.png)
Buy Side Vs Sell Side: Decoding The Two Pillars of Financial Markets
- Team Kautilya
- Sep 7
- 2 min read
SYNOPSIS
The buy side steps in with capital, always searching for the next big return. The sell side creates the platform, bringing liquidity, deals, and opportunities to life. One fuels ambition, the other ensures balance. Together, they shape every trade, every price, every market move. This is where money meets meaning where finance truly comes alive.
On the buy side of the financial market, for money management and fundraising, investors buy or invest large portions of securities. Professionals or investors with capital who want to buy securities fall into the buy side of the capital market. This category includes mutual funds, hedge funds, pension funds, insurance companies, and private equity firms.
The sell side is when the public deals with the trading, selling, creation, and promotion of securities in the financial market. Financial institutions are involved in the activity of selling securities to raise funds. Financial institutions like investment banks, brokerage houses, market makers, and others conduct the activity on the sell side.
Economic view
The buy side and sell side provide two main functions of liquidity and price discovery. The sell side issues supply chain finance to businesses, while the buy side allocates funds into investments that fuel growth.
Recently, the State Bank of India approved a plan to raise Rs 20,000 crore through Basel III norms. In this case, the sell side will arrange the securities, which will be purchased by investors, like mutual funds, insurance funds, and investment firms, on the buyer side of the market. Hence, the funds that SBI needs will be secured by investors.
How does the buy side and sell side earn profit?
The buy side conducts the research, buys securities at a lower price, and sells in the market at a higher price.
The sell side of the market earns its part by fees and commissions. Hence, the main motive for the sell side is to make as many deals a possible. Market makers have a strong influence and engage in activities like underwriting, foreign exchange, and managing bonds for both companies and individual investors
Conclusion
Professionals need to understand both sides as they are interconnected. The buy side focuses on investing capital to generate returns, while the sell side ensures liquidity. Understanding both sides of the market will help make a smarter investment decision.
Well put