Could MiFID II and Commercial Pressures spell the end for Email Distribution of Financial Research?
By David Jones
In the $3.4bn market for financial research, two powerful forces are driving companies away from email distribution towards comprehensive document sharing solutions. In Europe, the MiFID II regulatory changes will require consumers to monitor and report their use of research. And in the US, research producers are tightening controls to ensure only those people who have paid for access will be able to read their reports.
Updated European Rules for the Financial Research Market (MiFID II)
In Europe, MiFID II regulations will require asset managers and pension funds to disclose exactly how much of their clients’ money they are spending on financial research. Currently, the cost of research is included in the trading fees paid by these organisations to brokers and investment banks. This could lead to conflicts of interest, as a recent Financial Times article pointed out:
[The FCA] has warned that managers could be wooed into executing trades with the brokers who were especially generous in passing on free research, whether or not using that broker represented the best deal for the client.
To minimise the chances of this happening, from 2017 onwards brokers and investment banks will separate, or unbundle, the costs of financial research from their overall trading charges. Asset managers will be required to monitor their use of research, record how much they are spending with each producer and report these costs to the regulator and their customers. The upshot of this is that traditional means of research delivery, typically email, will have to be replaced by robust solutions that allow the consumers of research to accurately track their usage.
Commercial Pressures drive increased controls in the US
These regulations don’t apply in the US, but a move away from email distribution is also happening there, this time being driven by the providers of research: the Investment Banks. Investors there consume almost two-thirds of research via email, according to a recent Bloomberg article. The problem with this approach is that once a PDF has been emailed it can be distributed far beyond its original intended readership, and the original publisher has no means of tracking who is reading it. So investment banks are moving to alternative solutions, as Bloomberg reports:
Bank of America Corp. has started embedding analysts’ reports into web pages, so it can more easily restrict access than with PDF files that are widely shared with people who aren’t paying clients, said Candace Browning, the firm’s head of research. It’s joining rivals Morgan Stanley and Citigroup Inc. in limiting access, and more plan to follow. The approach also makes it easier to track analysts’ readership and customize products for specific types of clients, according to bank executives and consultants.
These two trends, driven by both the producers and consumers of financial research, are moving the global research market away from email towards document sharing platforms.
At iPushPull we’ve always been dedicated to reducing the amount of email our customers have to deal with, whether through our Excel data sharing service or our PDF distribution platform. They both provide an access controlled and monitored solution for sharing data and documents around companies and between companies and their clients, without the need for emails.
We’ve recently signed our first partnership in the financial research market with FutureTechs, a leading provider of technical analysis to the futures market. The iPushPull document distribution platform lets FuturesTechs easily and securely share their reports with their clients on an access controlled and monitored platform. To try it for yourself, please get in touch or sign up for a free trial today.