London, 21 July, 2011 – A new report from Aite Group examines the key trends that have developed in the commission management industry since the 2006 implementation of new regulation in the United States and U.K. The report also explores the adoption of commission management in the European and Asian markets, and major commission management initiatives provided by full-service and agency brokers.
Scandals in the U.S. and U.K. markets prior to 2006 forced regulators to investigate the use of commission credits in relation to best execution and conflicts of interest at large investment banks that provide multiple services, including research, to the asset management community. The resulting regulation created commission-sharing arrangements in the U.K. and client commission arrangements in the United States with the goal of ensuring that investors’ money was used appropriately in the investment process. Since the 2006 implementation of this regulation, commission management has become a routine process at many large global asset management firms; even so, adoption has not been broad or uniform among the smaller and regional asset managers and in various markets across the globe.
“While Aite Group is seeing a greater global acceptance of commission management as a conduit to best execution, it has been less popular in Europe (excluding the U.K.) and the Asia-Pacific region,” says Simmy Grewal, analyst with Aite Group and co-author of this report. “Attitudes toward commission management need to change, not only in the Asia-Pacific region, but across Europe and other parts of the world, as well. Bad connotations around soft-dollar payments need to be dispelled and replaced with a more accurate understanding of commission management, the need for independent research, and how these impact best execution.”
The report explores major commission management initiatives from full-service and agency brokers, including Barclays Capital, Bloomberg Tradebook, ConvergEx, Deutsche Bank, Instinet, ITG, Knight, Liquidnet, State Street, and UBS.
This 31-page Impact Report contains five figures. Clients of Aite Group's Institutional Securities & Investments service can download the report.