What Is Sell-Side?
Let me explain what sell-side means in the financial world. It's the part of the industry that deals with creating, promoting, and selling financial instruments like stocks, bonds, foreign exchange, and others to the public market. This can also cover private capital market tools, such as private placements of debt and equity. As someone on the sell-side, you work to develop and maintain products that the buy-side can access.
On Wall Street, the sell-side includes investment bankers who act as go-betweens for issuers of securities and the investing public, plus market makers who ensure liquidity in the public market. These same roles apply to private debt and equity issues through investment bankers and corporate finance advisors.
Key Takeaways
You should remember that sell-side is about creating, promoting, and selling stocks, bonds, foreign exchange, and other instruments. Sell-side professionals and firms focus on products for the buy-side. Investment bankers on the sell-side connect securities issuers with investors, and market makers are the key players providing market liquidity.
Understanding Sell-Side
Think of the sell-side and buy-side as two essential sides of Wall Street—they rely on each other to function. The sell-side aims for the best prices on financial instruments while offering analysis and insights on them.
On the buy-side in public markets, you'll find money managers from hedge funds, institutions, mutual funds, and pension funds—individual investors count too, though the term often means professionals. In private markets, it's private equity, VC funds, and corporate venture arms. Sell-side features market makers driving the financial markets. For instance, anyone buying stock to sell later for profit is buy-side.
Foreign Exchange Sell-Side
The FX market is the largest globally, with over $6.6 trillion traded daily as of 2019. Here, sell-side is led by major banks like JP Morgan Chase, Citibank, Deutsche Bank, and UBS. Their trading rooms split into interbank traders handling large spot and forward currency deals, and salespeople who offer securities to buy-side clients like hedge funds, mutual funds, and big corporations. Interbank traders often take proprietary positions, but salespeople usually don't.
Bond Market Sell-Side
The global bond market ranks second largest, valued at over $100 trillion, with the U.S. portion around $40 trillion. Investment banks dominate sell-side, including Goldman Sachs and Morgan Stanley. Banks like JP Morgan Chase and Bank of America, blending commercial and investment banking, underwrite and manage bond issues. Many serve as primary dealers for U.S. Treasury bonds, buying directly from the Treasury. These banks actively trade and position in the bond market.
Stock Market Sell-Side
Investment banks also lead the sell-side in stocks, underwriting issuances, taking proprietary positions, and selling to institutional and individual investors. A standout sell-side activity is handling IPOs—companies need investment banks to underwrite and go public. Underwriters, often brokers, bridge companies and the public, marketing and selling initial shares.
Example of Sell-Side
Consider a millionaire seeking to invest a large sum. He approaches an investment bank for advice. Their private wealth management team reviews his assets and risk profile, devising a strategy and suggesting products to sell him. He engages the bank, paying fees for management. This service and product offering is pure sell-side, as the bank sells to the client.
