Sensing Opportunity, E-Trade Setting Up Stock Research Unit
Schmelkin, Alissa, American Banker
E-Trade Group Inc. said Monday that was setting up a global equity research unit for institutional clients with an eye to providing the same analysis for retail brokerage clients in the future.
The online brokerage firm is trying to exploit the Wall Street scandal over investment bank research. E-Trade says the need for independent research has become more apparent amid allegations that the biggest U.S. investment banks compensated equity analysts who brought in banking business, creating a conflict of interest.
The idea to offer research came up six to 12 months ago, but now "is an incredibly opportune time" to initiate the operation, said Jarrett Lilien, E-Trade's chief brokerage officer, in an interview. E-Trade is hoping that providing its own equity research to some 650 institutional clients will bring in more revenues and attract additional institutional business.
E-Trade enters the research market as regulators investigate banking companies such as Merrill Lynch & Co. and Citigroup Inc.'s Salomon Smith Barney unit for conflicts of interest between their research and investment banking units. E-Trade does not have an underwriting business.
There is another twist, however. E-Trade, based in Menlo Park, Calif., is setting up this new research unit in London, and the initial research will focus on Europe. Many of the institutional accounts came with the acquisition E-Trade made in 1999 of TIR Holdings Ltd., a brokerage based in Dublin.
The company said Monday that it had hired Martin Evans, the head of European research at Credit Lyonnais in London, as director and head of global research. Six other research analysts from Credit Lyonnais are joining with him. The six are scheduled to start at the end of this month, and Mr. Evans in the next six months.
"We do have a budget, and we do expect that this will pay for itself pretty much immediately," because E-Trade anticipates that Mr. …