buyside

Lazard Capital employees charged in gift probe

Jim Kim — Fri, 31 Oct 2008 11:39:37 -0400

Lazard Capital Markets, which spun off from Lazard, has been charged with failure to supervise three employees who allegedly spent more than $800,000 improperly entertaining traders at Fidelity in an effort to win trading volume. Recall that a few Fidelity employees have already been charged with improperly accepting gifts. In many ways, this is a holdover issue from what now seems to be the distant past. There has been a sea change--notably the rise of commission sharing arrangements--in the way the buyside pays the sellside for execution services. In general, the whole soft-dollar issue has faded. That was quite an era for some buyside traders.

For more:
- here's a Financial News Online article

Can everyone be wrong?

Wed, 23 Apr 2008 06:59:59 -0400

Back when the subprime crisis had not fully bloomed, there were a few brave souls who were convinced--absolutely!--that the mortgage edice was about to crash. You can imagine the pitch meetings. They were likely derided as delusional. You can almost hear the argument: "So you mean to tell us that everyone is wrong? That this entire industry built up by the likes of Merrill Lynch and Lehman Brothers and Bear Stearns is all a house of cards?"

We all know the rest of the story. Now we see something else at work: the entire buyside seems to be rushing into distressed credit. Every brand name private equity firm is busy launching distressed credit funds. Hedge fund are even angling in. So is the herd headed toward a cliff again? Maybe, maybe not. Consider leveraged loans. Banks pretty much had to offload them for balance sheet purposes. But are any issuers set to default? Not likely. Some leveraged-up firms may suffer to be sure, but it's more likely that most will find a way.

Then again, we've heard that before.

- Jim

Buyside moving to tap more trading venues

Tue, 04 Dec 2007 06:59:54 -0500

We're witnessing an explosion in trading options these days that has led to growing concerns on the buyside about fragmentation and the thought that perhaps good trading opportunities are being missed. Fidelity Capital Market Services, the trading arm of the fund giant, has moved to provide broader liquidity sources to clients. According to Financial News Online, it has added 13 new partners to its platform. Clients now can access 17 third-party venues plus the firm's brokerage clients. So this is one way to effect a kind of consolidation. In effect, the firm has become a service aggregator. My suspicion is that the real value will be in the interface software that Fidelity can offer its clients. Lots of room for competition. A killer app could be born.

For more:
- here's the article

Read more on: Fidelity

SPOTLIGHT: Buyside Research Efforts

Fri, 19 Oct 2007 06:59:52 -0400

From the buyside point of view, there's so much research to contend with that keeping it all straight is a chore. Which is why the TowerGroup expects a lot more spending on technologies to make it all the easier to use. Article

The next major Wall Street scandal?

Sun, 01 Jul 2007 20:01:34 -0400

Business Week says this is an open secret on Wall Street: Prime brokers with access to information on big trades are tipping off their other traders and their hedge fund clients, allowing them to do a bit of front-running. Does this really go on? Well, it's going to be hard to prove. I am sure it goes on to an extent, especially if the prime brokerage operation and a hedge fund are owned by the same company. The people who are really suspicious are mutual funds. They stand to lose a lot as the bid and ask moves against them subtly but enough to really affect their P&L over the long-term. You have got to think that buyside players with real clout have made this an issue. If it goes on. Do prime brokers really have advance word on mutual fund orders?

For more:
- here's the commentary

More on dark pools and trading

Mon, 14 May 2007 20:01:36 -0400

The rise of dark pools has been noted by many. Such execution services now handle about 10 percent of all shares traded each day. They sport cool names like Liquidnet, Sigma X, VortEx and the like. They are also proliferating. According to MarketWatch, a host of them have sprung in the last few months. Clearly, the buyside values the ability to consummate trades quickly, anonymously and in bulk. But this dark pool trading is a bit unregulated, and some think some huge conflicts are brewing. The SEC has taken note. In June, the NYSE will launch MatchPoint, an after-hours crossing network. There are many approaches to dark pool services, and a lot of competition. You have to figure that consolidation will occur at some point. Until then, the field is wide open.

For more:
- here's the MarketWatch article

SPOTLIGHT: Electronic Forex Trading

Wed, 11 Apr 2007 20:01:32 -0400

It's hard to argue with the logic of electronic trading, which seems to be the future of every market. The latest example comes from the forex market, where half of all buyside trades are now electronic, up from 30 percent the year before. Article

The future of equity research

Thu, 21 Dec 2006 19:01:35 -0500

In many market segments, we are living in a golden era on Wall Street, but one area that has failed to shine is equity research. Let's face it, telling people at happy hour that you're a stock analyst doesn't draw quite the reaction it did a few years ago. Yet somehow, despite all the tumult from investigations and Reg FD, the more things change, the more they stay the same. In 2007, I do not expect any magic on the part of equity research units. There are a lot of changes afoot, but the basic trends established this year do not look like they will change significantly. Despite Fidelity's big moves, most of the buyside is not pushing to disaggregate, but they will continue to beef up in-house capabilities. Sellside research shops will remain under pressure; their product will likely get even more vanilla. Independents will remain a lowly regarded niche. So it strikes me that the ground is fertile for some truly entrepreneurial thinking. If you can come up with something out of the box, people will have to take note.

Can independent research remain independent?

Sun, 10 Dec 2006 19:01:37 -0500

We've discussed independent research at length over the years. The fact remains that the industry, what's left of it, is still searching for a hands-down winning business model. The issue is how can one get paid for research outside of the tainted channels that, while battered, are here to stay? Fidelity has moved to unbundled research and trading, and that's a good thing. But it seems to be pressured away from sell-side research and leading to more buyside research initiatives than creating opportunities for independent shops. The paid-research model, no matter what you think of it, hasn't really caught on, beyond a few established firms and niches. So perhaps the vaunted global settlement has proven much less profound than many anticipated.

For more on independent research:
- here's some commentary from Forbes

Technical research on the rebound?

Tue, 28 Nov 2006 19:01:34 -0500

It was big news last year when Louise Yamada and Ralph Acampora, two of the biggest names in technical research, were let go by Citigroup and Prudential. Many people proclaimed the death of technical research. There have been some signs of a comeback. Yamada founded her own firm, amid strong institutional demand for her services. Acampora has joined Knight Capital and seems to be doing well. Some others, like Dick Arms, are expanding. But in general, while the decline may be controlled, the Street is not likely to bring back the discipline in a big way. The buyside seems more intent on other approaches. But when you think about it: technical analysis is alive and well in the form of algorithmic trading programs. Perhaps this is the ultimate triumph, one that necessitated a changing of the guard.

For more on this:
- Here's an article from Investment Dealers' Digest (For FierceFinance readers)
- The research industry has been a topic of much discussion lately. Article