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I have no idea what this means!!!! When Direct brokerage am managing a portfolio for direct brokerage client, I will be doing many buy and sell transactions in that portfolio. I need to choose a broker who will be doing these transactions direct brokerage me. Here, though client is paying the brokerage fee, but it is me, who is selecting a broker and giving him business. Now, to oblige me, broker may offer me some soft direct brokerage referred to as soft dollars.
Standards say that these soft dollars are to be used strictly for purposes that benefit underlying clients. Now, there could be some clients who choose their own broker and ask me to do transactions for their portfolio thru their broker.
This is client directed brokerage agreement. Because, this would not be fair to clients in the former case, where these soft dollar benefits should actually be going. Soft dollars are not monetary in nature. These research direct brokerage should be used only for the benefit of client a1. What rus1bus said above, and what I am saying below that are the right definition.
Brokerage refers to the amount on any trade retained by a Broker to be used directly or indirectly as payment for execution services and, when applicable, Research supplied to the Investment Manager or its Client in connection with Soft Dollar Arrangements or for benefits provided to the Client in Client- Directed Brokerage Arrangements.
For these purposes, trades may be conducted on an agency or principal basis. No talk of soft dollars. Does brokerage flow from a client to a manager direct brokerage a broker? I would try to forget about soft dollars in this example. I am not expert in direct brokerage, but I liked direct brokerage discussion and decided to investigate the topic. Soft Dollar Arrangement refers to an arrangement whereby the Investment Manager directs transactions to a Broker, in exchange for which the Broker provides Brokerage and Research Services to the Investment Manager.
Brokerage Arrangement refers to an arrangement whereby a Broker provides services or products that are in addition to execution. Client-Directed Brokerage Arrangement refers to an arrangement whereby a Client directs that trades for its account be executed through a specific Broker in exchange for which the Client receives a benefit in addition to execution services.
Client-Directed Brokerage Arrangements include rebates, commission banking, and commission recapture programs through which the Broker provides the Client with cash or services or pays certain obligations of the Client.
A Client may also direct the use of limited lists of brokers—not for the purpose of reducing Brokerage costs but to effect various other goals e. Let me see whether I can simplify this or confuse you guys direct brokerage more, by explaining this in plain English as requested by Floyd direct brokerage where it is relevant. You need to read the entire Soft Dollar Standard including the examples, as mentioned in earlier posting.
To me, it says. Who is direct brokerage as the specific client? Only the client can get the benefit, not its representatives, trustees. See transaction 5 and 6 in CFAI example. Does it profit all of this specific client? It is not allowed to give benefit only to a subgroup of the specific client, if the client is constituted of a group. See transaction 7 where it only benefits one subgroup of the client the client in this case is all the investors in a hedge fund.
Does it profit this client ONLY? See transaction 8 where the brokerage benefits the specific client AND two other clients. You need to understand this rule in direct brokerage context of the Soft Dollar standard where the standard explains how you should allocate the brokerage benefits to ALL clients and the investment manager. Under client direct brokerage, the client who is entitled get the exclusive benefits so you need to make sure that the client has direct brokerage right is entitled to direct the brokerage to get the benefits.
Skip direct brokerage main content. Be prepared with Kaplan Schweser. Study for Success in My understanding on this is: Just my two cents. Northeastern Student Jan 5th,