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

Micha Bender, Benjamin Clapham, Peter Gomber and Jascha-Alexander Koch

Financial Analysts Journal, 2021, vol. 77, issue 3, 69-92

Abstract: Brokerage houses historically have provided research and related services together 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.

Date: 2021
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DOI: 10.1080/0015198X.2021.1929687

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