Barclays Capital, Deutsche Bank and J.P. Morgan have emerged to dominate the post-crisis fixed-income trading business in Europe, according to a study by Greenwich Associates.

Across Europe, institutions in 2009 shifted fixed income trading flows away from financial service firms whose balance sheets took significant hits during the global financial crisis.

This trading business was redirected to a relative handful of dealers viewed as the most financially secure and best positioned to be reliable fixed-income liquidity providers and sound derivatives counterparties.
 
Barclays Capital, Deutsche Bank and J.P. Morgan together account for 36 per cent of overall institutional fixed income trading volume in Europe, up from 30 per cent last year.
 
“For financial service firms that experienced significant balance sheet or reputational crises last year, the consequences to their fixed-income franchises have been severe,” says Greenwich Associates consultant Peter D’Amario. “Dealers that were able to avoid a crisis have reaped the benefits of new trading business and expanded market share in 2009. While banks like Deutsche Bank and Barclays Capital did not emerge from the crisis unscathed, the write-downs they experienced were less painful than those of many competitors. As a result, they were able to maintain their robust fixed-income platforms, including large staffs of traders and salespeople, which gave them a real advantage when business began to pick up this year.”
 
More than half of the largest and most active European institutions shifted fixed income trading volumes to dealers with the least amount of counterparty risk from 2008 to 2009, as did almost 40 per cent of European institutions as a whole. Nearly a third of all institutions reduced the overall number of dealers with whom they trade.

Barclays Capital and Deutsche Bank have each captured a market share of nearly 12 to 13 per cent of institutional trading volume in Europe, after both firms gained share from 2008-2009. However, the biggest gains in market share last year were achieved by J.P. Morgan, which increased its market share by more than a third to 11 per cent of the European total.
 
Outside this emerging top rank, several other dealers gained market share from 2008 to 2009, in particular BNP Paribas, Citigroup, Credit Suisse, Goldman Sachs, and Société Générale.

“Most, but not all, of these firms have several things in common with one another, and with the three market leaders,” says Greenwich Associates consultant Frank Feenstra. “They weathered the storm without serious balance-sheet crises, they proved more reliable providers of liquidity than other, more-troubled firms, and for the most part they avoided large-scale government intervention.”