Sell Side

What it is:

Sell side, sometimes called prime brokers, refers to investment firms which sell securities and assets to money management firms and corporate entities. They may be considered intermediaries which both perform research and conduct the actual purchase of securities.

How it works/Example:

Sell side firms are registered members of a stock exchange and they take orders from buy side firms. The services they offer include brokering, dealing, advisory services and investment research.

In short, they both generate trading ideas and execute trades.

Sell side firms charge buy side firms for the product (the stock), the cost of trading the stock (the trader's salary) and the cost of the research (the analyst's salary). Many sell side firms now delineate the cost of their products so that purchasing firms know they are paying an appropriate price for the best research available.

Why it Matters:

Companies on the sell-side of the financial industry seek to derive value by carefully researching stocks to fit their clients' individual investment strategies and by directly purchasing the securities off of the markets.

Buy side and sell side firms are the direct participants of every trade made on an exchange.

Best execution refers to the imperative that a broker, market maker, or other agent acting on behalf of an investor is obligated to execute the investor's order in a way that is most advantageous to the investor rather than the agent.