August 27, 2008
- Toronto, CA
Bay Street abounds with tales – some true, some apocryphal, but all plausible given the culture of the securities industry – of brokerage salespeople entertaining clients by running up tabs in the thousands at pricey bistros or even strip bars.
But tickets to the big game, a table at a tony restaurant or even a long-term business relationship just don't cut it any more for brokerages trying to win trading orders from big investors such as pension funds. Regulators are pushing money managers to justify the billions they spend collectively on trading fees each year because the payments detract from investor returns, and a new industry is springing up to profit from the change.
A handful of companies such as Toronto-based First Coverage are creating systems to track the performance of recommendations generated by brokerage firms. No longer do portfolio managers have to depend on a gut feeling that one analyst is better than another, or that one salesman has superior ideas and deserves a commission.
First Coverage, a startup running out of a sparsely furnished office north of Toronto's financial hub, is basing its business on a computer program that streamlines and tracks the flood of ideas brokerages generate every day as part of their pitch to investors for business.
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