“The thinking that got us to where we are, is not the thinking that will get us to where we want to be.”
- Albert Einstein

Context
The seismic events around the demise of Lehman Brothers just over a year ago shook the foundations of the perceived market norms and made them look decidedly unstable. As a result, investment firms have been forced to quickly reshape and rebuild their processes in many areas. It’s worth taking time to evaluate how the market has changed the dynamics of commission sharing agreements.

In recent discussions with hedge funds, one key area for change is the handling of commission sharing agreements (CSAs). Whilst the handling of research commission pools may not have had the drama of plunging stock prices, the losses that particularly European funds suffered from Lehman were both real and material. So fund managers understand the significant benefits of CSAs, but have concerns as to whether solutions can be found for the following issues: