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EUROPEAN BROKERS SURVEY: How to survive in European broking

Stockbroking is now concentrated in a very few hands. Fund managers are much more sophisticated, withdedicated dealing desks and in-house analysts. Andrew Capon looks at what's beengoing on behind the results of this year's ninth annualEuromoney/Global Investor European brokers poll

European stockbroking is facing further consolidation in the next few years. Forthose firms not in the top half of the tables for pan-European research andexecution and for those that fail to make the top three slots in the individualcountry tables, survival will not be easy.

That is the stark conclusion of this year's European brokers' survey. Askedwhether the number of brokers they use in European markets is rising, falling orstable, over two-thirds of responding fund managers replied that the number wasfalling or stable. Although in the past 18 months there has been a flurry ofacquisitions among brokers jostling to cope with these new competitive realities- ABN Amro's acquisition of Alfred Berg, Merrill Lynch's acquisition of theUK's Smith New Court, Spain's FG Inversiones and Carnegie's Italian business, andDresdner Bank's acquisition of Kleinwort Benson - it is clear thatconsolidation is far from over.

As fund managers choose to deal with fewer brokers, so commission isconcentrating in fewer hands: the rich are getting richer. The rest will go thewall, be acquired, or develop a strategy that will allow them to survive on alower percentage of a commission pot that is still, overall, expanding.

The degree of commission concentration varies from fund manager to fundmanager, but it is now fairly typical for a hard core of 10 brokers to receiveapproximately 70% of all commissions in Europe.

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