WALL STREET JOURNAL.
Big Investors Don’t Want Wall Street Analysts Snooping on Them
concerned that sharing readership habits with banks’ other clients
could give rivals an edge
Amar Reganti, center, is
investment director of Wellington Management, which has
expressed concerns about how data about its employees’ reading
habits are being used. PHOTO: BRIDGET BENNETT/BLOOMBERG NEWS
June 14, 2018 5:30 a.m. ET
Some of the world’s
biggest investors have a message for Wall Street: Stop reading over
Banks, under pressure to find new ways to boost revenue in their
giant research arms, are collecting loads of data on what their clients are
reading and when. But some investors who make trading decisions based on that
research are pushing back.
Capital Group, one of Wall Street’s biggest and most influential
clients, has asked the banks that sell research notes to the firm to limit
tracking what its employees are reading, according to people familiar with the
Other giant investment managers, including Wellington Management
T. Rowe Price Group Inc., have expressed
similar concerns about how data about their employees’ reading habits are being
used, some of the people said.
Investor concerns about banks’ data-collection efforts come at a
critical time for Wall Street’s research business, which accounts for a portion
of trading commissions. Banks still generate more than $4 billion in the U.S.
annually from notes and other engagements with their armies of analysts,
according to estimates by Greenwich Associates. But the revenue stream is under
pressure from new regulatory rules in Europe and clients’ push to reduce their
To bolster the business, banks are increasingly employing some of
the same techniques adopted by
advertising and media companies, such as
tracking who has access to the notes to ensure everyone is paying. They also
want to keep track of what clients are reading to help better price research
It is also a sensitive topic at a time when banks are exploring
new data products. Some bankers said that hedge funds have asked if they can see
a stream of aggregated research data, such as what notes are the most read, or
longest read, but also that their banks weren’t selling that information, people
familiar with those requests said.
The amped up data-tracking has rankled some customers, who worry
that even anonymized readership habits, if shared with other clients, could
allow rivals to get ahead of their trades. Some liken it to the maelstrom
surrounding social-media behemoth
Facebook Inc., which has faced intense
criticism for its
handling of user data.
“It’s a real tug of war,” said Philip Brittan, chief executive of
startup Crux Informatics Inc., which helps banks organize and potentially sell
their internal data. “Banks will say it’s our property, and [clients] will say
their usage is their property. It’s an unsettled topic."
Beginning about two years ago, banks started moving from the old
system of emailing PDFs to using new websites using HTML5—a web coding language
that allows for more tracking of user activity—for distribution of research
While banks could track whether emails were opened, they didn’t
see much else. With the new technology, they can typically see in real-time
exactly what pages are being read, for how long, and by which users.
Some clients see these latest efforts as a misuse of their
Capital Group, a Los Angeles firm with about $1.7 trillion in
assets under management, has asked banks and other research providers to archive
readership data related to the firm and not use it in any way for a period of
time, according to people familiar with the discussions.
Following these discussions, some banks have agreed to adopt a
90-day embargo for reader-tracking data, the people said. Other firms have gone
back to sending research notes as PDF email attachments that can’t be tracked as
easily as an HTML5-based website, some of the people said.
Research providers argue that readership tracking is meant to
improve the product, allowing them to better target clients’ interests and plan
their communication with customers. Banks, for example, might notice that a
client hasn’t opened a note about a time-sensitive trading opportunity and could
follow up with a call before the market opened the next day.
Banks are facing a number of pressures in research. For several
years, the decline in assets and revenue of active investment managers,
historically research’s biggest customers, has squeezed commissions.
More recently, new rules in Europe have made it illegal to offer
research as a side benefit of trading, long the practice globally. Instead,
investment firms with European clients starting in January must pay a set price
for research, and some clients don’t want to pay as much as banks think they
Greenwich Associates estimated that European research revenue
fell 20% year-over-year in the first quarter, or by $300 million. The firm,
which tracks banking trends, expects those same fee pressures to be exerted
globally in the years ahead.
Telis Demos at