What Is Sell-Side?
Sell-side is the part of the financial industry that is involved with the creation, promotion, and sale of stocks, bonds, foreign exchange, and other financial instruments to the public market. The sell-side can also include private capital market instruments such as private placements of debt and equity. Sell-side individuals and firms work to create and service products that are made available to thebuy-sideof the financial industry.
The sell-side of Wall Street includes investment bankers, who serve as intermediaries between issuers of securities and the investing public, and themarket makerswho provideliquidityin the public market. Investment bankers and corporate finance advisors play the same role for private issues of debt and equity.
Key Takeaways
- Sell-side refers to the part of the financial industry that is involved in the creation, promotion, and sale of stocks, bonds, foreign exchange, and other financial instruments.
- Sell-side individuals and firms work to create and service products that are made available to the buy-side of the financial industry.
- The sell-side of Wall Street includes investment bankers, who serve as intermediaries between issuers of securities and the investing public.
- Market makers are the big players on the sell-side who provide liquidity in the market.
Understanding Sell-Side
The sell-side and buy-side of Wall Street are two sides of the same coin. One is dependent upon the other and could not operate without the other. The sell-side tries to get the highest price possible for each financial instrument while providing insight and analysis on each of these financial assets.
Buy-side players in the public market include money managers at hedge funds, institutional firms, mutual funds, and pension funds. Individual investors are technically on the buy-side. In the private market, private equity funds, VC funds, and venture arms of corporations investing in startups are on the buy-side. However, the term mostly applies to professional money managers. On the sell-side of the equation are the market makers who are the driving force of the financial market. For example, any individual or firm that purchases stock to sell it later at a profit is from the buy-side.
Foreign Exchange Sell-Side
The FX market is the world's largest financial marketplace, with more than an estimated $6.6 trillion changing hands daily, as of 2019. Here, the sell-side is dominated by top multinational banks, led by JP Morgan Chase, Citibank, Deutsche Bank, and UBS. Bank trading rooms are divided into two groups:
- Interbank traders who buy and sell large amounts of currency on the spot and forward markets.
- The salespeople that sell securities to buy-side customers including hedge funds, mutual funds, and large corporations.
Many interbank traders take proprietary positions, but salespeople generally do not.
Bond Market Sell-Side
The global bond market is the world's second-largest financial marketplace, with an estimated value of over $100 trillion. The U.S. bond market is estimated to be valued at approximately slightly over $40 trillion.
Investment banks dominate the sell-side, with the largest being Goldman Sachs and Morgan Stanley. JP Morgan Chase and Bank of America, which combine commercial and investment banks under a single holding company, underwrite and manage bond issues. Many are also primary dealers of U.S. Treasury bonds, which means that they buy directly from the U.S. Treasury. The investment banks are very active, both trading and taking positions in the bond market.
Stock Market Sell-Side
Investment banks also dominate the sell-side of the stock market.They underwrite stock issuance, take proprietary positions, and sell to both institutional and individual investors. One of the most high-profile activities of the sell-side in the stock market is in initial public offerings (IPOs) of stocks. Companies can't go public themselves. They must enlist the services of an investment bank for underwriting. Underwriters are typicallybrokers,who act as a buffer between companies and the investing public, and who market and sell those initial shares.
Example of Sell-Side
A wealthy individual worth millions of dollars is looking to invest a significant portion of his capital. He heads to an investment bank for some options. The private wealth management division of the investment bank takes a look at the individual's assets and risk tolerance and comes up with an investment strategy for the individual as well as certain financial products they can sell to him.
The individual takes on the business of the investment bank, paying it commissions and fees for managing his money. The business that the investment bank has offered the wealthy individual is considered the sell-side of the business as it is selling to the client services and financial products.
FAQs
The Sell-Side refers to firms that issue, sell, or trade securities, and includes investment banks, advisory firms, and corporations. Sell-Side firms have far more opportunities for aspiring analysts than Buy-Side firms usually have, largely due to the sales nature of their business.
What is the role of the sell-side? ›
Sell-side is the part of the financial industry that is involved with the creation, promotion, and sale of stocks, bonds, foreign exchange, and other financial instruments to the public market. The sell-side can also include private capital market instruments such as private placements of debt and equity.
