Comparative

Analysis of
Edelweiss vs Market
(Equity Broking)
Summer Intern Project
Submitted by: Manindra Konda
IIM Calcutta (PGP 2014 2016)

Agenda
1)

2)

Global Brokerage Industry

1)

Overview

2)

Client Segmentation and Perspective

US Brokerage Industry
1)

Market findings

2)

Trends

3)

Market Penetration

4)

New Products of the Brokerage Firms

3)

Indian Brokerage Industry

4)

Comparative Analysis
1)

Edelweiss vs Other Competitive Firms

( Kotak Securities, ICICI Securities, Sharekhan)

5)

HNI Equity Broking Revenue Forecast

6)

Recommendations

Global Investment Banking & Brokerage

Industry

Market Value
$69.4 billion
(grew by 11.5%
in 2014)

Category
Segmentation
M&A is largest
(37.7% of
sector)
Equity 30%

Geography
Segmentation
Americas
(54.1%)

Market Share
JP Morgan
leading player
(6.8% Market
Share)

Market value
forecast
2019
Value: $70
billion
(an increase of
0.8%)

Market Rivalry
Increasing
Competition

Source: Marketline

Client Segmentation
The Online Brokerage market consists of investors with a wide range of trading activities,
demographic profiles, and risk tolerances. Popular client segmentation of the brokerage firms
are the following three categories:

Traditional Investors. long-term investors with sporadic trading activity (<3 trades per
month). this defines the largest proportion of self-directed investors.

Active Investors. investors trading between 3 and 10 trades per month. active investors
tend to use a wider range of tools than traditional investors.

Active Traders. investors trading over 10 trades per month. this group of investors tends to
be more self-directed and is less interested in advice.

Another upstart e-brokerage in New York is courting a new niche: Young, Inexperienced
investors.

Consumer Perspective
Controllable variables that have an impact on the long-term success of investors

Being and staying Invested;

Having access to quality investment advice and money management;

Keeping costs low

US Brokerage Industry

Trades at the top ten online firms currently account for 30% of the trading volume
on the New York Stock exchange and the Nasdaq. by some estimates, the number
of online trading accounts in the united states will reach 20 million this year and
double over the next five years.

Brokers are competing for market share through technology and the rise in online
trading abroad.

Active Traders prefer a broker with low costs and exceptional execution
capabilities. The strategy for many web brokers is to maintain a focus on low
transaction costs and superior trade execution to attract more accounts.

US Brokerage Industry
Some findings on the US Online Brokerage Industry

The US Online Brokerage market is highly fragmented

Main drivers of the wealth management and online brokerage industries :

Regulations, Client Expectations, and Technology

Growth in the market, customer DARTs (Daily Average Revenue Trades) including mobile darts

Social Media and Mobile Channels are at the forefront of firms strategic plans.

Financial institutions interested in offering online brokerage services have the

choice to work with a third party vendor or build their own online brokerage
functionality.

US Brokerage Industry
Trends

Continued growth of Online Investing

Impact of services, firms offering due to the growth of online brokerage

Technology to provide automated, but personalized, advice online

Mobile trading darts are increasing. (one firm cites a steady increase
for mobile trading darts since 2012, with 13% of trades placed on a
mobile device in 2014. )

Bank brokers are cross-selling and up-selling to capture more client

assets.

Social media and online client communities are increasingly utilized

(eg: The Scottrade Online Community)

Some New Products from Firms

Charles Schwab Corporation - Schwab Intelligent Portfolios, An Automated
Investment Advisory Service.
Schwab Intelligent Portfolios is the only Investment Advisory Service using sophisticated
Computer Algorithms to Build, Monitor, and Rebalance Diversified Portfolios based on
an Investor's stated goals, Time horizon and Risk Tolerance without charging any
advisory fees, commissions or account services fees.
Investors with as little as $5,000 will receive a portfolio recommendation after answering
a short set of questions that quickly assess their goals and risk tolerance, and the
portfolio is automatically rebalanced as market dynamics change.

continued
Capital One Sharebuilder introduces New Research Tools for Investors
New Portfolio Allocation and Performance tools are designed to educate
investors on strategic asset allocation and the relationship between
allocation and return. the What If I Had Invested tool allows investors to
determine how a theoretical investment would have performed.
Portfolio Allocation breaks down a portfolio by asset class, market cap
and security. This tool may help investors better understand the level of
diversification among their asset classes, and determine if they have
enough exposure to various asset classes.

Indian Brokerage Industry

Few Statistics of the Retail Equity Brokerage Market

25 million registered clients across exchanges.

52 lakh active clients for all stock brokers of the Exchange (April 2015 trading
volume)

Demat account opening has increased by 8% in the second half of FY15 against
4-5% in earlier years.

Low Penetration, High Potential for the Financial Sector

The e-Broking clients accounted for nearly 63% of the total client accounts during
FY13

The total income generated by e-Broking accounts of the overall sample

companies stood at 84.5 Bn during FY13, increasing around 20% YOY.

Out of the total client accounts added during FY13, nearly 82% of the clients
were added through e-Broking accounts

Indian Brokerage Industry

Emerging products: Mobile Broking, Research Services and Online Discount

Broking
Mobile trading is poised to grow in the future

Key Industry Trends

One, broader set of investors (retail, institutional and HNIs) has participated in
the markets during 9MFY15 as indicated by the strong increase in cash
volumes.

Two, with decreasing risk aversion, traders have preferred to move into the
futures segment in place of the options segments.

Three, volumes have increased in higher margin segment like the futures and,
in particular, cash volumes, the overall revenue and profitability profile and,
thereby, the credit profile of the brokerage industry is expected to
improve.

Indian Brokerage Industry

Trends of Internet & Mobile

Trading (BSE)

Services offered for

HNI
RESEARCH

CORPORATE
ACCESS

TRADING

ADVISORY

Note: Graph prepared based on data from Capitaline

Note: Graph prepared based on data from Capitaline

HNI Equity Brokerage Revenue forecast

HNI Equity Brokerage Revenue forecast

Retail Brokerage revenue (FY 15)

Retail Brokerage Revenue (FY 15); 40%

Retail Brokerage Revenue

(FY 15)
Mass Affluent

Mass Affluent; 60%

HNI

As per ICRA analysis FY14, the financial performance of 15 prominent entities accounting for ~35% of the overall equity
market share.

City wise Equity Turnover

Note: Details as of FY14

Way Ahead
Client acquisition and
retention

Scope to Increase HNI revenue

share (in top 15 entities) to 6%
over the next few years

Technology: Improvement in
Online and Mobile Trading
applications

Regions to explore: Mumbai,

Hyderabad, Bangalore

Internet Presence

THANKYOU