Research: Trade Ideas catch on
The success of Trade Ideas, a platform developed by a consortium of investment banks for distributing trading ideas to their clients, shows that trading ideas are becoming an increasingly important element of the brokerage service that buy-side clients are willing to pay for.
Since its launch two years ago by a consortium of four investment banks – Citi, Credit Suisse, Dresdner Kleinwort and Merrill Lynch – the number of the global platform’s users has almost quadrupled to 242, including 150 sell-side firms, leading hedge funds and traditional asset managers. Approximately 50% of users are based in Europe, 25% in the US, and 25% in Japan and the rest of Asia.
The system enables users to send and receive trading ideas and to analyse and rank the performance of those who send them. The system, which only allows ideas to be sent to parties that agree to the exchange, has become a useful tool for buy-side clients to help measure the value of this traditional brokerage service.
"One of the things we see is that some buy-side firms are putting real money behind trade ideas in terms of where their commissions go," says Simon Tizard, executive director of Trade Ideas. "Typically a hedge fund or asset manager using our system allocates as much as 25% of its commissions to trade ideas, while for some the figure is 100%, which suggests that they don’t value any other service from brokers."