With the buy-side increasingly looking to separate trading decisions from where it purchases research, a new platform offering independent research is marketing analysts directly to the buy-side.
New York-based StreetBrains, LLC is launching a third-party platform focusing on equity, alternative, derivatives and fixed income research analysts. "We've essentially cut out the middlemen," says Lawrence Margolis, a founder and managing director at StreetBrains in New York. The public Web site went live on Tuesday afternoon.StreetBrains will disseminate research from the analysts to end users, including hedge fund managers, family offices, pension fund managers and investment professionals, says Margolis. The company will specialize in marketing, distribution and branding of a portfolio of institutional research products. "We will do all the "heavy lifting for the analysts and let analysts be analysts," says Margolis, who is currently a managing member of Gotham Research, which is one of the research brands that is being marketed the platform.
Out of the starting gate, StreetBrains is offering five research brands: Gotham Research, (quantitative), Sterling Account (energy), MediValue (Biotech), Pattern Watch (Technology) and Real Consumption (Retail/Consumer).
Subscribers can access the research through a unified hub, which is indexed and searchable. Research will also be emailed to subscribers each day. Analysts can update the research dynamically in response to market events. On the analysts' side, they will enter their research into an online system and they can attach video and audio clips or Excel charts and graphs. Reports are delivered in HTML format as opposed to PDFs. "It's really taking the typical research report from a brokerage firm and moving it to the next level where we can deliver the research electronically," says Margolis.
Unlike competitors in the independent research space, the firm is not a broker dealer and is not operating a trading desk, so "there's no conflict of interest," emphasizes Margolis, who cites the example of Soleil Securities, which provides independent research to portfolio managers and buy-side analysts but also maintins its own sales and trading desk.
"The distinction between us and Soleil is that they have a trading desk and they have sales traders that pick up the phone. We do the opposite," says Margolis. We don't have sales traders. "We have relationship managers," he says. Their job is to show the customers the different research brands they have on the platform, he says.
Margolis likens the approach to being a talent agent that makes the talent of the analyst available in a limited fashion. Margolis says the analysts will not be churning out research that shows up on First Call or Briefing.com or wire services. Instead, StreetBrains will help the analysts build their brands and market the products. Each analyst or product will have its own Web site, he says.
The new research platform is also giving buy-side firms the freedom to use lower-cost electronic execution strategies to fulfill their best execution obligations. Customers can pay for the research in hard cash or use a commission sharing programs that are proliferating at brokers. CSA programs are growing in popularity because they allow the buy-side to utilize the execution services of say a bulge bracket broker while setting aside an pool of commissions that can go toward paying third-party research providers. "CSAs do for execution what we do for research. It's part of all the unbundling," says Margolis.
A subscription ranges in price from $25,000 to $70,000, says Margolis. The price is based on a combination of the size of the universe of securities followed as well as the analyst and the performance. "We have a strict vetting process that we utilize when we are looking at analysts," says Margolis. The process starts with an online background survey and extensive tracking by a research committee of their methodology and performance of the products to determine the pricing, he says.
StreetBrains currently has 26 analysts in various stages of the vetting process. Each of the five initial products has between one and seven analysts working on it. Margolis hopes to have 14 or 15 products by year-end. Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio