January 14, 2025 — U.S. equity commissions rose 5% in 2024, the first increase since 2021.
Every year, Crisil Coalition Greenwich uses data from its research with hundreds of U.S. institutional equity investors to project the total amount of commissions the buy side paid to brokers for trades of U.S. equities. Prior to 2024, that commission pool had contracted for two consecutive years, dropping from a peak of $7.4 billion in 2021 to a low of just $5.4 billion in 2023. Fueled by the tailwind of strong equity market performance, that downward trend reversed itself in 2024, with total commissions climbing to nearly $6.2 billion.
“The buy side is cautiously optimistic about the future,” says Jesse Forster, Senior Analyst at Crisil Coalition Greenwich Market Structure & Technology and author of U.S. equity market trends hold steady in 2024. “The recent SEC reforms and the new SEC Chair's focus on cooperation between regulators and market participants have created a sense of renewed possibility.”
Migration Toward Electronic Trading and Automation
The U.S. equity market continued its migration toward electronic trading last year, with 44% of overall trading volume executed electronically (including algorithmic strategies and crossing networks). Managers expect electronic trading to increase to nearly half of their flow within three years, at the expense of high-touch trading, which they anticipate will account for only 39% of their flow by then.
Across the market, traders are looking for a delicate balance between technology and human touch, with high-touch sales traders still playing a crucial role in finding hard-to-find liquidity and working complex orders.
“Buy-side traders remain resolute in their dual mandate of finding liquidity for their clients while exploring opportunities for automation within their firms,” says Jesse Forster.
What’s Driving Buy-Side Commission Allocation Among Brokers?
When it comes to selecting a broker for a trade and allocating commission spend, sourcing natural liquidity remains the top priority for the buy side, holding steady at 29% among buy-side traders overall and 34% among hedge funds. Ease of use, reliability and high-quality technical support remain the primary criteria for selecting electronic trading providers, garnering over two-thirds of buy-side preferences.
“The buy side has long said they wish to reward brokers who consistently add real value to their day,” says Jesse Forster. “Now that the commission pool is growing again, they may finally have the means to do so.”