SEC Votes to Publish Guidance on Soft Dollars, and more

SEC Votes to Publish Guidance on Soft Dollars

The Securities and Exchange Commission (SEC) voted to publish, for comment, interpretative guidance on money managers' use of soft dollar commissions to pay for brokerage and research services, according to an announcement on Wednesday.

Money managers are permitted to use commissions under Section 28(e) of the Securities and Exchange Act of 1934. Section 28 (e) creates a safe harbor by allowing a person who exercises investment discretion to pay more than the lowest available commission, if that person determines that the commission is reasonable in relation to the value of the "brokerage and research services" received.

The proposed guidance would clarify that the scope of the Section 28 (e) safe harbor is limited to brokerage and research services that: satisfy the eligibility criteria in the statute; provide lawful and appropriate assistance to the money manager in carrying out his decision-making responsibilities; and satisfy the requirement that the money manager make a good faith determination that commissions paid are reasonable in relation to the value of the products and services provided by broker-dealers in connection with the accounts for which the money manager exercises investment discretion.

The SEC also voted to publish, for comment, guidance on commission-sharing arrangements. The Commission, within thirty days of its publication in the Federal Register, should receive comments on the proposal.

ITG Plans to Acquire Plexus Group for $12 million

Investment Technology Group agreed to acquire Plexus Group, a Los Angeles-based specialist in transaction-cost analysis (TCA) services, for $12 million in cash. Plexus is a wholly owned subsidiary of JPMorgan Chase Bank, N.A. In 2004, its revenues were approximately $11 million and in 2005 revenues are projected to remain at the same levels, and the business is expected to break even, according to ITG.

Since both companies are leading providers of TCA services, ITG and Plexus clients will benefit from a more comprehensive TCA product offering, the release stated. The acquisition also expands ITG's client base into the plan sponsor and sell-side customer segments in the United States and Europe, the release said. Plexus customers consist of over 200 financial institutions that collectively transact over $4.5 trillion in equity trading volume.

On July 13, ITG announced plans to acquire Macgregor, the Boston-based developer of trade order-management systems in the global financial community, for $230 million.

TradePortal.com Launches Service Bureau

TradePortal.com, together with its direct-access brokerage arm, TradePortal Securities, is launching a service bureau for broker dealers and prime brokerages to enhance their relationship with buy-side customers. TradePortal will now offer is entire MatrixSuite of products, FIX-compliant order routing, risk management tools and SDK (software development kit) in a service bureau configuration, the release said.

Brokers executing through TradePORT can route orders directly to a client-designated market for execution through a platform carrying the broker-dealer's own MPID(market participant ID), effectively advertising the broker-dealer as destination for order flow.

TradePortal's technology platform includes: a white labeled systems, with front-end and smart routing features to a FIX 4.4-compliant gateway into the proprietary MatrixSuite back office; an extensive toolbox for managing trading and settlement information, including a fees engine and flexible management systems for regulatory features and real-time compliance used by firm administrators; plus a FIX hub API (application programming interface) that incorporates .NET Web services into its smart order routing technologies for clients seeking the use of that technology only.

BT Global Services Promotes Edelstein to Head Financial Vertical

Howard Edelstein, president and CEO of BT Radianz, is being promoted to head a new business unit within BT Global Services focused on serving the global financial industry. The new unit will combine BT Radianz with BT Trading Systems and BT Global Financial Solutions into a single market-facing vertical designed to be best-of-breed in the financial industry, according the release. Edelstein will serve as president and CEO of BT Global Financial Services.

The decision to launch the new vertical flows out of the strategic thinking behind the recent acquisition of Radianz, a leading global provider of financial services connectivity, previously owned by Reuters.

BT Trading Systems is one of the world's leading suppliers of financial trading room systems. More than 60,000 traders in more than 1,400 trading rooms across 41 countries rely on its voice applications and integration technologies, according to the release. Separately, the BT Radianz network connects more than 10,000 financial sites around the world through a single, managed connection, while providing access to more than 170 pre-trade, trade and post-trade applications from leading content and service providers across its straight-through processing chain.