Sell-side broker-dealers are feeling continued pressure to consolidate, as the trading activity that is the heart of their business remains well off the levels of several years ago.

Since touching 10 billion shares per day about four years ago, U.S. equity volumes have trended downward, recently settling in the range of 5 billion to 5.5 billion shares.

“A lot of firms have to look at themselves and ask what is my value, where is my niche, where can I make money?” said a senior executive at a large sell-side firm. “If I can’t make money running a full-blown execution stack from end to end, then I need to joint-venture or spin off assets — lean in to where I’m strong and stay away from where I’m not.”

“We’re not going back to 8 or 10 billion shares anytime soon,” said the executive, who wasn’t authorized to speak on the record. “Wallets on the buy side are still under compression.”

In this executive’s view, the largest and strongest broker-dealers will be able to add market share, and some of the smaller, boutique shops with highly differentiated offerings will also do well. The mid-tier brokers, which lack the scale of the Bulge Bracket and the uniqueness of the minnows, are most vulnerable to being squeezed.

“There are too many entrants in that realm,” our source said. “The ‘tail’, or boutique shops will be just fine. Clients are willing to still pay for that conference, or that one-off analyst meeting, or that one road show.”

But the one-stop-shop model is best-positioned to navigate an extended market lull, the person said.

“In order to win in the equities business today, you have to be strong from end-to-end of execution,” the person said. “You have to have a well-executed high-touch business, and you have to have a very strong electronic franchise. The two of them have to work hand-in-glove.”

“In order to run a full-blown electronic execution business, it costs a tremendous amount of spend, upkeep, and maintenance,” the source said. “It is incumbent on the sell side to not only focus on investing in new products and new technologies, but also the way we think about liquidity, which is not a commodity like an algorithm is.”

Buy-side firms have been consolidating sell-side providers, but institutions still pay “too many” brokers, our source said; some long-only institutions do business with more than 100 trade handlers, according to our source.

All-in-all, the overriding theme is the landscape today is markedly different compared with a half-decade ago. “Pre-2008, resources were never an issue,” the source said. “The game plan was to service the buy side with as many resources as we possibly could.”

“Today, we all have to do more with less,” the person concluded. “There is not a never-ending plethora of resources and even if we had that, the buy side doesn’t have the wallet to pay for it.”