This document discusses the convergence of buy-side and sell-side firms in the investment industry. Traditionally, buy-side firms invest on behalf of clients while sell-side firms receive and execute client orders. However, some buy-side firms and prime brokers now function similarly by trading across multiple exchanges through multiple brokers. This poses challenges around market data costs, risk management, and back-office operations. The document proposes that ZagTrader's global order management solution allows buy-side firms and prime brokers to outsource these problems by providing direct market access, data integration, and a centralized platform.

1. The Convergence of the
Buy-Side and Sell-Side
BY
SHIHAB KHALIL - CEO ZAGTRADER

2. A simple definition of a Buy-Side and Sell-
Side
A firm that invests in securities for its clients (and possibly
its own) is usually called a “Buy-Side”.
A firm that receives the orders from its clients and forwards
them to execution is usually called a “Sell-Side” or a Broker.
Sell-Side activities can involve brokering, dealing, advisory
services, and investment research.

3. Examples of Both Sides
Buy-Side
Asset
Management
Hedge &
Mutual
Funds
Institutional
Investors
Retail
Investing
Sell-Side
Investment
Banking
Brokerage
Prime
Brokerage

4. Market Segment in Focus
For the sake of this presentation, We will focus on the Buy-
Sides that:
◦ Manage Clients’ Portfolios
◦ Trade Across Multiple Exchanges through multiple brokers

5. Discretionary vs Non-Discretionary
A Discretionary account allows the Portfolio Manager to manage the
account and buy and sell securities without the client’s consent.
A Non-Discretionary account allows the Portfolio Manager to
manage the account, only after the client provides directions. The
portfolio manager can not make decisions without referring to the
client for every transaction.

6. Buy Side Typical Transaction Workflow
Buy-Sides usually trade with multiple brokers for multiple markets.
Buy-Sides can even trade with multiple brokers for the same market.

7. Current Challenges to Buy-Sides
Buy Sides trade on:
◦ Multiple Exchanges
◦ Through Multiple Brokers
◦ Using many screens (Direct broker screens and
aggregating screens operating over routing networks)
Trading Teams gather all the trades in Spread Sheets and send them over to back-office /
accounting at the end of the day.
Risk Management is in question.
Back Office and Operations are blind until end of day.
Corporate Actions pains are linearly correlated to the number of securities covered

8. The Sell-Side Process Flow
Sell Sides are electronically connected to the exchanges they cover, and offer
their clients various channels, such as Online, DMA via FIX Routing networks.
Brokers are focused on their markets they cover only. They do not worry about
other exchanges’ data and services.

9. There is one more category.. Prime
Brokerage
What about the Financial Institutions that offer regional or global trading for
their clients, act as brokers, but more function like a non-discretionary “buy-
side”?
They are buy-sides from the order sending perspective.. But technologically
dysfunctional brokers – since they do not offer electronic means to receive
orders from their clients..
You do not have to be a member of an exchange to be labelled “Broker”. You can
be a “Prime Broker”.

10. Major challenge facing Buy-Sides and
Prime Brokerage
Now that we have established certain similarities between some
Buy-Sides and Prime Brokers, the following are some of the serious
issues:
MARKET (Expensive) DATA
Eliminate risk by deploying a sophisticated Order Management
System and real-time integrated back-office, to achieve real-time risk
management, you need to have real-time market data INTO the
system.

11. How Big are the costs of data?
Example: An institution wishing to trade on 10 exchanges..
◦ Obtain Data Feed pipe from a Feed Provider : $5,000 per month (on Avg)
◦ $1500 per exchange per month for becoming a vendor of record / Distributor
◦ Bandwidth to get the large data into the system
◦ The IT infrastructure to support the incoming big-data
◦ The IT staff that are needed to be on a higher level of sophistication
Direct Costs can exceed $250,000 per year In addition to cost of IT +
Human Capital

12. What if you can out-source your
problems?
Focus on your own business
Run a solid platform
Let the data people send data to your end-users directly and
on-demand
Let the platform connect to Corporate Actions data
providers and only receive data that matters to you

13. The Convergence of the Buy-Side and Sell-
Side  Prime Investment Banking
Global Brokerage Operation, offering Online, Mobile Apps,
Direct Market Access (DMA) via Routing Networks, Cross
Market Settlement, Multiple Asset Classes, Managed and
Un-Managed Portfolios

14. ZagTrader Pioneered Solution
Global Prime Brokerage is now a reality with ZagTrader’s Global Order
Management Solutions, in partnership with various global data provides, all
working together to provide this unique solution.

15. Global Integrated Platform.
Maintain Independence.
Leap Forward.
www.ZagTrader.com