FSA's Soft Dollar Rules Draw Comment
The comment period on the U.K. Financial Services Authority’s proposed soft dollar rules closed last week.
Drawing the strongest comments: the FSA’s view that post-trade analytics should fall outside the "execution" definition, and therefore not be softable unless qualifying as "research." Both the Investment Adviser Association and the U.K. Investment Management Association asked the FSA to reconsider this position. "Analysis of experiences with prior trades may play an important role in a manager’s best execution decisions for current transactions," said the IAA, which called post-trade analytics "inherently part of the execution decision for any particular trade."
In addition, both groups asked the FSA to treat raw data feeds as falling within the execution definition. "Real time price information and real time trading information are among the necessary inputs to the choices between venues, brokers and trading mechanisms that the dealing desk in a fund management company makes in delivering best execution," said the IMA.
The IAA asked the FSA to clarify that non-softable "publicly-available information" would not encompass 1) research based on public information, but that is not widely disseminated and 2) research that is publicly available but not marketed to the general public. The IAA also asked for clarification that a non-U.K. adviser that acts as a sub-adviser for a U.K. manager would not be subject to the FSA’s soft dollar rules.