February 25, 2025 — While brokers in Europe express cautious optimism that a modest increase in institutional trading commissions last year could mark the end of declining commission wallets, the industry still faces real challenges in the form of a continued shift to lower-cost electronic trading, and the growing concentration of trading business in the hands of the largest brokers.
The total pool of commissions paid by institutional investors to brokers on trades of European equities increased 4% in 2024, reversing from a 14% decline in 2023, according to new data from Crisil Coalition Greenwich.
“Although the sell side may be relieved at the modest increase, they should anticipate that their clients will increasingly opt for lower-commission electronic trading,” says Jesse Forster, Senior Analyst at Crisil Coalition Greenwich Market Structure & Technology and author of European equities: 2024 trends and opportunities. “While the buy side still finds value in high-touch sales traders, they are clearly reducing their reliance on them for both economic reasons and workflow scalability.”
E-Trading and Algos Drive Efficiency
An ongoing focus on efficiency and cost savings continues to drive managers globally toward electronic trading. Currently, 35-36% of European equity flow is trades are executed electronically, with U.K. managers expecting to trade 37% of their flow electronically by 2027. Continental managers, who are further along in their algorithmic trading journey, anticipate trading 42% electronically by then.
The shift to electronic execution is changing how the buy side selects brokers for European equity trades. When it comes to picking a broker for an algorithmic trade, buy-side managers prioritize ease of use, reliability and high-quality support, as well as access to dark liquidity and proactive algo trading consultancy. The use of algo wheels is becoming more prevalent, with over 40% of U.K. and continental European managers utilizing them.
The Future: Innovation and AI
Looking ahead, investors expect to see continued innovation and growth in electronic channels, driven by the adoption of AI and machine learning. These technologies will enhance decision-making and risk management, leading to more efficient trading processes and likely industry consolidation.
“While this cycle of consolidation and innovation will ultimately benefit investors, as it drives competition and leads to better services,” says Jesse Forster. “It’s less clear what impact these changes will have on commissions and broker revenues.”
European equities: 2024 trends and opportunities tracks the size of the buy-side commission pool, breaks down commission flows by trading channel, analyzes how buy-side firms are allocating their trading volume, and examines the key criteria institutions use when selecting brokers for trades of European equities.