New bank capital rules that are throwing the bond dealing market into tumult have one happy result for Canadian banks – a huge pickup in market share on their home turf.
Figures from Greenwich Associates show that Canadian banks have gained big ground in market share. The Big Six's share of the fixed-income trading volume in Canada has risen to about 62 per cent from 51 per cent the year before, Greenwich said in a report.
The bond business is in the middle of a fundamental shift as new bank capital requirements make it tougher for traders at banks to take on risk. As Bloomberg pointed out recently, volumes in corporate debt markets are plumbing new depths in the U.S., and it's not for lack of product to trade as the amount of debt outstanding is on the rise.
In that environment, everyone is worried first about their businesses in their home markets. Greenwich said foreign dealers are pulling back on what they were willing to do in Canada, and Canadian banks benefited.
However, Greenwich said Canadian banks deserved some credit for what they did. After losing market share the year before as foreign rivals ramped up, the Canadians worked hard to upgrade their ability to compete in areas such as electronic trading.
"Last year was a wake-up call for Canada's major dealers," Greenwich's Peter Kane said in the report.
Royal Bank of Canada's capital markets business led the market share stakes, with 17.5 per cent, Greenwich's survey showed. The securities arms of Bank of Nova Scotia, Bank of Montreal, Toronto-Dominion Bank and Canadian Imperial Bank of Commerce rounded out the top five.
(Boyd Erman is a Globe and Mail Capital Markets Reporter & Streetwise Columnist.)
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