Soft Dollars

[12c]

I can’t believe that I am a level 3 CFA candidate and still do not fully understand Soft Dollars. I understand trade commissions as follows.
Buy side client A buys 1 share of xyz @ 10.00 commission is 0.02 Total Cost 10.02
Sell side shop B delivers 1 share of xyz and receives 10.02.
Sell side shop B buys 1 share of xyz for 10.00 commission 0.02 Total cost 9.98
Buy side client B delivers bonds and receives 9.98
Sell side shop receives 0.04 commission which goes towards paying sales/trading and bank’s employees.
How is the 0.02 cents commissions property of Client A and Client B? If your buy side why even pay commission if it is deemed your property as client? If it is property isn’t it a disservice to buy side’s client not to credit it back or eliminate alltogether?
Have i got this all wrong? JoeyD?

 

[JoeyDVivre]

Because that’s commissions not soft dollars. Soft dollars happens when buy side shop says to sell side shop “we’ll do 200000 round turns on futures contracts with you in the next year with our client’s money but you will pay for 3 Bloomberg machines and the risk management software”. On the nefarious side the buyside shop adds “and my vacation to Grand Cayman”. CFAI would object to the vacation but probably not the other two (but the guidelines are tricky).