There were two pieces of news to strike fear into the broking community this week: the stock exchange revealing that equity trading volume had slumped and the merger of two small brokers.
The two are linked and many believe matters will get worse.
Australian stockbrokers say things have not been this bad in a generation. There are now too many brokers trying to service a dwindling pool of clients.
As equities have fallen increasingly out of fashion since 2008 the average broker is writing less commission.
As business dries up, Australia's mid-tier brokers have started to merge. This week, BBY signed an agreement to acquire its smaller rival Cameron Stockbrokers. About 20 of Cameron's client advisers will be folded into BBY.
BBY's executive chairman, Glenn Rosewall, told BusinessDay yesterday the industry could expect more acquisitions by the end of the year, as companies scrambled to cut costs.
''We might have another four or five years of difficult times,'' he said. ''It's a difficult environment. Everyone's facing these sorts of pressures, everyone's looking at their costs.''
According to the Australian Securities Exchange, there are few signs matters will improve.
The ASX unveiled its full-year annual profit this week. Net income in the year to June 30 was $339.2 million, a fall of 3.7 per cent. Three of the stock exchange operator's main business units, listings, equities trading (cash market), and information services, suffered large falls in revenue.
The head of the ASX, Elmer Funke Kupper, warned that in the first six weeks of the 2013 financial year, activity levels in the equity and derivative markets were well below this time last year. Part of the problem, he said, was that markets had become less volatile. So while cash market volumes were down, volumes in the interest rate futures market had fallen away too.
In the six weeks to August 10, the daily average cash market value traded was $3.5 billion, a whopping 24.6 per cent below the full-year 2012 average.
One senior broker, who wished not to be named, explained the problem yesterday: ''You can't exist on $4 billion a day turnover. Nobody can. In the bull market it was $7 billion a day, but the break-even for the industry is probably $6 billion.
''If these volumes are any indication of the next six months then there'll have to be serious considerations as to who will survive through this or who will have to merge.''
But the chief executive of Patersons Asset Management, Michael Manford, said the outlook for the next six months was better than people thought.
''I think broking in general will have quite a pick-up over the next six months, because you've got good profit results coming out from the big-cap sector … and a bit of stability has returned to the market,'' he said.
''In the absence of another major shock emanating from Europe, liquidity's now starting to return to the market and I think people will be surprised by the improvement in liquidity over the next six months.''
Mr Rosewall said it was unlikely that volumes would soon return to the heady days.
''I don't think the industry can bet on volumes going back up to that level for a while,'' he said.
''So I think that the approach to the stockbroking business, it's about looking at your costs.''