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GMP Securities' Harris A. Fricker,Fernando Morales/The Globe and Mail

GMP Capital Inc. just painted a vivid picture of how bad it is for smaller Canadian brokerages right now.

The brokerage slashed its regular payout in half after reporting its fourth quarter in a row of weak results, as a rough capital markets environment cut revenue by 43 per cent.

If it's this bad for GMP, which has one of the strongest franchises and capital structures of all Canadian independents, it's got to be even bleaker at small employee-owned firms.

The problems are almost everywhere for independents, especially the many that focus on small mining and energy stocks.

Trading commissions are slumping as the amount of stock changing hands on Canadian markets plunges. Fees for running financings are declining as a sudden and vicious bear market in shares of small mining companies has led them to stop raising money. And when deals do get done, the topsy-turvy markets can mean that they can lead to losses if the underwriters get caught with unsold stock.

That means capital conservation goes to the top of the list, so GMP's dividend cut should be no real surprise. Analyst Sumit Malhotra of Macquarie long ago pointed out that maybe it made more sense to reduce the payout by half and institute special dividends if and when the brokerage sees good quarters again.

GMP management seems to agree.

"In the context of the current market environment, we remain focused on conservative capital management and ensuring our cost structure is aligned to the reality of the landscape before us," GMP chief executive officer Harris Fricker said in the earnings release.

Given that, the one number that sticks out in the report is this: a compensation ratio of 73 per cent. Once again, GMP's employee compensation is eating up almost three-quarters of total revenue. It's the third quarter in a row that the company has reported a comp ratio in that range. In more normal markets, the ratio is usually closer to half of revenue.

Shareholders could be forgiven for asking why they are getting less in dividends and profits when compensation is not falling nearly as fast as revenue.