Sunday, October 10, 2010

Is There Any Way to Attribute Revenues for Corporate Access?

One of the items valued by the buyside is access to corporate management.  As was stated before, this could be a meeting or presentation at a conference or non-deal roadshow.  After either event, how can the sponsoring investment bank confirm that the buyside client is doing more business i.e. trading commissions?  The bank can check the before and after revenue levels in regards to the trading activity for the issuer.  There are certain caveats that must be taken into account.
  • If the security is lightly traded, then the fund manager may execute trades in a more heavily traded stock to pay for the meeting.
  • If the meeting merely caused the fund manager to keep the current holding, then the manager may execute trades in another security to pay for the meeting.
  • If the trading desk for the sponsoring bank does not give "best execution" for the security, the manager may execute trades in another security to pay for the meeting.
  • A better metric may be to calculate the trading market share of a security.

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