Moody’s Investor Services shared its 2019 Outlook for US Securities Firms with Tarders Magazine. The paper includes insight on exchanges and other trading venue operators, retail brokers, market makers and advisory boutiques.
Here are some of the highlights:
The 2019 outlook for US securities firms is stable owing to credit strength derived by their scale and diversification as well as organic growth, which drives strong profitability.
- Exchanges’ outlook driven by scale and diversification, shareholder distribution policies relatively stable
- Retail brokers’ credit profiles to continue benefiting from higher rates, albeit deposit betas will reduce the benefit of future rate hikes
- Market makers and exchanges should benefit from increased volatility and trading volumes
- Fadi Abdel Massih, Moody’s Assistant Vice President — Analyst, one of the authors of the report says, “One of the key drivers for the stable outlook for exchanges includes strong cash-flow generation, underpinned by their scale and diversified business models. For retail brokers, higher deposit betas will reduce the benefit of future Fed rate hikes and a flatter yield curve could put some pressure on net interest margins, although a decline in long-term rates is not expected.”
- Donald Robertson, Moody’s Senior Vice President, a co-author of the report says, “Market makers and exchanges stand to benefit from increased trading volumes derived from market volatility associated with changing central bank monetary policies and ongoing geopolitical tensions. Although in most cases the incremental benefits would likely be distributed to shareholders rather than retained by the firms.”
