Buy side and sell side are two fundamental aspects of the financial markets. The buy side refers to firms that purchase securities, including investment managers, pension funds, and hedge funds, and invest large quantities of securities as part of money management and/or fund management. On the other hand, the sell side refers to firms that issue, sell, or trade securities, including investment banks, advisory firms, and corporations.

The main differences between buy side and sell side are related to the type of research they undertake. Buy-side analysts conduct broad research that often uses information from trusted sell-side analysts to make investment recommendations. By comparison, sell-side analysts research specific industries or sectors to generate sales of financial products.

Other differences between buy side and sell side include the following:

Buy Side

• Professionals and investors invest in securities, including common shares, preferred shares, bonds, derivatives, and other products that are sold by the sell side.
• Buy-side investors can place large-scale transactions to keep trading costs low.
• Buy-side firms usually have a pool of funds that is used for investing.

Sell Side

• The sell-side mostly consists of banks, advisory firms, or other firms that facilitate the selling of securities on behalf of their clients.
• The most high-profile sell-side activity is underwriting IPOs, acting as a buffer between companies going public and the investing public.
• The sell-side requires more salesmanship than the buy-side.

In summary, the buy side and sell side are complementary and indispensable to each other. While the buy side refers to firms that purchase securities, the sell side refers to firms that issue, sell, or trade securities. The main differences between buy side and sell side are related to the type of research they undertake and the nature of their business.