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
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.
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