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More Soft Dollars Coming to Nasdaq?

Traders Magazine, January 2002

John A. Byrne

The Nasdaq Stock Market may soon see a massive expansion in soft-dollar services offered by dealers. That follows the SEC's approval of eligible riskless principal transactions, which are acceptable in commission' business for research and brokerage services. It is a radical step for Nasdaq. The soft-dollar industry is the province of agency transactions, a form of business that seems ready to expand on Nasdaq since the introduction of decimal pricing. Until recently, Nasdaq was driven by principal trading, in which dealers made money on spreads. Soft dollars were an insignificant factor. This spread, or net-based trading, however, is no longer a profitable arrangement for many dealers, many of which are suffering through shrinking margins.

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