Trade ideas

Trade ideas are investment ideas which are sent by institutional stockbrokers to their clients. They typically propose a trade in a specific stock and are developed by the individual idea author’s (e.g. a salesman) own knowledge of their client’s particular area of investment interest, so will take into account: the client’s investment style, portfolio size and the sector and geographic focus.
Recipients of trade ideas can be hedge funds, bank’s proprietary trading desks and money managers. Trade ideas are sent to the client with a recommendation to buy or sell, an amount in value (e.g. $2 million) and often a timeframe and an indication of level of conviction.
Brokers only send trade ideas to their most valued clients. In return for receiving ideas that provide superior investment returns they are rewarded with increased commission payments from their clients. Trade ideas are therefore highly performance related. Only brokers providing consistently good ideas are rewarded by the client and only those clients prepared to pay for them will continue to receive the brokers’ ideas.
Brokers use an Alpha capture system to author and publish ideas.
Trade ideas have traditionally been equity oriented, however clients are increasingly looking for more diverse recommendations across a wider range of asset classes and financial instruments. It is expected that Alpha capture systems will become more sophisticated (covering derivatives, options, futures etc) as demand for realistic idea performance tracking tools become more widely used and accepted.

Main Menu

See Also

Main Menu