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.
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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.

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