selling and trading. The service, dubbed the Investor Movement Index, will give TD Ameritrade a better idea of what its investors are doing and therefore give it more information to better tailor its offerings to its customers. TD Ameritrade is on our analysts' list of stock to follow, sign up to talk to them now at

The above sentiment tracking index also reflects an industry-wide shift to greater transparency. It appears that many throughout the financial sector are gaining a better appreciation for investor confidence and are taking steps to preserve and increase it whenever possible. The trend could also be considered a preemptive move to placate regulatory bodies which favor greater transparency. The Charles Schwab Corp. (NYSE: SCHW) joined a growing list of U.S. money market fund managers that have all agreed to publish daily fund asset values. Prior to this, fund managers typically posted monthly values and even those were on a 60-day delay.  

The movement towards greater transparency also illustrates an increased willingness on behalf of the financial sector to address regulatory issues before they become problematic.  The threat of further regulatory changes will always loom over the financial sector and investors would be wise to closely follow any potential adjustments.  

Efforts to become efficient and shed underperforming assets are also still ongoing for many companies within the industry. Morgan Stanley (NYSE: MS) announced this week that it plans to reduce its Asian investment banking workforce by around 15%. The move to reduce its workforce in the region could be in response to its declining position in certain areas of the Asian markets.  A slowing Chinese economy could also be behind the company's decision to dial back its employee count in the region.  

Moving forward, if trade volumes can bounce back, brokerages and money managers may be in-line for substantial gains this year. Even without a significant improvement, the outlook for the industry is currently positive because the economy keeps moving in a forward direction while internal efforts to improve are also ongoing. Another round of fiscal cliff concerns could certainly undo some of the industry's progress though.  

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