Brokers and Research and Trading — Oh My!

O'Reilly Money:Tech Conference
The best part about being a conference chair for Money:Tech is the opportunity to see what’s happening on the front lines of the FinTech and Securities businesses. No surprises here: turnover and layoffs are out there, but I also see new opportunities and a thrust towards being smart, thrifty, and creative. More on that in a minute — first let’s talk about the shape of the Industry.

Brokers and Trading are coming to the forefront. I mentioned this in an earlier piece and since then my radar is up big time. With the Merrill/BofA deal and the pending Citigroup/Morgan Stanley arrangement, a return to the rough-and-tumble, sharp-elbows school of trading/brokerage prowess is coming back into vogue (Hello, Bud Fox). The days of your father’s order taker may have returned. Clients are looking for advice, insightful commentary, and idea generation, especially on the retail side (institutions have been asking for this since the beginning of time). The name of the game in the brokerage business is maintaining and growing client accounts. Brokers by their nature provide market surveillance and identify return opportunities in line with a client’s product and risk profile. Ultimately, If your clients are transacting, your trading floor is happy. So in this case, information = transactions. For the broker, a well-informed client is a prosperous client, and the client is ultimately happy if he is making a return.

If the dogfight is on the brokerage side, this opens up a lot of questions. With sell side research a shell of its former self, especially in comparison to the pre-Spitzer days of coverage, coverage, and more coverage, where are all these brokers going to get information to deliver to their clients? Where is all that differentiated content going to come from? It will not be from the top sell side names that have gone independent and proprietary like Ed Wolfe. No sirree, the gap has been created. Those guys are working for a limited number of buy side clients, and it’s so long and thanks for all the fish.

So if you’re a retail broker or financial consultant (FC) and your Research department isn’t covering enough companies or doing research on emerging product areas like ETFs (Exchange Traded Funds), the game has to shift to third parties or you need do it yourself. That means tools, sites, and idea generators — both traditional and non-traditional — are going to be making headway. This, I believe, is where the Internet is entering the picture.

In my travels, I’ve encountered people from all walks of the financial industry who are using web searches, Google alerts, RSS newsreaders, and web scraping, with varying degrees of success. If they’re really adventurous, they are building interfaces using Netvibes, Infongen, iGoogle, and others. But they complain about the time it takes to set up and, especially, maintain these tools. They also note their lack of “financialness,” which I interpret as tickerization and the like, for we market denizens live by our tickers — MSFT, YHOO, GOOG, APPL, BAC, MS. Yet even with all that kvetching, they are finding value. That’s why I’m hopeful, better mousetraps aside, that the current need to “Do It Yourself” creates a greater user base and spurs the development of new tools and services.

So when I see something like this, from a company called Connotate, I get a few goosebumps.


This is basically a solution in which you can designate a page or site that needs to be parsed and the results stored as data. Pick and choose the elements, and Connotate’s agent-based technology does the manual work of collection, normalizing, monitoring, and aggregating, while you do other tasks. You can then plug the data into your model. Imagine creating your own version of the Challenger, Gray & Christmas report on planned layoffs on a regular, real-time basis. Or, if you so choose, gather the data from VGChartz while pairing it with Amazon sales data to proxy NPD. (Flames await me)

So stay tuned, keep your radar up, and watch the action as we go forward.

Connotate and other interesting tool and service providers will be at Money:Tech, held at NYC’s Marriott Marquis Hotel from Feb 4 – 6, 2009. I have some special discount passes for up to 50% percent off, a benefit of being a co-chair. I have a limited number for the first few people who email me.

  • Stefano Bertolo

    another company that does sophisticated data extraction from web pages is Lixto.

  • A fascinating topic, even if I’m not completely familiar with the world of finance related data mining and trend finding.

    I’ve been curious about similar issues myself recently as a web designer and general geek, in the interests of building more automated information sorting websites. Feed aggregation and RSS readers are all well and good but there comes a point where it’s all just too much to handle. I cringe at using the term “information overload”, perhaps the signal to noise analogy is more appropriate.

    It’s not so much that there is too much information out there, but rather to do with the fact that the vast majority of the information is irrelevant and of low quality. It seems a shame to not put all the raw computing power out there on to the task of making sense of it all.

    A related article I read a while back was a case study by someone who has created a self running science site that finds, sorts, categorizes and presents the latest science news and press releases, all in a neat human-readable format. You can read about it here at the Drupal site:

    It is a practical application of data mining, parsing and sorting technologies that would need hundreds of work hours for actual human beings to achieve. This project was a one-off by the author, and as far as I know none of the code/technology has made it into the public domain yet. I’m wondering if there are open source projects and resources which cover similar ground. Similar site setups for niche interests would make for some interesting exploration.


  • Retail brokerage was declining in favor of trading the bank’s own book. That latter might be muted for a while, but I expect it to return. Likely retail broking will continue its secular decline. The reason for retail brokerage to even exist is that the bank has “new information” that can be used. When information was hard to acquire and primarily through analyst access to companies, that made some sort of sense. However, the data you are talking about is available to anyone. So what value does the retail broker add to it to justify the higher commissions? I don’t see it.

    In the past you have blogged on web access to data that might be useful, but that information was available to everyone, not just the institution.

    I agree with you that interesting data access and display is happening, I just don’t see it helping the retail broker or his institutional counterpart. For that you need a perceived (real or not) edge – a star analyst or analytical approach.