EU has once again delayed the implementation of MiFID II to 3rd of January 2018 after ‘exceptional technical challenges’.
This is not the first time MiFID II has been delayed as the dreaded EU directive has many moving parts (collecting data from 300 trading venues and up to 15 million financial instruments) and has already changed directions many times.
Bloomberg’s MiFID II event “Spotlight on Independent Research”
Recently, we attended Bloomberg’s MiFID II event “Spotlight on Independent Research”. The main highlight of the Bloomberg Independent Research event was a keynote speech by Sandy Bragg, Principal of Integrity Research Associates, who was reporting the results of his recent survey on research pricing.
Integrity Research Pricing Study – independent research pricing and fee structures results:
Nearly 50% of firms showed revenues of less than $1mln in 2014. Integrity Research showed that the smaller the research producer the more likely pricing is pre-determined either fixed, by usage, or by product and because smaller firms have smaller revenues they have a preference and a need for cash payments.
Larger firms (in this case the 20% of those surveyed that had annual revenues of more than $10mln) have a preference for more lucrative fee structures that are based on opaque CSA’s. Essentially the larger firms rely on what the research consumer (traders/fund managers) offer to pay.
The independent research environment is closely followed as the more traders and fund managers are forced to pay for research that they consume, the more they will be forced to think about their research requirements.
Strategy consultancy firm Stratevolve estimate that 95% of electronically delivered research is not read, which means there is a lot of research out there that is surplus to requirement! This means research departments across the board are in the firing line.
According to the FT, Fund managers that have already stopped paying for research through commissions and pay research producers directly such as Baillie Gifford, Aberdeen Asset Management and Stewart Investors have all seen research costs fall.
This is not a good environment to be a research analyst but one silver lining in the cloud maybe that research analysts go independent and create a bigger market place for research which is why the last year has seen a few new research exchanges appear, with the likes of Research Pool, ERIC and Research Exchange looking to create an exchange of research.
With that in mind here is one Independent Research Conference you do not want to miss:
Global Independent Research Conference London on March 16, 2016 will help to create a community between buy-side participants and independent research providers. This conference is for the buy-side community including Portfolio Managers, Chief Investment Officers, Fund Managers, Strategists, Analysts and Chief Economists great way to get an insight into the state of the economy around the world for your investment decisions.