Most Frequently Asked Press Questions

Research FAQs
Industry Basics
 Industry Topics

Research FAQs

  • What are the industry’s profits for the year?

Securities Industry* Profits

 

Pre-Tax Profit Margin

Pre-Tax Margins
Based on Net Revenue

1990

0.4

0.7

1991

9.6

14.3

1992

9.8

13.5

1993

11.5

15.2

1994

2.5

3.9

1995

7.5

12.5

1996

9.4

15.1

1997

8.9

14.6

1998

6.6

11.4

1999

9.9

14.7

2000

9.5

15.5

2001

5.9

9.2

2002

5.6

7.6

2003

11.3

14.2

2004

8.8

11.6

2005

5.5

9.5

2006

7.6

15.0

*All U.S. broker-dealers doing a public business (NASD- and NYSE-member firms)

Other SIFMA links:

  • What's the average daily transaction volume for the U.S. equity markets? Dollar volume?

Average daily transaction volume?

 

NYSE

NASDAQ

AMEX

 

Million Shares

Million Shares

Million Shares

2006

1,826.7

2,001.9

69.0

Average daily dollar volume?

 

NYSE

NASDAQ

AMEX

 

$ billions

$ billions

$ billions

2006

43.4

33.4

2.4

Note: Figures are based on year-end 2006 preliminary data.

For further information, check the following Web sites:

  • How much capital will the industry raise this year? By what means did it raise that amount?

In 2006 the industry raised more then $3.9 trillion for the U.S. businesses. This figure includes $3.3 trillion in corporate underwriting, including $45.9 billion in IPOs.

Total Underwriting

($ billions)

Year

Total

Equity

Debt

1990

192.7

23.9

168.8

1991

357.1

75.9

281.2

1992

488.1

101.8

386.3

1993

666.0

130.8

535.2

1994

466.7

76.9

389.8

1995

538.5

97.1

441.4

1995

736.2

151.9

584.3

1996

937.9

153.4

784.5

1997

1,260.0

152.7

1,107.3

1999

1,275.4

191.7

1,083.7

2000

1,280.7

204.5

1,076.2

2001

1,623.9

169.7

1,454.2

2002

1,553.0

154.0

1,399.0

2003

1,949.6

156.3

1,793.3

2004

2,288.7

202.7

2,086.0

2005

2,789.1

190.4

2,598.7

2006

3,333.7

188.0

3,145.7

Source: Thomson Financial Securities Data

Stock Underwriting

($ billions)

Year

Total

IPOs

Preferreds

Follow-ons

1990

23.9

10.1

4.7

9.0

1991

75.9

25.1

19.9

30.9

1992

101.8

39.6

29.3

32.9

1993

130.8

57.4

28.4

45.0

1994

76.9

33.7

15.5

27.7

1995

97.1

30.2

15.1

51.8

1995

151.9

50.0

36.5

65.5

1996

153.4

44.2

33.3

75.9

1997

152.7

43.7

37.8

71.2

1999

191.7

66.8

27.5

97.5

2000

204.5

76.1

15.4

112.9

2001

169.7

40.8

41.3

87.6

2002

154.0

41.2

37.6

75.2

2003

156.3

43.7

37.8

74.8

2004

202.7

72.8

33.2

96.7

2005

190.4

62.6

29.9

97.8

2006

188.0

55.7

33.1

99.1

Source: Thomson Financial Securities Data

Corporate Bond Underwriting

($ billions)

