Soft Commissions

AAA

DEFINITION of 'Soft Commissions'

Any type of commission that is not paid in actual dollars. Soft commissions allow investment companies and institutional funds to cover some of their expenses through trading commissions. For example, receiving research from a counterparty in exchange for using their brokerage services. Thus the expense would be classified as trading commissions and at the same time would lower their reported expenses on research in this instance.

INVESTOPEDIA EXPLAINS 'Soft Commissions'

There are a large number of investment funds that usually buy things in soft dollars, because it allows the fund to avoid reporting expenses to cost-sensitive investors. Soft commissions thereby allow funds to finance their expenses and ultimately lower their expense ratios. But this type of reporting has frequently resulted in reporting problems for fund companies for various reasons.

RELATED TERMS
  1. Address Commission

    The fee paid by vessel owners to charterers, the party who owns ...
  2. Commission Broker

    Someone who gets paid by the brokerage company for which he works ...
  3. Futures

    A financial contract obligating the buyer to purchase an asset ...
  4. Omnibus Account

    An account between two futures merchants (brokers). It involves ...
  5. Trilateral Commission

    From the site at Trilateral.org: The Trilateral Commission is ...
  6. Broker

    1. An individual or firm that charges a fee or commission for ...
Related Articles
  1. What You Need To Know About Financial ...
    Insurance

    What You Need To Know About Financial ...

  2. Tax Tips For The Individual Investor
    Retirement

    Tax Tips For The Individual Investor

  3. How To Target Ideal Customers
    Professionals

    How To Target Ideal Customers

  4. Benchmark Your Returns With Indexes
    Mutual Funds & ETFs

    Benchmark Your Returns With Indexes

comments powered by Disqus
Hot Definitions
  1. Last In, First Out - LIFO

    An asset-management and valuation method that assumes that assets produced or acquired last are the ones that are used, sold ...
  2. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  3. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  4. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  5. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  6. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
Trading Center