Agency Trade vs Principal Trade - Soft Dollar

[ryzhiy]

Hi guys,
I still can’t figure it out why it is important to distinguish on which basis broker executes trades. Particulary, I doesn’t make sense to me why should I disclose this? The goal to seek the best execution is clear and this should be the only consideration, right?
Thanks

 

[nera]

have the same question… does anyone have a clue?

 

[jgrandits]

principal trades are done on a ‘spread’ or ‘discount’ basis where the cost/commission is factored into the overall price, there is no explicit comission. research purchased through principal trades should directly benefit the client when fiduciary regulations apply, if not, then research may benefit other clients as long as prior consest has been obtained.
traddes done on an agency basis, with explicit commission, should benefot the client over time, if not immediately.

 

[nera]

so it is a matter of commissions, not of whether the seller owns the securities or delivers them from a third party, is it right?