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Commissions Falling For European Fund Managers

Stephen Harris

4 September 2006

European fund managers have held down dealing commissions through tough negotiations on price and a move towards trading portfolios of shares and using lower-cost electronic trading systems. This, despite recent increases in trading volumes and equity assets under management according to a survey by US-based consultancy Greenwich Associates. Although fund managers’ holdings of equities increased by up to 15 per cent in the first quarter of 2006 to about €3,100 billion ($3,977 billion) total commissions paid on all equity trades only rose 2 per cent to €4.3 billion. The average commission rates on cash agency trades have fallen from 18 basis points to 17 bps, according to Greenwich, and the average rate on self-directed electronic trades of European shares fell from 10 to 7 bps. New UK rules on “unbundling”, which require fund managers to break down how they reward brokers for research and execution, will also put downward pressure on commissions.