Services allied with the exchange of securities and commodities, not elsewhere classified, include companies that support financial markets. This industry excludes firms that provide investment advice or offer investment research and management services. Encompassed are a wide variety of companies that offer expertise in a broad variety of miscellaneous activities.
523991 (Trust, Fiduciary, and Custody Activities)
523999 (Miscellaneous Financial Investment Activities)
Commodity and security clearinghouses are corporations established by an exchange in order to facilitate the execution of trades. This is accomplished by transferring funds, assigning deliveries, and guaranteeing the performance of all obligations. Member firms regularly submit statements to clearinghouses that indicate a net balance in each security or commodity on the exchange, along with the net amount to be paid or received, in order to balance the member's account.
A securities' custodian is a company, usually a commercial bank, that holds someone's assets for safekeeping in an account. For a fee, the custodial institution may collect dividends, interest, and proceeds from securities' sales, and disburse funds according to a customer's instructions. A quotation service is a firm that provides statements or listings of the prices at which securities trade. These quotes are often the last prices at which trades took place, but they may also be the current bid or asking price.
Transfer agents are another type of company in this industry. These organizations are usually banks or trust companies and are appointed by a second party to transfer its securities. The agent may also maintain current records of securities owners for transmitting dividends, reports, or securities distributions.
This industry originated in the United States in the early to mid 1800s, during the emergence of various U.S. financial markets. The establishment of the Securities and Exchange Commission (SEC), soon after the Great Depression in 1929, boosted many services. The SEC established various regulations that encouraged, and often mandated, the use of many of the miscellaneous services that now exist. The industry realized rapid growth during the post-World War II economic expansion.
Strong securities markets in the 1990s enabled most sectors of the industry to benefit from very active markets through the end of the century. The Dow Jones Industrial Average continued to reach new heights throughout the late 1990s, zooming well past the 10,000 mark.
The major challenge facing the industry in the mid 1990s is the proliferation of discount trading via the Internet. As of 1998, online trading leaders, in terms of market share, were Schwab at 27.4 percent, Waterhouse at 12.4 percent, E*Trade at 11.8 percent, Datek at 10.0 percent, Fidelity at 9.4 percent, and Ameritrade at 7.6 percent. While many securities dealers offer online trading — such as Merrill Lynch, Quick and Reilly, Charles Schwab, Jack White — new companies like E*TRADE, which typically have very low trading charges and convenient online account services 24 hours a day, provide serious competition for established industry leaders. According to Fortune, "Market share is difficult to measure because players like Schwab and American Express don't break out their numbers …it appears that E*Trade is the leading Internet trading firm, with more than 6,000 Internet-based transactions a day."
As reported by U.S. Banker in their April 1999 edition, top clearinghouse firms in terms of market share were Bear Stearns at 10 percent, Pershing at 9 percent, Fidelity at 6 percent, CSC at 4 percent, Southwest Securities at 4 percent, and U.S. Clearing at 4 percent.
Business Rankings Annual 1997. Farmington Hills, MI: Gale Group, 1996.
Clarke, John M., Jack W. Zalaha, and August Zinsser III. The Trust Business. Washington, DC: American Bankers Association, 1988.
"E*TRADE: Is This Investing's Future?" Fortune Online, 3 March 1997.
Market Share Reporter 2000. Farmington Hills, MI: Gale Group, 1999.
Moody's Investors Service. Moody's Industry Review. New York: The Dun & Bradstreet Corp., January 1997.
"Number of Web Users Doubled From Year Ago." Reuters Limited, 25 April 1997.
Standard & Poor's Industry Surveys. New York: Standard & Poor's Corporation, October 1996.