ethic: brokerage money, should, understand

BC_MBA_student

I still don't understand what is brokerage. will the broker pay money if they execute the trade? but I think the firm should pay the broker to execute the trade, is it? Thanks.

llxx

My take on the matter is slightly different than gjertsen's. I'm of the view that soft dollars are products or services (e.g. research reports etc.) that the broker provides the money manager for selecting him/her. I think in the inv. mgmt. (IM) industry execution of trades is one of those things where there is little value added that can be provided by the broker, so which broker a money manager selects can often be based on what other services/incentives (i.e. 'research' in CFA speak) a broker can provide the money manager for selecting him/her to execute trades on the clients behalf. Since this 'research' can be quite useful, it can be viewed as a form of currency in itself, and hence given the name of 'soft dollars', as opposed to 'hard dollars', i.e. actual cash.

Hope this helps.