Two dominant stockbrokers handle 75% of share deals

Almost three-quarters of the €18.5 billion (£14.57 billion) of business in Irish stocks transacted on the Irish Stock Exchange in the last seven months of 2000 was handled by just two stockbroking companies - the Bank of Ireland-owned Davy and the AIB-owned Goodbody, The Irish Times has learned.

This confirms a common perception among institutional investors that the two big brokers are getting bigger at the expense of the other brokers. It is understood that in the seven months from June to December after the introduction of the Xetra settlement system, Davy conducted more than 44 per cent of the total turnover in terms of its cash value with Goodbody accounting for almost 29 per cent.

In terms of the number of individual transactions, the positions were reversed with Goodbody representing 34 per cent to Davy's 32 per cent.

This reflects Goodbody's private client business, reputedly by far the biggest of any stockbroking company and among the most profitable because of the higher commissions charged to retail investors. It also reflects that trading by Eircom shareholders with electronic accounts is routed through Goodbody.

Davy's market share by value is distorted somewhat by an exceptionally strong performance in November and December. In November, Davy's market share by value was more than 49 per cent of the €4.3 billion of Irish stocks traded while in December it handled 48 per cent of €2.5 billion traded. In the previous five months, Davy's market share varied between 39 per cent and 42 per cent.

It is impossible to put a value on what this market share means to the broking firms in the absence of a breakdown of the business between institutional and retail investors. But market sources said the fees from this size of business would be measured in tens of millions of euros. The unexpectedly high market share held by Davy and the strong showing by Goodbody suggest that the two other big broking firms - NCB and ABN-Amro have suffered. It also suggests that second-tier firms like Merrion, Bloxham, BCP and Dolmen Butler Briscoe have no more than single-figure percentage market shares.

The figures compiled by the stock exchange include transactions in Irish stocks by member firms of the Irish exchange. They do not include dealings in Irish stocks in London by either Irish or overseas stockbrokers. Market sources estimated that of the six biggest Irish companies, around 40 per cent and maybe 50 per cent of the dealings in terms of value took place in London with the balance in Dublin via the Xetra system.

Of this London figure, 40-50 per cent is thought to be handled by the Irish stockbrokers. The balance is handled mainly by Merrill Lynch, Goldman Sachs, Warburg, Morgan Stanley, CSFB, Salomon Smith Barney and Commerzbank.

Since the introduction of Xetra, the stock exchange has been able to maintain detailed records of the amount of business transacted by each stockbroking company. Last month, the stock exchange gave each company details of its own market share but did not give details of the other market shares.