Investment Banking Sales Brokers

The Philadelphia Stock Exchange (now known as NASDAQ PHLX) is the oldest stock exchange in the United States. It was founded in 1790. The best-known exchange in the United States—the New York Stock Exchange—was founded in 1792. The first investment bank in the United States was founded by financier Jay Cooke in 1861. Jay Cooke & Company, which was located in Philadelphia, provided loans and sold bonds to help finance the Union war effort, and, later, became a federal agent in the government financing of railroad construction. Ever since that time, sales brokers have helped banks sell securities on the secondary market. Transactions that are made on the secondary market occur between investors, and any profits from their sale go to the selling investor, not to the company that issued the stock or to the underwriting bank. Investment banks earn commissions and fees from executing and clearing client transactions on major stock, futures, and options exchanges worldwide, as well as over-the-counter transactions.

Recently, the investment banking industry has gone through a period of transition. “The new regulations that followed the financial crisis [of 2007–08] have changed the industry in a number of ways, making it difficult to profit from many traditional lines of business by creating onerous capital, funding, and liquidity requirements and increased costs and operational complexity,” according to Turning Around Investment Banking: An Agenda for Reviving Profitable and Sustainable Growth, a 2016 report from professional services firm PricewaterhouseCoopers LLP. “Although investor confidence and deal flow have recovered somewhat, the trading environment for previously very profitable business lines in fixed income, currencies, and commodities (FICC) has remained challenging.” Reuters reported that FICC trading revenue at 12 of the world’s largest investment banks declined from $109.1 billion in 2010 to $69.9 billion in 2015. In response, many banks began moving away from trading activities and focusing on more profitable areas of business.