Buy side

The market divides by function rather than by direction. The buy side is the institutions deploying capital they own or manage: pension funds, insurers, sovereign wealth funds, mutual and exchange traded fund managers, hedge funds and corporate treasuries. The sell side is the banks and brokers that make prices, execute orders, publish research and distribute new issues to them. Despite the names, neither side is permanently a buyer or a seller, and both are on each side of transactions every day.

The split explains a good deal of behaviour. A buy side desk is measured on the return of a portfolio and on how much of that return was given away in execution, so it cares about moving size without disturbing the price, which is where block arrangements and execution algorithms come from. A sell side desk is measured on flow and on the spread it earns, so it cares about turnover. Research is produced by the sell side and consumed by the buy side, which is why an analyst's rating is a distribution product as well as an opinion.

For a retail participant the term appears mainly in commentary about positioning and flows, where buy side demand means institutional demand. The trip-up is reading the two labels as a hierarchy or as a claim about who is better informed. They describe roles in a transaction, and many groups occupy both at once, running an asset management arm alongside a dealing business, which is precisely the arrangement that conflict of interest rules exist to govern.