ShmoopTube

Where Monty Python meets your 10th grade teacher.

Search Thousands of Shmoop Videos


Tech Videos 99 videos

Finance: What is co-variance?
8 Views

What is covariance? Covariance is the comparison of how assets move in the markets. Positive covariance is when assets move in tandem, such as when...

Finance: What is After Hours Trading?
1 Views

What is After Hours Trading/Extended Trading? After hours trading describes any trades made after the market closes or before the market opens. Bec...

Finance: What is Volatility?
77 Views

What is volatility? In the world of investing, volatility basically means riskiness. It looks at the returns for stocks or indexes, and if they are...

See All

Finance: What are Hard Dollars v Soft Dollars? 4 Views


Share It!


Description:

Using "soft dollars" is really a way of saying "bartering," where a firm may, for example, trade shares in return for inventory, rather than using cash.

Language:
English Language

Transcript

00:00

Finance a la shmoop what are hard dollars versus soft dollars? okay can we

00:09

make the joke about soft dollars that took viagra no okay all right we won't [Dollars take pills of viagra]

00:13

or maybe we just did okay well whatever so there really is such a thing as soft

00:19

dollars in fact they apply to the manner in which stock brokerages and other

00:23

service vendors to the buy side are paid on Wall Street well on any given trade

00:29

there are somewhere between three and twenty different sellers at the price [Sellers appear]

00:32

the same price like a mutual fund wants to buy a million shares of Disney at 103.34

00:37

and yes for a stock like Disney, Goldman is selling Morgan is

00:41

selling JP Morgan is selling in a gazillion other small banks all around

00:45

the world are selling all at the same exact price well the mutual fund wants

00:49

to do the trade in one block of a million shares not doing little business

00:53

with everyone so they're gonna trade with one bank why would they choose any

00:56

one bank over another? well usually the quality of the banks research or values

01:01

add contribute to who wins that million share trade with the three center share

01:06

Commission for a nice thirty grand pay day but what if the Wall Street mutual fund [Stock market graphs appear on computer screens]

01:10

wanted to purchase specialized trading computer terminals from Bloomberg well

01:15

why wouldn't Bloomberg begin their own trading operation trading stocks

01:19

brokering them and selling them and all that stuff with very little incremental

01:24

capital cost to Bloomberg above what they already do for a living and then

01:28

they themselves Bloomberg offers a million shares of Disney and 103.34

01:32

Well the mutual fund wants to buy 30 grand worth of computer [Computer terminals appear]

01:36

terminals for its traders and it would prefer to not have to write a check in

01:40

cash to buy those so in fact common practice on Wall

01:44

Street is to use yes soft dollars which is kind of another

01:48

word for barter where in the Wall Street firm trades the trade of those million

01:53

shares of Disney to Bloomberg in return for the $30,000 worth of computer

01:59

terminals they soft dollar purchased them and had they paid cash it would

02:04

have been called a hard dollar transaction got it and if your dollars

02:07

are too hard well may we recommend a better moisturizer [Stack of cash with a tube of moisturizer appears]

02:11

soft dollars, hard dollars...

Related Videos

GED Social Studies 1.1 Civics and Government
39794 Views

GED Social Studies 1.1 Civics and Government

Fake News
11938 Views

How do you tell fake news from real news?

Finance: What is Bankruptcy?
260 Views

What is bankruptcy? Deadbeats who can't pay their bills declare bankruptcy. Either they borrowed too much money, or the business fell apart. They t...

Finance: What is a Dividend?
1777 Views

What's a dividend? At will, the board of directors can pay a dividend on common stock. Usually, that payout is some percentage less than 100 of ear...

Finance: How Are Risks and Rewards Related?
589 Views

How are risk and reward related? Take more risk, expect more reward. A lottery ticket might be worth a billion dollars, but if the odds are one in...