Morgan Stanley cuts research jobs as rising e-trading volumes eat into commissions

Morgan Stanley cuts research jobs as rising e-trading volumes eat into commissions

Morgan Stanley is cutting around 50-60 equity research jobs as increased use of electronic and direct access trading services by buy-side clients puts the squeeze on commissions.

According to a Wall Street Journal report, which cites people familiar with the plans, the job cuts - which affect staff in the US and Europe - equal seven per cent of the bank's global stock research headcount of 800 people.

The cuts reflect a shift by institutional investors toward cheaper electronic trading, which has resulted in a sharp fall in commissions.

At an investor meeting in February, Jerker Johansson, co-head of institutional sales and trading at Morgan Stanley, said that in recent years commission rates had fallen 18% annually in the US and 13% in Europe.

While investors have paid a "going rate" of around four to five cents a share for trades executed by the bank, they can trade electronically for less than a penny a share, says the WSJ report.

Johansson also described how a customer had shifted the majority of its business away from full-service trading to electronic trading in just one year.

This increased use of direct access and eletronic trading has led to a number of other banks cutting staff. Last year Swiss bank UBS axed 30 equities traders in response to increased client demand for automated electronic trading, while Goldman Sachs sacked around 30 traders.

The WSJ report says some of the affected Morgan Stanley employees are expected to move to other areas such as investment banking or asset management. The bank is also planning to allocate some of its resources to faster growing Asian and emerging markets and emphasise more distinct higher-value reports rather than "maintenance" research.

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