What is the difference between buy-side and sell-side roles? ›
What Type of Firms Hire Buy-Side and Sell-Side Analysts? Buy-side analysts work for firms that manage money, such as hedge funds and private equity groups. In contrast, sell-side analysts work for institutions that sell financial products, such as investment banks and brokerages.
What is the sell-side of the financial model? ›
Sell Side refers primarily to the investment banking industry. It refers to a key function of the investment bank, namely to help companies raise debt and equity capital, and then sell those securities to investors such as mutual funds, hedge funds, insurance companies, endowments and pension funds.
What is the role of the sell-side M&A? ›
Sell-side role in an M&A transaction
Identifying investors who would be interested in a deal. Advising on the transaction and due diligence process. Evaluating the selling company and performing financial modeling. Facilitating a potential deal and acting as an intermediary.
Is Morgan Stanley buy-side or sell-side? ›
As mentioned above, businesses that function on the financial markets as the “sell side” include investment banks, broker-dealers, and market makers. Examples of “sell-side” firms include: Goldman Sachs. Morgan Stanley.
Is Goldman Sachs buy-side or sell-side? ›
Is Goldman Sachs Buy-Side or Sell-Side? As one of the largest investment banks, Goldman Sachs is largely on the sell-side of the market, providing liquidity and execution for institutional investors. However, Goldman Sachs also has some buy-side arms, such as Goldman Sachs Asset Management.
Is JP Morgan buy or sell-side? ›
Popular sell-side firms are Goldman Sachs, Barclays, Citibank, Deutsche Bank, and JP Morgan.
Is BlackRock buy or sell-side? ›
Buy-Side Firms
The largest and most renowned firms and banks on the buy-side are as follows: BlackRock. The Vanguard Group.
What makes more money buy-side or sell-side? ›
Buy-side jobs generally make more money, as they are taking the risk.
Sell-side analysts also meet with company management teams to gather information and insights into their business operations. JPMorgan Chase, Goldman Sachs, and Morgan Stanley are examples of sell-side firms. These companies offer investment banking, sales, and trading services to institutional and individual clients.
What is an example of a sell-side marketplace? ›
Sell-side eCommerce often involves using Internet technologies to market products or services. The products are not necessarily physical ones like books or clothes. Spotify, for example, does not sell concrete music CDs but music streaming services.
What are buy-side roles in finance? ›
The financial institutions of a free-market economy include a segment called the buy-side: firms that purchase investment securities. These include insurance firms, mutual funds, hedge funds, and pension funds, that buy securities for their own accounts or for investors with the goal of generating a return.
How long does sell-side due diligence take? ›
What are the stages of an M&A due diligence process, and how much time does it usually take? The typical process is determined by the Seller and Investment Bank, but typically takes 3-4 weeks until initial deliverable.
Why is sell-side due diligence important? ›
There are many advantages to performing sell-side financial due diligence, including reducing risk, accelerating the transaction, and maximizing the enterprise value. The value of sell-side financial due diligence: Provides transparency and credibility to the financial information shared with buyers.
How to run a sell-side M&A process? ›
Sell Side Auction Timeline Example
- Preparing for sale: 4-6 weeks. Define Strategy. ...
- Round 1: 4-6 weeks. Contact buyers: Exchange NDAs and distribute the CIM. ...
- Round 2: 4-6 weeks. Hold meetings with interested buyers, conduct Q&A and answer follow-ups. ...
- Negotiations: 6-8 weeks. Negotiate with buyers submitting bids.
Sell-side research aggregates information and data through several key methods – including financial modeling, company management insights, industry/sector analysis, and expert networks – and then consolidates these inputs to develop research reports that encompass business updates, competitive analysis, and financial ...
What is the role of the buy-side? ›
Buy-Side – is the side of the financial market that buys and invests large portions of securities for the purpose of money or fund management. Sell-Side – is the other side of the financial market, which deals with the creation, promotion, and selling of traded securities to the public.
What is a sell side research job description? ›
Sell-side analysts research and deliver detailed reports to clients, which serve as recommendations for investments they might choose. For example, an analyst may produce weekly or monthly reports for a specific industry, plus as-required reports for volatile changes or differences.
What is the best description of the role of research teams on the sell-side? ›
The investment research done by a sell-side analyst will assist the client with making an informed decision on their investment, which will stimulate the process of buying or selling financial instruments. Buying and selling of financial instruments will produce commissions for the brokerage.
