FINRA Reports Fewer Brokers


The equity commission pool isn’t the only thing that is shrinking these days.

The sales trader, the person many on the buy-side rely upon for market color, trade execution or a fancy meal, continues to fade into the landscape. Thanks in part to the efficiency and affordability of technology, firms – both the buy and sell-side – have funneled more of their trades into algorithms and smart-order routers and into the cybersphere.

“It’s no secret that the high-touch sales trader is a more scarce commodity these days,” said a head trader in  New York. “With the buy-side looking to get its trades done faster and cheaper, it justifies throwing and order into an algorithm rather than paying a trader in a lot of cases.”

But that is not to say the days of the sales trader or him working a larger and/or more specialized order are numbered. One buy-side trader told Traders Magazine that while he is encouraged to use algorithms wherever he can doesn’t mean he does.

“I’ll be looking for specific liquidity and push an order to my broker,” the buysider began. “Sometimes I need the order finessed and worked over time and I trust my guy to get it done. Algorithms can’t always find the liquidity that I’m looking for – especially if its a small or micro cap or if the liquidity was in the market a few days ago and isn’t now. A human will remember where that liquidity was and make the call and hopefully, goose a trade.”

In its latest report, the Financial Industry Regulatory Authority (FINRA) reported that in 2017 the trend towards fewer brokers continued from the year prior. The number of broker-dealer firms registered with FINRA declined to 3,726 in 2017 from 3,835 in 2016, while the number of registered representatives fell to 630,132 from 635,902.

The full report, The FINRA Industry Snapshot 2018, provides a high-level overview of the industry, ranging from the number of FINRA-registered individuals to the overall revenues of firms; from trading activity to how firms market their products and services. All of the data are reported in aggregate to respect the confidentiality of regulatory information.

The full report can be accessed here:  

FINRA said the purpose of the report is to increase awareness and understanding about the broad range of firms, individuals and trading activity that it oversees.

From a geographical perspective, California led the pack in terms of registered firms and branches –  1,032 and 17,061, respectively. Second was New York with 1,617 firms and 10,536 branches, followed by Florida’s 701 firms and 10,237 branches. Texas and Illinois rounded out the top 5 with  656 firms and 11,009 branches and 647 firms encompassing 7,299 branches, respectively.

In 2017 only 96 new firms registered with FINRA while 205 left. In 2016, 124 new firms were created as 232 exited the business.

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