Storm Copestand
Traders Magazine Online News

Conquering Fear in Trading

In this exclusive to Traders Magazine, therapist Storm Copestand examines how traders can manage expectations and conquer their fear during the entire execution process.

Traders Poll

Amid changes in builder, do you think the CAT project will be completed by 2020?

Free Site Registration

June 30, 1999

Filtering Buy-Side Research

By Bill Davenport

Also in this article

  • Filtering Buy-Side Research
  • Page 2

About five years ago, the big concern for buy-side traders was finding market data. Today, the big issue is how to filter it. There is simply a lot more research produced today than five years ago.

To make matters worse, the advent of new technologies has led to a deluge of information. These new technologies include e-mail and the voiceblast (a voice mail sent simultaneously to multiple buy-side customers by a broker).

So the question is, how do harried buy-side traders only obtain the research they need?

The good news is that much of the data on buy-side desktops is redundant. Brokers disseminate virtually the same information over several distribution channels. For example, some brokers e-mail their morning-meeting notes to the same buy-side audience that already receives these notes over the First Call Network. (First Call is operated by Thomson Financial, the parent company of Securities Data Publishing, publisher of Traders Magazine.)

Internal Research

Many buy-side firms have created or expanded their internal research departments, producing an increasing volume of research and earnings estimates (to which traders need to pay attention). This is in response to the lack of objectivity in some brokers' reports. Much of the bias stems from pressure on the brokers to avoid sell recommendations in order to preserve their firms' investment-banking relationships.

Furthermore, there is an increasing amount of information available on the World Wide Web, ranging from corporate web sites, trade publications and regulatory agencies, to chat and news groups for day traders. It is now commonplace for traders to visit such well-known venues as Yahoo! Finance, Silicon Investor and the Motley Fool. These sites have a direct impact on security prices.

So the challenge is to leverage the increased availability of information without being overwhelmed. The solution is to combine the data sets and utilize intelligent alerting mechanisms that navigate and filter information. These data sets include proprietary brokerage research, earnings estimates, third-party information, internal data and additional web content.

A good system incorporates such mechanisms, identifying the content that the user needs to make investment decisions. A system like this enables customers to combine multiple data sets onto a single Enterprise Information Portal that can be customized to meet each user's unique needs.

Brokers are also taking advantage of the opportunities provided by the Internet. Many are seeking to build more direct relationships with their clients by creating web sites specifically targeted to their institutional buy-side customers.

These sites often include supportive information not previously available to the buyside, such as the firm's earnings models and event calendars. Some analysts also add video and audio clips to their research, providing additional insight. Audio and video clips are increasing in importance as we move to a high-bandwidth world, allowing efficient usage of these technologies.