Friday, January 20, 2006

OMS Vendors Oppose SEC 28(e) Guidance

Traders Online: The stock dealers and institutional traders complete interactive news and information service of Traders Magazine: "Some order management system executives have gone into a full-court regulatory press.

They are lobbying the SEC to reverse its opinion that their services don't qualify for alternative commission arrangements. Those used to be called soft dollars. They were recognized under the safe harbor of Section 28(e) of the Exchange Act. OMSs have billed on a soft dollar basis, but that may end.

The SEC, in a recent guidance release explaining how commissions should and should not be billed, said expenditures that are not integral to the execution of orders don't qualify for alternative arrangements. Officials at Charles River Brokerage, a unit of the buyside OMS vendor of the same name, wrote in a comment letter that OMSs come within the guidelines of 28(e). Indeed, these officials argued that, for smaller firms, OMSs are critical to achieving best execution. Stephen Schardin, president and managing director of Charles River Brokerage, contended the OMS is critical to the execution process."

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