Commission Sharing Agreements

Given the current market conditions, both brokers and investor firms are looking for ways to make more from the invesment business they execute. Brokers are keen to attract trading volume from new clients and to strengthen their trading relationships with existing clients. One way both sides can do this is to make better use of commission sharing agreements (CSA). Following the demise of Lehman Brothers in September 2008, investor firms are looking to widen their range of CSA brokers to reduce dependency on individual brokers - an opportunity for brokers. In addition to the credit risk advantages, investor firms are looking to realise the efficiency gains to be made and research costs that can be reduced and mitigated.

As a result, there is an increased urgency for both brokers and investment managers to support the changes in their CSA strategies. From our recent research and projects in this area, if your organisation is still using a manually intensive or spreadsheet based process to support CSA’s you may not be able to take advantage of this strong trend. Firms who cannot support these more complex arrangements and provide a simple, efficient and transparent process to support their clients’ needs are increasingly at a disadvantage in these ever more competitive markets. Even firms who have traditionally coped with these types of arrangements using manually intensive processes are now finding them difficult to scale and monitor with any confidence.

To understand more about how other firms are improving their CSA business processes please contact us for an initial discussion.

Common Issues - Pragmatic Solutions

MPI Europe has engaged in project work and research on this topic across a range of financial institutions from brokers to hedge fund managers. In this way we have identified many common issues faced by firms and the pragmatic solutions that we can help clients implement.

“For an apparently simple process in theory, it is complex to implement in practice"

“Our old process made us reactive - we couldn’t be sure we were getting all the payments we should have”

“We need more evidence as to precisely why allocation decisions are made”

For more details on our case studies or toolkit, or contact us More >>