We have been engaged in a research project for a client, who wanted information on “sell side fixed income attribution systems.” This cause me to reflect a bit on the term “sell side.”

You’ve no doubt run into the terms “buy side” and “sell side”; but do you know what the they mean? I used to always think of the sell side as the market that provides securities to asset managers, who in turn would represent the “buy side.”

We might think of the sell side as those who sell from their own inventory (dealers), but this wouldn’t be sufficient, would it, as brokers, too, make securities available to buyers. So to limit this to dealers is, I think, inappropriate. And of course, asset managers also sell, right? But to include them would result in no differentiation whatsoever.

During one of my doctoral finance courses, a professor offered a definition which I think is perhaps more accurate: the sell side sells liquidity. But even here, wouldn’t asset managers sell liquidity, too? But to include asset managers is, I think, inappropriate, because once you do, then there is no need to differentiate between the two sides of the market. Yes, there are times when asset managers may provide liquidity, but in general, we’re speaking of broker/dealers, yes?

Trusty Wikipedia offers the following: “It is a general term that indicates a firm that sells investment services to asset management firms.” Investment services? Does not an asset manager sell investment services, too? But to avoid confusion, they add “These services encompass a broad range of activities, including broking/dealing [sic], investment banking, advisory functions, and investment research.” It’s interesting to note that this page states “This article needs attention from an expert on the subject.” And the absence of references makes its information less valid. But who has written on this matter to any extent?

As always, your thoughts on this are welcome.