While is still too early to tell, some market participants feel that one of the unintended consequences of the $1.4 billion global settlement regarding biased Wall Street research could be an upturn in demand for independent research.
Of course, indy firms stand to reap a $432 million windfall over the next five years due to the specific terms of the research settlement. However, we have started to hear rumblings that non settlement investment banks and brokerage firms have begun poking around to see if it makes sense for them to offer independent research to their customers. At the heart of this move is the concern that the non settlement firms will be at a competitive disadvantage as a result of the “free research” the settlement banks will be providing to their clients over the next five years.
This could be one of the reasons that Dain Rauscher recently signed a contract with one well-known independent provider of fundamental research. Some market watchers note that regional broker dealers have often contracted with brand name indy research firms in the past to bolster their research offerings. They explain that the Rauscher deal is nothing more than an extension of that trend.
While that may be so, it could also be the sign of an inflection point in the demand for research offered by the growing ranks of indy firms. We will keep an eye on it for you.