Sell side

Sell side is an expression used in financial markets. It refers to firms that take orders from Buy side firms and then work the orders. This is typically achieved by splitting them into smaller orders which are then sent directly to an exchange or to other firms.

Sell side firms are paid through commissions charged on the sales price of the stock. Sell side firms employ research analysts, traders and salespeople who collectively strive to generate ideas and execute trades for Buy side firms, enticing them to do business. Part of the research analyst's job includes publishing research reports on public companies, these reports analyze their business and provide recommendations on the purchase or sale of the stock.

One recent trend in the industry has been unbundling of commission rates; simply put, this is the process of separating the cost of trading the stock (e.g. trader’s salaries) from the cost of research (e.g. research analyst salaries). This process allows Buy side firms to purchase research from the best research firms and trade through the best trading firms, which often are not one and the same.

After the bursting of the dot-com bubble, many US sell side firms were accused of self-dealing in a lawsuit brought by New York State Attorney General Elliot Spitzer. In addition to the business done with Buy side firms as described above, sell side firms also performed investment banking services for corporations, such as stock and debt offerings, loans, etc. These corporate clients generally did not like to see negative press put out about their own companies. To try to prevent the publishing of negative research, corporate clients would pressure the sell side firms by threatening to withhold lucrative banking business or demanding equally lucrative shares in IPOs - essentially bribing the sell side firm. While the $1.4 billion settlement of this lawsuit made significant progress in cleaning up the industry in the US, it's notable that the lawsuit only went after sell side firms, leaving the arguably equally culpable corporations relatively unscathed.

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  • Sell v. United States — SCOTUSCase Litigants=Sell v. United States ArgueDate=March 3 ArgueYear=2003 ReargueDate= ReargueYear= DecideDate=June 16 DecideYear=2003 FullName=Charles Thomas Sell, Petitioner v. United States Citation=123 S. Ct. 2174; 156 L. Ed. 2d 197; 2003 U …   Wikipedia

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  • Side Collateral — A pledge that partially collateralizes a loan. The pledge can be a physical asset, financial asset or personal guarantee. While physical or financial assets can be assigned an underlying price or value, personal guarantees depend solely on the… …   Investment dictionary

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