The WSJ reports today that Goldman got received a no-action letter from the SEC giving them broad access to using client-commission arrangements. Through these arrangements, Goldman and other large sell side investment banks will act as "commission catchers" for smaller research boutiques. Mutual funds like this because they can be sure of Goldman's top notch execution and still receive and pay for boutique firms' research. It's really just another version of soft-dollar commission payment, but one that specifically cuts out the small trading desks that most regional and boutique I-banks still maintain.
Hedge funds won't like the service much, because they'll find it tougher to mask their trading flow, and they suspect (quite rightly) that Goldman and the other bulge bracket firms are trading against their flow.
The real losers, though, are the traditional boutique investment banks that still struggle to make the old cash equity model work. The cold economic reality is that the cash equities business is going away.
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