Introduction
The sell-side is a very important part of the financial industry. It's where stocks, bonds, and foreign exchange are made, marketed, and sold on the public market. The sell-side also includes private capital markets, such as private placements of debt and equity, in addition to public markets.
In short, the sell-side makes and sells financial products and services that are useful to the buy-side, which includes people and organizations that invest money.
Who is on the Sell Side?
- Investment bankers and market makers make up most of the sell side.
- Investment bankers help companies that issue securities and investors who buy them.
- Market makers keep financial markets liquid by always buying and selling securities.
- Investment bankers and corporate finance advisors do similar things in private capital markets: they help businesses get private debt or equity.
How the Sell-Side and Buy-Side Work Together
The buy-side and sell-side are two parts of the same system; they need each other to work.
- The sell-side's job is to get the best price for financial instruments and to give research, insight, and analysis.
- The buy side, on the other hand, includes institutional investors like hedge funds, mutual funds, and pension funds.
- Private equity and venture capital firms put money into new businesses.
- Even individual investors buy stocks with the hope of making money.
👉 In short, the buy side buys and the sell side sells, and one side helps the other.
FX Sell-Side
The foreign exchange market (FX) is the biggest financial market in the world. It had a daily trading volume of over $6.6 trillion as of 2019.
The FX sell-side is dominated by big banks like:
- JP Morgan Chase
- Citibank
- Deutsche Bank
- UBS
There are usually two kinds of trading operations that happen inside these banks:
- Interbank dealers buy and sell large amounts of currency on the spot and forward markets.
- Securities salespeople sell financial products to clients on the buy side, such as hedge funds, mutual funds, and big companies.
Interbank dealers may have their own trading positions, but salespeople only care about helping clients.
The Sell Side of the Bond Market
The global bond market is huge, worth more than $100 trillion. The bond market in the United States is worth more than $40 trillion.
Investment banks are also in charge here. Some of the biggest players include:
- Goldman Sachs
- Morgan Stanley
- JP Morgan Chase
- Bank of America
These companies perform various key roles:
- Managing and underwriting bond sales.
- Acting as main dealers in U.S. Treasury bonds (buying them directly from the government).
- Buying and selling bonds and taking positions in them.
These organizations are the main reason why the bond market is liquid and prices are fair.
Sell Side of the Stock Market
Investment banks are once again in charge of selling stocks on the stock market. Their duties include:
- Underwriting stock offerings, especially IPOs.
- Holding stocks in their own name.
- Selling stocks and bonds to both institutional and retail investors.
A company can't go public on its own. It hires an investment bank to sell its shares to the public and back them up.
These underwriters work as middlemen between companies and investors. They help make sure the IPO goes smoothly and help decide the right price for the offering.
An Example of the Sell-Side in Action
Think of a multimillionaire who wants to put a lot of his money into the stock market.
- He asks an investment bank for help.
- The bank's private wealth management team looks at his finances and how much risk he is willing to take, and then they come up with a personalized investment plan for him.
- The bank gives the client financial products and advice in exchange for commissions and management fees.
đź’Ľ The bank sells services and products to the client, which is the sell-side of the business.
Analysts on the Sell Side
If you've ever seen financial news that talks about analyst ratings, those analysts are usually on the sell side.
Their job is to:
- Keep an eye on a group of companies, usually in the same industry.
- Make financial models to predict how well things will go.
- Make research reports and suggestions for the company's clients.
A sell-side research report usually includes:
- An overview of the company
- Estimates of money
- A goal for the price
- A suggestion to buy, sell, or hold
When a group of analysts releases estimates, they are averaged together to make a consensus estimate — a standard that investors use to judge how well a company is doing.
Analysts on the Buy Side vs. the Sell Side
When a company reports its earnings, stock prices can go up or down depending on how the results compare to what most people thought they would be.
- The stock price usually goes up when earnings are better than expected.
- Most of the time, if they miss, it falls — but not always.
Sometimes, a “whisper number” goes around — an unofficial number that differs from the published consensus. Traders pay close attention to this because it may reflect real market sentiment.
When a sell-side analyst starts covering a company, they give it ratings like:
- “Buy”
- “Sell”
- “Hold”
These suggestions show how they think the stock will do, not necessarily how the company will do.
But the truth is that a lot of what a sell-side analyst does is marketing. They want institutional clients to trade through their firm's desk so they can make money from commissions.
To be successful, analysts must:
- Provide useful insights and unique data.
- Be the first to tell clients a unique story.
- Maintain direct access to company management.
Analysts who can arrange one-on-one meetings with company executives are valued by institutional investors because these meetings often lead to stronger client loyalty.
However, there’s also a conflict of interest — If an analyst gives a bad recommendation, it could hurt their firm's investment banking relationship with that company.
Analysts often balance being honest with keeping good relationships.
A lot of what analysts discuss with clients happens behind closed doors, outside public reports. Smart investors know that a written report doesn’t always show the analyst’s full opinion.
Analysts on the Buy Side
Buy-side analysts, on the other hand, work for investment funds. Their main goal is simple — to be right.
How well their stock picks add to the fund's returns is how their performance is measured. Finding winning stocks is just as important as avoiding big mistakes.
Buy-side analysts do the following:
- Read financial news and reports (often written by sell-side analysts).
- Make models and projections.
- Research businesses and sectors.
- Develop new investment ideas.
Buy-side analysts usually cover broader areas than sell-side analysts. For example, one buy-side analyst might cover the entire technology sector, while multiple sell-side analysts might only cover software or semiconductors.
Many buy-side analysts use sell-side research but still perform their own deep analysis.
They might also pay sell-side firms soft dollars — commissions from trades that pay for research indirectly.
So even though buy-side firms don’t “buy” research directly, they compensate sell-side analysts indirectly through trading activity.
The Main Differences Between Buy-Side and Sell-Side Analysts
Both types of analysts look at companies and financial data, but their goals, pressures, and rewards are very different.
| Part | Analyst on the Sell Side | Analyst on the Buy Side |
| Main Goal | Make money from trading commissions and clients' interest. | Make the fund do better by making smart investments. |
| Pay Attention To | Access to management, market knowledge, and information flow. | Getting alpha, avoiding risk, and being accurate. |
| Hours of Work | Often longer and full of travel. | More stable but under a lot of stress. |
| Basis for Pay | Based on the impact of research and relationships with clients. | Based on how well the funds did and how much money they made. |
| Limits | Tougher on who can own stocks and what they have to say about them. | Less strict rules. |
Sell-side analysts don't always need to make perfect predictions, but they do need to deliver useful information quickly.
Buy-side analysts can't afford to make mistakes often because their success depends directly on how well their investments perform.
Last Thoughts
The sell-side is the most important part of the world's financial markets. Sell-side professionals drive market activity and connect investors with borrowers.
They do everything from:
- Underwriting IPOs and bond offerings
- Providing liquidity
- Conducting research
At the same time, the buy-side relies on them for information, data, and access — keeping the cycle of interaction and dependence going.
They may have different goals, but together they keep the world's money moving.
