JP Morgan and Lehman Brothers are the leading dealers with the highest market shares in U.S. fixed-income trading across products, according to a survey by Greenwich Associates, the financial services research and consulting firm headquartered in Greenwich, Conn. released on Monday. Both dealers also have the top rating by institutional investors for delivering the best service qualify across fixed-income sales, research and trading.

“This looks at the quality of sales coverage, the quality of trading and the research and also the back-office, that goes into the service quality,” says Frank Feenstra, a managing director at Greenwich Associates.

According to the Greenwich Associates’ 2007 U.S. Fixed-Income Dealer Rankings, Lehman Brothers and JP Morgan tied for the number one position overall in the ranking. The survey is based on interviews with 1,300 institutional investors and covers three product categories: rates, credits and securitized debt.

The other top dealers ranked in order are Deutsche Bank, Goldman Sachs and Banc of America, which all grew their fixed income trading businesses over the past 12 months, according to the Greenwich study. Merrill Lynch and RBS Greenwich Capital Markets also gained share.

The rankings reflect a combination of traditional firms and foreign firms that have been trying to gain a foothold in the U.S. market, where it’s been difficult, but are now getting closer.

“In general, we see some foreign firms building momentum and stronger franchises,” observes Feenstra in an interview, who notes they have been investing in this business. In the release, Feenstra said three foreign firms — Deutsche Bank, RBS Greenwich Capital and Barclays Capital — increased their market shares in at least two product categories from 2006 to 2007, he said in the release. While Deutsche Bank has always been big in Europe, it now ranks among the top U.S. fixed-income dealers.

Buy-side clients also voted on what’s most important to them, indicating that sales continues to be more important than secondary trading, than new issues or research, says Feenstra But while secondary trading has become more important and sales slightly less, there is less of a gap between the two, he says.

It would be interesting for buy-side institutions to look at this list and see where different dealers rank on their market share and on their service quality level and how they compare with their counterparties, says Feenstra. “The buy-side cares about who provides liquidity which means you have to have a big market share,” says Feenstra. The buy-side is looking at “who will be there for me,” he says.

Consistency is also important, he says. Some investors look for a firm they can use for one-stop shopping. "Others want firms that are good in a particular product bucket, this will tell them who is good and who is providing them with distinctive, differentiating service levels to their clients,” says Feenstra. Standing out for its consistency, Lehman placed among the top three in all product buckets, while JP Morgan ranked among the top three in two of the product buckets. It’s also noteworthy that Banc of America Securities, a firm that wasn’t a major fixed-income dealer five years ago, ranked in the top three in credit and securitized products, he says.

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