09 November 2018 : IEM Finance Survey: Primary dealers as perceived by investors

IEM Finance conducted the 16th online annual survey of French primary dealers’ (SVTs) clients from 18 September 2018 to 19 October 2018. The aim of this survey is to assess the quality of commercial relationship and services provided by primary dealers to their clients, as well as clients’ views on the functioning of the French government debt market.

In 2018, 246 investors answered the questionnaire, leading to a 21.9% participation rate.

Main results of the survey :

1. The French government debt market:

Investor satisfaction on the functioning of French government debt market remains very high and continues to increase: 100% of French investors and 97% of investors globally declared to be “very satisfied” or “satisfied” in 2018, as compared to respectively 100% and 95.7% in 2017 and 100% and 92.9% in 2016.

Liquidity and transparency are valued by investors, who consider those criteria to be important for a sovereign issuer, such as AFT. The importance of these two factors increased in 2018, with respectively 90.2% and 69.4% of investors considering it to be “very important”, against 86.8% and 65% in 2017. Liquidity remains the most important criterion before transparency, predictability and innovation.

The liquidity of securities issued by the French government continues to be highly valued by investors. Regarding OAT, almost all investors expressed their satisfaction (97.5% were “very satisfied” or “satisfied”). Investor satisfaction on inflation-indexed securities decreased slightly in 2018: 74.6% of investors declared to be “very satisfied” or “satisfied”, against 77.1% in 2017 and 64.2% in 2016. Regarding BTF, 86% were “very satisfied” or “satisfied” (against 92% in 2017 and 87.8% in 2016). It is worth noting that respectively 37% and 36% of investors surveyed did not express any opinion on the liquidity of inflation-indexed securities and BTF.

As far as transparency is concerned, and beyond information provided by AFT, investors were “satisfied” with the information received from French public institutions on economic policy and public finances. The proportion of satisfied investors increased to 94% in 2018, from 91% in 2017.

Regarding AFT strategy to introduce more flexibility in the choice of securities to be issued, with the reopening of old lines at auctions (“off-the-run”), a vast majority of investors declared to be “very satisfied” or “satisfied” (97.4% against 94.4% in 2017).

31% of investors who answered the questionnaire declared to have bought the Green OAT 1.75% 25 June 2039, either by syndication for 72% of investors and/or on the secondary market for 64% of investors. 65% of investors declared to have bought it for its “Green” specific feature.

The proportion of investors who have been in contact with AFT over the last 12 months, among those who responded to the questionnaire, remained stable at 38.2% in 2018.

2. Primary dealers - SVTs:

On the French government debt market, the top-five most frequently quoted primary dealers by investors as being their main partner are: :

2018 2017
1 – BNP Paribas
2 – Société Générale
3 – JP Morgan
4 – Crédit Agricole CIB
5 – Natixis     

1 – BNP Paribas
2 – JP Morgan
3 – Barclays
4 – Société Générale
5 – Crédit Agricole CIB

On fixed-income markets overall, the top-five most frequently quoted primary dealers by investors as being their main partner are :

2018 2017
1 – JP Morgan
2 – BNP Paribas
3 – Barclays
4 – Citigroup
5 – Société Générale
1 – JP Morgan
2 – BNP Paribas
3 – Barclays
4 – Goldman Sachs
5 – Citigroup

-    Being a primary dealer is still the most important criterion for the selection of an intermediary, with 72.2% of investors considering it to be “very important” or “important”. The League Table published by AFT at the beginning of February, which assesses the performance of primary dealers on the primary and secondary markets and in terms of the service offered, remains the second most important criterion for investors.

-    Investors gave their opinion on attention paid to the quality of various services offered by primary dealers:

o    Pricing is still considered as the most important service: the proportion of investors considering it to be “very important” increased once again and reached 90.1% in 2018 against 89.1% in 2017.

o    The quality of information, advice and sales coverage remains the second most important service. It is considered to be “very important” by 51.2% of investors against 48% in 2017.

o    Attention paid to research increased in 2018, with 33.2% of investors estimating it to be “very important”, as compared to 31% in 2017.

o    Regarding the post-market (back/middle office), 22.1% of investors assessed this service as "very important” against 26.2% in 2017.

o    Overall, ratings of primary dealers increased once again for two of the three assessed services. The quality of research remains the best-rated service by investors with an average score of 7.7/10; as compared to 7.6/10 in 2017. The quality of pricing received a higher rating than last year, with an average score increasing to 7.6/10, as compared to 7.5/10 in 2017. The assessment of quality of information, advice and sales coverage remained steady with an average score of 7.4/10.