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Compliance August 12, 2002
SEC Spreads Soft Dollar Harbor to NASDAQ Trades
December 20, 2001 (PLANSPONSOR.com) ? With
decimalization tightening trading spreads, the Securities and
Exchange Commission (SEC) has voted to extend ?safe harbor?
protections for soft dollar trades to some NASDAQ stocks,
according to Dow Jones.
Reported by Camilla Klein
Soft dollar trades are those in which brokers give a
portion of trading commissions back to clients in the form
of research and related services.
Nasdaq stocks have been excluded from these soft dollar
protection deals, since brokers dealing in Nasdaq stocks
generally make their money on the spread, as opposed to
commissions.
But Nasdaq is now moving towards commission trading, since decimalization has tightened the spreads on Nasdaq stocks (see Money Managers Unhappy with Decimalization ).
Nasdaq is now seeking safe-harbor protection for principal
trades, those where brokers match orders from market
participants at no risk to themselves. Confirmations for
these trades reveal the transaction costs, allowing client
to judge whether these are reasonable.
The SEC will also extend the safe harbor to other
markets that provide similar information and safeguards,
according to Dow Jones.