The securities industry is experiencing a "clear, strong and persistent trend toward concentration," Securities Industry Association president Edward I. O'Brien said today.
Addressing the opening session of the SIA's annual convention.O'Brien said concentration had reached the point where about 7 percent of the New York Stock Exchange member firms now account for well over half of the business done with the public.
"As of June 30, 1977, the largest 25 NYSE firms had about two-thirds of the capital and gross revenues for all NYSE firms dealing with the public, and well over half of the securities commission revenues," he told the group, which represents the country's dwindling number of brokage and investment banking firms.
Since June 30, several of the large firms have annouced pland to merge, and the current merger mania has been the main topic of conversation at this gathering which some participants say is serving as a clearing house for possible new consilidations.
"It-s a big marketplace down here," said one brokerage chief.
Outgoing SIA chairman David W. Hunter, head of Parker-Hunter Inc., a Pittsburgh firm, also gave a glommy assessment of the industry's economics in his farewell speech.
"We are in Chaos, we are experiencing a period of rapid concentration, most of us face a question of survival." Hunter told the meeting. But he added that for the surviving fims, there remained "substantial opportunities."
Earnings of NYSE member firms were off 66 per cent in the first six months of 1977 from year-earlier lev-Hunter said, and "our return on net worth in this speculative business currently appears to be in the area of 3 per cent."
In his remarks, O'Brien noted that the elimination of fixed commission rates in May 1975 had hit firms with an institutional business particularly hard, and also has led to diversification where brokage revenues are dervived.
"From 1973 through September 1977, in terms if market share of commission revenues, thepercentage increased from 37.3 per cent to 45.3 per cent for national wire houses, remained about the same for regional and local firms for commission houses, commission-introducing firms, and declined for the reamining three categories which are all more heavily dependent upon institutional brokerage business," he said.
Meanwhile commissions declines from 53.8 per cent of total revenues in 1973 to 42 per cent now.
Deputy Treasury Secretary Robert Carsell said in a speech that his department is examining the problem of where to draw the line between securities and banking activities which had been separated by the 1933 Glass Steagal Act, but said "We do not believe that this is the type of issue that should be resolved solely by a legal analysis of a statute enacted in 1933."