Year

Total

Convertible

Asset-backed

Non-agency
MBS

Straight

1990

168.8

5.5

43.6

43.2

76.5

1991

281.2

9.4

52.2

59.2

160.4

1992

386.3

8.4

55.8

82.5

239.6

1993

535.2

15.2

62.6

117.7

339.7

1994

389.8

12.2

81.7

73.7

222.2

1995

441.4

12.0

113.1

36.5

279.8

1995

584.3

21.3

168.4

51.9

342.7

1996

784.5

26.0

223.1

69.4

466.0

1997

1,107.3

17.9

286.6

191.9

610.9

1999

1,083.7

26.9

287.1

140.5

629.2

2000

1,076.2

49.6

337.0

102.1

587.5

2001

1,454.2

78.3

383.3

216.5

776.1

2002

1,399.0

30.5

469.2

263.9

635.4

2003

1,793.3

72.7

600.2

345.3

775.1

2004

2,086.0

32.5

869.8

403.8

779.9

2005

2,598.7

30.1

1,172.1

645.7

750.8

2006

3,145.7

62.8

1,250.8

773.1

1,059.0

2003

1,793.3

72.7

600.2

345.3

775.1

2004

2,086.0

32.5

869.8

403.8

779.9

2005

2,598.7

30.1

1,172.1

645.7

750.8

2006

3,145.7

62.8

1,250.8

773.1

1,059.0

Source: Thomson Financial Securities Data

  • What is the average income of registered representative? How long has the average RR been in the business?

According to SIFMA’s most recent Report on Production and Earnings of RRs, in 2005 average RR production was $414,164 and average total earnings was $173,851. The average registered representative has worked in the industry 13.2 years and at his or her current firm 10.1 years.

  • How many people are employed by the securities industry? Has this been increasing?

There were approximately 829,700 individuals employed as security and commodity brokers or service personnel at the end of 2006, which was the industry's fourth consecutive annual increase. The all-time high was 836,900 in 2000.

For quarterly updates on national, New York State and New York City securities industry
employment, see: http://www.sifma.org/research/statistics/employment_impact.html.

SIFMA Research Reports also provide occasional articles on industry employment. See http://www.sifma.org/research/research_reports.html.

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Industry Basics

  • How is the industry regulated?

The securities industry is extraordinarily well-regulated. A multi-tier system of government and self-regulatory organization (SRO) supervision provides both industry oversight and investor protection.

The following is an outline of the regulatory structure responsible for the industry:

Congress – continually modernizes regulation as capital markets expand and the industry develops new financial products and innovative financing techniques; oversees the Securities and Exchange Commission (SEC).

SEC – administers and enforces federal securities laws; drafts regulations, obtains comments on these proposals, and then enacts and enforces the regulations; oversees SROs (visit www.sec.gov).

National Association of Securities Dealers (NASD) – develops rules and regulations; conducts regulatory reviews of members’ business activities; disciplines violators; and, designs, operates, and regulates securities markets and services.

(In November of 2006, NASD and the New York Stock Exchange agreed to merge their member regulation functions, creating a single SRO for securities firms.)

Registered Stock Exchanges – govern broker-dealer member-firms trading on their respective exchanges.

Municipal Securities Rulemaking Board (MSRB) – establishes rules covering the issue and trading of municipal securities.

Broker-Dealers – responsible for complying with all laws and regulations pertaining to their business, including the strict supervision of their personnel.

Registered Representatives – must comply with employers’ internal business policies and all SEC and SRO rules.

State Securities Commissioners – enforce state securities laws (visit the North American Securities Administrators Association Web site, www.nasaa.org).

  • What is a registered representative?  

Most broker-dealers must be registered with the Securities and Exchange Commission (SEC) and National Association of Securities Dealers (NASD).  The firm’s registered representatives (RRs) must pass an exam on securities law and products, meet their continuing education requirements, and register with NASD Regulations. RRs are also referred to as financial consultants, investment professionals, advisers, and brokers.

Information on industry best practices is available on our web site at:

For more information on a broker’s role and responsibilities, visit NASD’s Web site:

http://www.nasdr.com/2620.htm

 

  • How many Americans own stock today? What is their average age, worth, income, etc.?

According to Equity Ownership in America, a survey commissioned by the Association and Investment Company Institute, a total of 91.1 million individuals owned equities in early 2005.  This figure accounts for an estimated 56.9 million, or half of all American households, a more than three-fold increase since the early 1980’s. In 1983, only 15.9 million households owned equities.

