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Research & the Role of Big Data

How have technology and big data shaped the future of the independent research and agency broker partnerships?

Traditional fundamental research shops became popular prior to the financial crisis and boomed as a cottage industry shortly thereafter, as analysts sought third-party expertise. However the research industry is not a revenue generator; it provides research on subscriptions paid by broker revenues via commissions. And currently, with commissions down and soft-dollar spending under attack, the business model is suffering.

Industry followers have watched boutique and full-service brokers massively cut back and consolidate in the last five to seven years, and coverage has shrunk significantly across remaining providers. Very little attention is given to names outside the S&P 500, and it's estimated the average coverage of the top full-service brokers is no more than 250 companies per organization. Not that it matters much: In recent years stock picking strategies have lost popularity in favor of basket trading, or simply moving in and out of asset classes, which has further drained commissions.

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Becca Lipman is Senior Editor for Wall Street & Technology. She writes in-depth news articles with a focus on big data and compliance in the capital markets. She regularly meets with information technology leaders and innovators and writes about cloud computing, datacenters, ... View Full Bio

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