Broker-friendly Brut comes to town

AN AMERICAN electronic equity market which launches today in London, promises some relief to hard-pressed brokers who are losing business to electronic systems.

Like other electronic communications networks (ECNs), Brut will deal direct with investing institutions, but it differs in promising to rebate the bulk of the commission it receives to brokers designated by its institutional clients.

The theory is that brokers who have lost, or fear they will lose, clients to electronic markets will quickly introduce these clients to Brut, because it gives the broker a chance of receiving some future commission instead of losing the business. The institutions co-operate because they would be paying commission anyway and this approach gives them a mechanism to reward brokers whom they believe provide the most useful research and similar services without it appearing to come directly out of their own pockets.

Brut has as shareholders 26 of the leading Wall Street investment houses and says these shareholders have persuaded it to bring the idea to London. Here it will target only institutions seeking to buy American equities but if the model works it may extend the process to European markets.