Commission sharing agreement

A Commission Sharing Agreement (CSA), or in the US named Client Commission Agreement (CCA), is a type of soft dollar arrangement that allows money managers to separately pay the executing broker for trade execution and ask that broker to allocate a portion of the commission directly to an independent research provider.[1] CSAs consist of a percentage of execution fees, that are directed to pay for research reports from sell-side banks. The form of a CSA can be as short as one page.[2] One of the disadvantages of CSAs is the counterparty risk, that the broker becomes as the cash is held on the broker's balance sheet [3] and not in a segregated client account. Moves included in MiFID II such as the creation of Research Payment Accounts (RPAs) aim to address this issue.

References

  1. ↑ (PDF) http://www.indxsecurities.com/content/7/JP1_add.pdf. Retrieved February 29, 2012. Missing or empty |title= (help)
  2. ↑ Example of a CSA
  3. ↑ Are CCAs Safe? -- Growing Counterparty Risk Drives The Buy Side To Rethink Client Commission Agreements And Consolidating Broker Relationships Archived 2014-06-21 at the Wayback Machine.
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