Systems and methods for determining fair value prices for equity research

• US 7,769,654 B1
• Filed: 05/28/2004
• Issued: 08/03/2010
• Est. Priority Date: 05/28/2004
• Status: Active Grant

• Current Assignee: Morgan Stanley Services Group Inc. (Morgan Stanley)
• Original Assignee: Morgan Stanley
• Inventors: Hurewitz, Barry S.
• Primary Examiner(s): Patel; Jagdish N
• Assistant Examiner(s): CHANDLER, SARA M
• Application Number:
  US10/856,442
• Time in Patent Office: 2,258 Days
• Field of Search: 705/35
• US Class Current: 705/35
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

Methods for determining a range of fair value prices for equity research to be supplied by a sell-side firm to a buy-side firm. The range of fair value prices may be used, for example, to frame the discussions between the sell-side firm and the buy-side firm over the price of equity research supplied by the sell-side firm. For example, the parties may engage in discussion discussions as to which determined fair value price or prices are most appropriate to the parties'"'"' circumstances. A number of different pricing techniques are disclosed.

Claims

1. A computer-implemented method of determining a value of equity research provided by a supplier of equity research to a consumer of equity research, the method comprising:

receiving by a computer device from a database first data describing a plurality of consumers of the supplier'"'"'s equity research, the plurality of consumers comprising the consumer, wherein the computer device comprises at least one processor and is in electronic communication with the database;

determining by the computer device a peer group of the consumer of equity research considering the first data, wherein the peer group comprises peer entities of the consumer selected from the plurality of consumers based at least on, each peer entity'"'"'s consumption level of resources of the supplier of equity research relative to the consumer'"'"'s consumption level of resources of the supplier of equity research;

calculating by the computer device an average amount that the peer entities spend with the supplier for equity research;

calculating by the computer a value of the equity research based on the average amount that the peer entities spend with the supplier of equity research; and

transmitting with the computing device data indicating the value of the equity research to an output device in communication with the computer.

2. The method of claim 1, wherein calculating the average amount that the peers of the consumer spend with the supplier for equity research comprises, for each peer, multiplying a total street spend of the peer by a percentage of a total street spend allocated to research by the peer.

3. The method of claim 1, wherein the value of for the equity research is also based on an average wallet share percentage of the supplier for peers of the consumer.

4. The method of claim 1, wherein the value of the equity research is also based on an average percentage of commissions allocated to research by peers of the consumer.

5. The method of claim 1, wherein the value of the equity research is also based on an average amount that peers of the consumer spend with the supplier for equity research as a percentage of assets under management.

6. The method of claim 1, wherein the value of the equity research is also based on an estimated cost plus mark-up of the supplier to provide the equity research to the consumer.

7. The method of claim 1, wherein the value of the equity research is also based on an hourly rate plus mark-up of an estimated number of analyst hours of the supplier to provide the equity research to the consumer.

8. The method of claim 1, wherein the value of the equity research is also based on a scaled price based on a known agreement relating to the provision of equity research.

9. The method of claim 1, wherein the value of the equity research is also based on a research service level of the consumer and a number of shares traded by the provider for the consumer.

10. The method of claim 1, wherein the peer entities of the consumer are determined based on at least one of commissions paid to the supplier, fund type, assets under management, wallet share of the supplier and-turnover-adjusted assets.

11. The method of claim 1, wherein the equity research is for a market sector, and the fair value of the equity research includes value of the equity research prices for the market sector.

12. A computer-implemented system for determining a value of equity research provided by a supplier of equity research to a consumer of equity research, the system comprising:

a database; and

a computing device comprising at least one processor and an operatively associated computer readable medium, wherein the computing device is in communication with the database via an electronic network, and wherein the computer readable medium comprises instructions thereon that, when executed by the at least one processor, cause the computing device to;

receive from the database first data describing a plurality of consumers of the supplier'"'"'s equity research, the plurality of consumers comprising the consumer;

determine a peer group of the consumer of equity research considering the first data, wherein the peer group comprises peer entities of the consumer selected from the plurality of consumers based at least on each peer entity'"'"'s consumption level of resources of the supplier of equity research relative to the consumer'"'"'s consumption level of resources of the supplier of equity research; and

calculate an average amount that the peer entities spend with the supplier for equity research;

calculate a value of the equity research based on the average amount that the peer entities spend with the supplier of equity research; and

transmit data indicating a the value of the equity research to an output device in communication with the computer.

13. The system of claim 12, wherein calculating the average amount that the peers of the consumer spend with the supplier for equity research comprises, for each peer, multiplying a total street spend of the peer by a percentage of a total street spend allocated to research by the peer.

14. The system of claim 12, wherein the value of the equity research is also based on an average wallet share percentage of the supplier for peers of the consumer.

15. The system of claim 12, wherein the value of the equity research is also based on an average percentage of commissions allocated to research by peers of the consumer.

16. The system of claim 12, wherein the value of the equity research is also based on an average amount that peers of the consumer spend with the supplier for equity research as a percentage of assets under management.

17. The system of claim 12, wherein the value of the equity research is also based on an estimated cost plus mark-up of the supplier to provide the equity research to the consumer.

18. The system of claim 12, wherein the value of the equity research is also based on an hourly rate plus mark-up of an estimated number of analyst hours of the supplier to provide the equity research to the consumer.

19. The system of claim 12, wherein the value of for the equity research is also based on a scaled price based on a known agreement relating to the provision of equity research.

20. The system of claim 12, wherein the value of for the equity research is also based on a research service level of the consumer and a number of shares traded by the provider for the consumer.

21. The system of claim 12, wherein the peer entities of the consumer are determined based on at least one of commissions paid to the supplier, fund type, assets under management, wallet share of the supplier, and turnover-adjusted assets.

22. The system of claim 12, wherein the equity research is for a market sector, and the value of the equity research includes value of the equity research for the market sector.