I am amazed at how much positive information there is for the online brokerage industry, and specifically the products my company, Profit Margin Essentials will offer. Although there has been a downward trend in overall revenue in the online brokerage industry, from an average increase of 5.3% per year to $8 billion in the five years to 2011, and a decrease in the overall financial services industry average annual growth of -2.2% to $7.8 billion in the last three years to 2019, the disparity could be accounted by the difference in what these two statistics measure, either way it is a very lucrative industry (IBIS World, 2019; Market Research.com, 2019). The key trend to note here, due to the nature of my business, is that the online broker industry has become very dependent on third-party developers who create software and the like for the online brokers (Market Research.com, 2018). Software development and other third-party developments have been very lucrative for online brokers. That means they want the products my company provides very much, and the demand means I can charge a premium. As a result of services, many big brokers have had robust growth, and it is forecast that this trend will continue into 2023 (Market Research.com, 2018). Analytics, which is one of our key products is very much in demand by the online brokers and is key to their robust recent growth.
A further favorable element for my company is the growth of the algorithmic trading market at a CAGR of 10.36% from 2018-2022 (Market Research.com. 2018). This will be good for my company, as one of our strategic options is to set up our own securities desk based on developing an algorithm which will take pools of investors into a flash trading scenario.
In 2018, the average sales/company were $7 million (Market Research.com, 2019). While employee productivity was $478,967, payroll per employee in 2018 was $103,618 (Market Research.com, 2019). The average sales figure, while high does not accurately reflect the larger brokers, as they make a lot more money and the start-ups which account for a considerable chunk of the industry operate at a large loss. So, this is a very lucrative industry that can well afford third-party developers that enhance their accounts. Therefore, these third-party developers can charge a higher amount due to demand and profitability. My business is very excited by the prospect of industry disrupting algorithmic programs that will flash trade. It is a high growth picture and will definitely profit my company greatly.
References
IBIS World. (2019). Online Stock Brokerages Industry in the US – Market Research Report.
Market Research.com. (2019). 2019 Miscellaneous Financial Investment Activities Market
Research Report. Retrieved from: https://www.marketresearch.com/Kentley-Insights-v4035/Miscellaneous-Financial-Investment-Activities-Research-12458042/
Market Research.com. (2018). E-Trading Software Developers in the US – Industry Market
Research Report. Retrieved from: https://www.marketresearch.com/IBISWorld-v2487/Trading-Software-Developers-Research-12134669/
Market Research.com. (2018). Global Algorithmic Trading Market 2018 – 2022. Retrieved from:
Marc Wolsky
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