The Countervailing Power of the Buy-Side
MICHAEL MURPHY: The title of the panel is “The Countervailing Power of the Buy-Side.” Earlier, I had asked six people to define the word countervailing before I was eventually able to figure it out.
Now that I understand it, I am reminded of Bob Dylan’s song, “The Times They Are A-Changing.” Well, that is happening today. Regulations have changed the markets. Commission rates are heading lower, driven by a more transparent marketplace and technological innovations by both brokers and investment managers. The innovations include electronic systems like Instinet and POSIT, as well as dark pools of liquidity, while brokers have moved into the program trading game to recoup some of the dollars subsequently lost. At the same time, brokers and investment banks have moved aggressively into the very profitable derivative marketplace.
This compression on rates and the shift of power from the sell-side to the buy-side, are probably largely driven by technology and the better application of this...