The typical equity owner is 51 years old, has a household income of $65,000 and household financial assets of $125,000.  Most equity owners are married, employed, and college graduates.

For more information view the Equity Ownership Survey

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Industry Topics

  • Is arbitration the right forum for settling disputes between investors and their brokers? 

For investors, arbitration is fairer, faster, and cheaper than going to court. Slightly more than half of all arbitration cases are decided in the investor's favor. In 2002, 55 percent of NASD's arbitration cases resulted in awards to investors, totaling more than $139 million. The average turnaround time for an NASD arbitration case is 13.7 months - litigation can stretch on for years. Also, Arbitration fees are minimal when compared to court costs.

Further information on the arbitration process can be found here:

http://archives2.sifma.org/press/pdf/ArbitrationTalkingPoints2003.pdf
http://www.sec.gov/answers/arbproc.htm
http://www.nasdadr.com/

  • What precautions has the securities industry taken in the wake of the September 11 terrorist attacks?  Is the industry prepared to overcome the effects of another attack or a major natural disaster? 

Business continuity planning has always been a top priority for the securities industry. The disaster of September 11 demonstrated the need for greater planning at the industry level and within individual organizations, securities firms, and service providers. In 2001, The Association formed a Business Continuity Planning Committee to help develop industry wide policies for responding to emergencies and ensuring that market activity can be quickly resumed in the event of an interruption. This year, the industry incorporated new BCP rules from the NYSE and NASD, which required additional enhancements to its plans and improved disclosures to customers.

Recent events have demonstrated that the industry is well prepared. The industry’s BCP efforts were instrumental in Wall Street’s quick response to the August 2004 elevation of the terrorist threat level to Orange in advance of the National Republican Convention. Last August, BCP was tested when a massive power outage blacked-out much of the Northeast and parts of the Midwest. The Association’s BCP Committee coordinated the response, working closely with representatives of all facets of the industry and New York City and State administrative and emergency services departments. Thanks to these efforts - and those of thousands of industry volunteers - on the morning after the blackout, the capital markets were up and running.

The committee continues to refine and enhance its BCP efforts, incorporating lessons learned from the aftermath of 9/11, the August '03 blackout, and preparing for and meeting heightened security concerns created by special events such as the Republican Convention. The committee also continues to work closely with the exchanges, utilities, self-regulatory organizations, and government regulators.

Further information on the industry's business continuity planning efforts can be found here:

http://www.sifma.org/services/business_continuity/

SIFMA Chief Financial Officer Don Kittell's testimony before Congress provides a good overview of the industry's efforts:

http://www.sifma./legislative/testimony/archives/KittellBCPTestimony.pdf

  • More investors are buying hedge funds, which has raised regulators' concerns. How can investors learn more about the risks of these investments?  

In reviewing the sales practices of securities firms, the industry's self-regulator, the NASD, raised concerns that firms may not be fulfilling their obligations to investors. The NASD reminded firms that they must provide a balanced disclosure of the features and risks in promotions about hedge funds, assess whether these investments are suitable for their clients, ensure that there is adequate supervision of the brokers offering these investments, and provide training on the features, risks, and suitability of these products.

More information about the NASD's concerns is available at:

http://www.nasdr.com/pdf-text/0307ntm.pdf.

The SEC has stepped up its efforts to educate investors and published an online brochure: Hedging Your Bets: A Heads Up On Hedge Funds And Funds Of Hedge Funds. The publication urges investors to read the prospectus and related financial materials closely, learn how the fund is valued, ask questions about the fees involved in buying, holding, and selling these funds, and make sure they understand possible limitations on the ability to redeem these shares.

More information is available at:

http://www.sec.gov/answers/hedge.htm.

SIFMA has alerted its member-firms to these concerns and circulated investor education materials prepared by the regulators.

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More Information

For media-related inquiries please contact:

Ben Veghte