Wirehouse

What is a 'Wirehouse'

A wirehouse is an archaic term used to describe a broker-dealer. Modern-day wirehouses can range from small regional brokerages to giant institutions with offices around the world. The term "wirehouse" owes its origins to the fact that, prior to the advent of modern wireless communications, brokerage firms were connected to their branches primarily through telephone and telegraph wires. This enabled branches to have access to the same market information as the head office, thus allowing their brokers to provide stock quotes and market news to their clients.

BREAKING DOWN 'Wirehouse'

The global financial crisis of 2008 led to unprecedented turmoil among wirehouses, primarily because of the very substantial exposure that many of them had to mortgage-backed securities. While a number of the smaller players were forced to close shop, some of the most prominent names in the industry (such as Merrill Lynch and Bear Stearns) were either acquired by bigger banks or disappeared altogether into bankruptcy (Lehman Brothers).

Most present-day wirehouses are full-service brokerages that provide the complete range of services to clients, from investment banking and research, to trading and wealth management. Although the proliferation of discount brokerages and online quotes has eroded the edge in market information that the wirehouses formerly possessed, their diversified activities in capital markets continue to make them very profitable entities.