Top Brokerages Are Ready to Be Rated
June 18, 2007
MeritMark, as the platform is called, will be launched with, and be available over, TheMarkets.com, where votes can be registered starting at the end of this month, according to officials.
The consortium has company: Thomson Financial last week announced the Thomson Extel Surveys' Internal Broker Review (IBR), an online service for the buy side that compiles and collates internal feedback, commentary and voting on the services received from brokerage and research firms. The Web-based program follows the approach of the annual Pan-European Extel Survey that dates back to 1974. IBR is now available on the Extel Web site and is scheduled to launch on the Thomson One platform in late 2007, Thomson Financial said.
The MeritMark sponsoring firms are Banc of America Securities, Bear Stearns & Co., Citigroup, Credit Suisse, Deutsche Bank, Dresdner Kleinwort, Goldman Sachs & Co., JP Morgan Chase & Co., Lehman Brothers, Merrill Lynch & Co., Morgan Stanley and UBS Investment Bank. All except Bear Stearns are investors in and owners of the six-year-old TheMarkets.com service that distributes research to buy-side clients.
"Both the buy side and brokers are desirous and in need of the evaluation of sell-side research and more transparency at a time when there is ongoing discussion about the unbundling of services," said Amy Kadomatsu, SVP of New York-based TheMarkets.com. The company's CEO, David Eisner, added, "We view ourselves as a bridge between the brokers and the buy side, and the expansion of our business into the broker evaluation process is a natural extension of that position."
According to research conducted by TheMarkets.com, current systems for assessing sell-side analyst performance have been difficult to use and not as efficient as a collective system supported and backed by a large number of firms.
"From the buy-side perspective, it can be painful to conduct these surveys," Kadomatsu said, noting that some firms try to manage the process on Excel spreadsheets, having to obtain analyst lists from individual sell-side firms that are constantly undergoing changes. The new MeritMark evaluation system is designed to bypass such problems.
"There is definitely an advantage to utilizing a system where 12 brokers have come together to create a standard format for providing evaluation and feedback," Kadomatsu said.
Further evidence of the need and demand for improvement in the broker assessment process is the Thomson broker review system. "The business has changed in the last five years, and both the buy and sell side are demanding even greater transparency," said Andre Lavoie, VP of institutional services at Thomson Financial. "The buy side wants access to tools that help them best allocate their resources." Steve Kelly, global head of Thomson Extel Surveys, said the system continues the long Extel tradition "by offering our buy-side clients a comprehensive way for them to conduct their broker votes internally, and to communicate those results with the sell side so they can both allocate resources more efficiently."
Closing a Gap
Thomas Bianco, a managing director with Merrill Lynch and a participant in the creation of the TheMarkets.com service, said, "We want to continually improve how we allocate our resources to our clients." The growth in size and influence of hedge funds has altered the research environment, he observed, and the client base for sell-side research has changed. "This is a service for those accounts that have not given us a formal evaluation before," he said.
