8 November 2019: IEM Finance Survey: Primary dealers as perceived by investors

IEM Finance conducted the 17th online annual survey of French primary dealers’ (SVTs) clients from 9 September 2019 to 04 October 2019. 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 2019, 221 investors, representing a total of 157 institutions (Asset Management companies, Banks, Insurance companies ...), responded to the questionnaire. This corresponds to a response rate of 20.5% in terms of respondents and 45.1% in terms of surveyed institutions.

Main results of the survey:

1- The French government debt market:

-    Investor satisfaction on the functioning of French government debt market remains very high. For French investors, this proportion reached 100% for the third consecutive, with another increase in the proportion of investors who declared to be “very satisfied” (57.8 % against 48.9% in 2018 and 40.0% in 2017). Among all investors, the satisfaction remained overall stable over three years: 96.2% declared to be “very satisfied”” in 2019, against respectively 97% in 2018 and 95.7% in 2017.

-    For investors, liquidity and transparency remained important criteria for a sovereign issuer, such as AFT. They were 84.9% to assess the liquidity as “very important” and 69.3% of them had the same assessment regarding transparency. Although they were considered to be less important, the assessment of the two other criteria, innovation and predictability, improved significantly in 2019.

-    The liquidity of securities issued by the French government continues to be highly valued by investors, notably concerning BTF on OAT. Regarding these two products, at least 80% of investors were always “satisfied” or “very satisfied” by the liquidity over a ten-year period.

-    Beyond information provided by AFT, a vast majority of investors (90.1%) were still “satisfied” by the information received from French public institutions on economic policy and public finances.

-    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” (94.9%).

-    The proportion of investors who declared to have bought the Green OAT 1.75% 25 June 2039 increased by 10 percentage points, from 30.9% to 40.2%. They bought it by syndication for 60.7% of them (against 72.2% in 2018) and/or on the secondary market for 78.6% of them (against 63.9% in 2018). More than half of them (52.4%) declared to have bought it for its “Green” specific feature. This confirms not only the interest of ESG1  investors for the Green OAT but also the technical qualities of the Green OAT which are similar to those of the others OAT.

 

2- Primary dealers - SVTs:

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

2019 2018
1 – JP Morgan
2 – BNP Paribas
3 ex aequo – Barclays et Société Générale
5 – Citigroup
 

1 – JP Morgan
2 – BNP Paribas
3 – Barclays
4 – Citigroup
5 – Société Générale

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

2019 2018
1 – BNP Paribas
2 – Société Générale
3 – JP Morgan
4 – Crédit Agricole CIB
5 – Barclays
1 – BNP Paribas
2 – Société Générale
3 – JP Morgan
4 – Crédit Agricole CIB
5 – Natixis

-    Being a primary dealer is still the most important criterion for the selection of an intermediary, followed by 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. The importance of these two criteria increased once again: the proportion of investors who considered them to be “very important” or “important” (74.7% and 39.4% respectively) reached its highest level since the launch of the survey in 2003.

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

o    Despite a 10 percentage point drop in the proportion of investors who assessed the quality of pricing as "very important", this service remained largely ahead of investor expectations.

o    Information, advice and sales coverage, as well as research, coming in second and third place respectively, were also assessed as “very important” by investors, to a lesser extent in 2019.  The two services were considered to be “very important” by 45.9% and 31.1% of investors respectively.

o    Regarding the post-market (back/middle office), it was considered to be "very important" by a slightly larger proportion of investors in 2019 (24.2%) than in 2018 (22.1%).
o    Overall, ratings of primary dealers decreased for the three assessed services in 2019: pricing, sales and coverage and research. However, it should be noted that this decrease remains relative and followed three consecutive years of increase for the three services.

1Environmental, Social and Governance