What Is Sell-Side?

The financial sector, known as the “sell-side,” is responsible for developing, marketing, and public offering stocks, bonds, foreign currency, and other financial products. Private placements of debt and equity are examples of private capital market products that might be included on the sell side. Individuals and companies on the sell side of the financial sector strive to develop and maintain goods accessible to the purchase side.

Investment bankers act as middlemen between securities issuers and the investing public, and market makers, who provide liquidity in the open market, are members of Wall Street’s sell-side. Corporate finance and investment banking advisors have a similar function regarding private debt and equity difficulties.

Understanding Sell-Side

Wall Street’s buy-side and sell-side are two sides of the same coin. One cannot function without the other and is reliant upon it. In addition to offering knowledge and analysis of these financial assets, the sell-side seeks the best price for each financial instrument.

Money managers at hedge funds, institutional corporations, mutual funds, and pension funds are examples of buy-side participants in the public market. Technically, individual investors are on the purchase side. On the buy side of the private market are venture arms of businesses, private equity funds, and venture capital firms that invest in startups. Still, the phrase mainly refers to financial advisors. The market makers, who are the engine of the financial market, are on the sell side of the equation. The buy-side includes, for instance, any person or business buying stock to sell it for a later profit.

Foreign Currency Sell-Side

As of 2019, the foreign exchange market (FX) is the biggest financial marketplace globally, with over $6.6 trillion changing hands daily. Top global banks, headed by JP Morgan Chase, Citibank, Deutsche Bank, and UBS, control the sell-side in this situation. Two categories exist in bank trading rooms:

• Large-volume buyers and sellers of currency in the spot and future markets by interbank traders.
• The salespeople deal with hedge funds, mutual funds, and big businesses as buy-side clients while selling securities.
• Salespeople typically do not take proprietary positions, although many interbank traders do.

Sell-Side of the Bond Market

At over $100 trillion, the global bond market is the second-biggest financial marketplace globally. The U.S. bond market is estimated to be worth over $40 trillion.

The sell-side is dominated by investment banks, the biggest of which are Morgan Stanley and Goldman Sachs. Bond offerings are underwritten and managed by JP Morgan Chase and Bank of America, holding companies that include commercial and investment banks. In addition, many purchase U.S. Treasury bonds directly from the Treasury as primary dealers. Investment banks are heavily involved in the bond market, trading, and position-taking.

Sell-Side in the Stock Market

Investment banks likewise dominate the selling side of the stock market. They take proprietary positions, sell to individual and institutional investors, and underwrite the issue of shares. IPOs (first public offerings) of stocks are among the sell-side’s most well-known stock market operations. Companies are not allowed to go public. An investment bank’s services are required for underwriting. Typically, underwriters are brokers who promote and sell those first shares while serving as a bulwark between businesses and the investing public.

An Illustration of Sell-Side

A multimillionaire is interested in allocating a large chunk of his cash. In search of some possibilities, he goes to an investment bank. The investment bank’s private wealth management section assesses the client’s assets and risk tolerance before developing an investment plan and recommending specific financial products for him to buy.

The person accepts the investment bank’s business, giving it fees and commissions in exchange for managing his money. Since the investment bank sells financial goods and client services, the business it has presented to the affluent is seen as being on the company’s selling side.

Conclusion

• The term “sell-side” describes the segment of the financial sector engaged in the production, marketing, and distribution of stocks, bonds, foreign currency, and other financial products.
• Individuals and companies on the sell side of the financial sector strive to develop and maintain goods accessible to the purchase side.
• Investment bankers are part of the sell-side of Wall Street, acting as middlemen between securities issuers and the general investing public.
• The prominent participants on the sell side that provide market liquidity are known as market makers.