The volume of trading in Canada’s fixed-income market declined 7 percent in the past year as foreign banks scaled back their domestic operations, Greenwich Associates said.
Increased competition from Canada’s largest banks, along with high personnel costs and low volatility, have led several global firms to serve clients internationally, the Stamford, Connecticut-based research firm said, citing a survey of institutional investors. Electronic transactions accounted for 48 percent of all fixed-income trading, up from 44 percent in 2013.
“The big Canadian banks are pretty aggressive when it comes to their domestic marketplace,” Peter Kane, a consultant with the research firm, said in a phone interview from Toronto. “There’s lots of competition in the rates market, specifically.”
The firm interviewed 125 Canadian institutional investors for details on their fixed-income dealers, Kane said. The study examined interest-rate derivatives, structured credit derivatives and excluded money markets.
Morgan Stanley eliminated fixed-income trading jobs in Toronto, along with London and New York, in June.
“If circumstances are good to put boots on the ground, non-Canadian banks will,” Kane said. “If circumstances change, they pull them back.”
RBC Capital Markets has 16.7 percent of Canada’s fixed-income market share this year, the highest of the nation’s largest seven banks, Greenwich said.