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Soft Dollars & Bundling: Here to Fight Another Day…

Soft Dollars & Bundling: Here to Fight Another Day…

Aite Group estimates that at the end of 2005, approximately US$20 million was spent both in the United States and the United Kingdom in commission management systems. Driven by urgent compliance needs, Aite Group expects a robust growth over the next thre

By Sang Lee, Sang Lee

Boston, MA, April 3, 2006 – According to a new report by Aite Group, LLC, despite what appears to be growing market opposition, soft dollars and bundling have survived the recent scrutiny from UK and U.S. regulators. While the talk of completely eliminating soft dollar arrangements has died down, regulators have pushed for new compliance rules and guidelines that will require greater transparency and disclosure of client commission management.

This report examines the details behind the final ruling from the Financial Services Authority (FSA) and the most recent interpretive guidance from the Securities Exchange Commission (SEC) to analyze the potential impact on key industry participants. This report also profiles four leading third-party client commission management systems: Cogent Consulting, Eze Castle, FinancialSockets, and Rontech.

According to Sang Lee, Managing Partner of Aite Group and co-author of the report, "Even though soft dollars and bundling will be with us to fight another day, continued regulatory pressure and bad PR have pushed large buy-side firms to end soft dollar arrangements and insist on unbundled services from their brokers." Lee also adds, "The current market trend of unbundling will continue, forcing large brokers to evaluate their proprietary research teams. It will also lead to further compression on trade commissions."

This is a 38-page Impact Report. Clients of Aite Group's Institutional Securities and Wealth Management services can download the report.