Buy side

From Wikipedia, the free encyclopedia
Jump to: navigation, search

Buy-side is a term used in investment banking to refer to advising institutions concerned with buying investment services. Private equity funds, mutual funds, life insurance companies, unit trusts, hedge funds, and pension funds are the most common types of buy side entities.

In sales & trading, the split between the buy side and sell side should be viewed from the perspective of securities exchange services. The investing community must use those services to trade securities. The "Buy Side" are the buyers of those services; the "Sell Side", also called "prime brokers", are the sellers of those services.

Sell side brokerages are registered members of a stock exchange, and required to be market makers in a given security. Buy side firms usually take speculative positions or make relative value trades. Buy side firms participate in a smaller number of overall transactions, and aim to profit from market movements and accruals rather than through risk management and the bid-offer spread. The 2010 Thomson Reuters Extel/UKSIF Survey shows that buyside firms are placing more emphasis on sustainability issues in the research & advisory services they receive from brokers.

Typically buy side firms do not provide custody services.

Challenges Facing Buy-Side[edit]

Nearly 90% of buyside firms are planning to increase SRI & sustainability asset allocation in 2011.[1]

Globally buy-side asset managers are looking at increased regulation in regards to their use of financial index and benchmark data, including adhering to IOSCO Principles. This is expected to increase cost and time for the buy-side in managing their data.[2]

In Short the entity paying the commission on trade would be a buy side and the one receiving it is a sell side.