To Bundle or Not to Bundle? A Review of Soft Commissions and Research Unbundling

Financial Analysts Journal, 2021, 77(3): 69-92

56 Pages Posted: 10 Jun 2021 Last revised: 8 Nov 2022

See all articles by Micha Bender

Micha Bender

Goethe University Frankfurt - Faculty of Economics and Business Administration

Benjamin Clapham

Goethe University Frankfurt Faculty of Economics and Business Administration

Peter Gomber

Goethe University Frankfurt Faculty of Economics and Business Administration

Jascha-Alexander Koch

University Siegen - School of Economic Disciplines; University of Siegen

Date Written: July 15, 2021

Abstract

Brokerage houses historically have provided research and related services togeth-er with order execution without separate fees. This practice of research bundling through so-called soft commissions has triggered an intense and ongoing debate considering that research bundling leads to nontransparent pricing and, therefore, can induce agency conflicts. A new European regulation has banned the use of soft commissions by requiring fee separation for execution and research services. Against this backdrop, we provide a systematic review of the literature on soft commissions to build a profound basis for further regulatory discussions and to uncover future research opportunities.

Keywords: Soft commissions, Soft dollars, Research bundling, Research unbundling, Trading costs, Brokerage industry

Suggested Citation

Bender, Micha and Clapham, Benjamin and Gomber, Peter and Koch, Jascha-Alexander, To Bundle or Not to Bundle? A Review of Soft Commissions and Research Unbundling (July 15, 2021). Financial Analysts Journal, 2021, 77(3): 69-92, Available at SSRN: https://ssrn.com/abstract=3863224 or http://dx.doi.org/10.2139/ssrn.3863224

Micha Bender

Goethe University Frankfurt - Faculty of Economics and Business Administration ( email )

Theodor-W.-Adorno-Platz 4
Frankfurt am Main, D-60323
Germany

Benjamin Clapham (Contact Author)

Goethe University Frankfurt Faculty of Economics and Business Administration ( email )

Theodor-W.-Adorno-Platz 4
Frankfurt am Main, 60323
Germany

Peter Gomber

Goethe University Frankfurt Faculty of Economics and Business Administration ( email )

Grueneburgplatz 1
Frankfurt am Main, 60323
Germany

HOME PAGE: http://www.efinancelab.de/no_cache/team/?user_wiwipubs_pi2[showUid]=478

Jascha-Alexander Koch

University Siegen - School of Economic Disciplines ( email )

Unteres Schloss
Post Box 29
Siegen, 57072
Germany

University of Siegen ( email )

Hoelderlinstrasse 3
57068 Siegen, NRW 57068
Germany

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