The Research department is almost always grouped together under the Markets division umbrella (Sales, Trading & Research), as Research analysts produce much of the information that the Sales and Trading teams use to inform their trade strategies and recommendations (to clients). Research teams are usually split up into two areas: (1) Fixed Income, Currencies & Commodities (FICC) and (2) Equities.
Research could involve conducting a detailed analysis of a particular asset class, company (or group of companies), market (including competitors and the level of market saturation) or industry (for instance providing an insight into industry trends or events that could or already have affected the performance of firms in that industry).
Research teams may produce projections of the future financial performance of companies (which could for instance help the Investment Banking Division to value a company for the purposes of an IPO); or estimations of future growth in particular asset classes, markets or regions (perhaps informing the investment decisions of traders or the advice offered by Sales people to their clients). This research is usually published in reports, either for internal teams and divisions, or clients.
- Chinese Wall: some of the information to which IBD bankers become privy must be kept private from the Sales and Trading teams. This is because these teams could otherwise potentially exploit the information to generate profits, which in turn could artificially manipulate the price of shares in the market. The barrier which is designed to stop the unethical free flow of information between different divisions within a bank is called the ‘Chinese Wall’ and its main objective is to prevent private information from being leaked, especially to the Markets division.
- Insider Trading: the buying or selling of a security based upon information procured that is not publicly available. This is a criminal offence as such action can give banks an unfair advantage and manipulate market prices. As such, banks must ensure sufficient controls are in place to enforce the ‘Chinese Wall’.
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By Jake Schogger - City Career Series