The ipushpull team is heading over to Bloomberg’s London office on 27th January for their MiFID II: Spotlight on Independent Research event. MiFID II (Markets in Financial Instruments Directive) is new European legislation intended to improve the functioning of financial markets after the global financial crisis and to strengthen investor protection. The aspect of MiFID II that interests us most is the financial research unbundling.
Until now, when banks provided research information to institutional investors such as pension funds and asset managers, the cost of that research was included (or bundled) in the trading commissions charged by the banks and brokers they trade with. This practice generated incentives for these investors to trade exclusively with particular institutions, rather than seeking better deals elsewhere or investigating alternative assets to invest in. In the new world, pension funds and asset managers will be responsible for monitoring their use of research, recording how much they are spending on it and reporting this information to both their investors and the regulator.
A MiFID II Primer
MiFID II is a rather dry subject to research but its effects on the financial markets will be far-reaching and many institutions are unprepared. For the most thorough and reliable information, head to the Financial Conduct Authority’s website. This covers all the MiFID II proposals, not just those affecting research providers and consumers, and has guides to what firms will need to do to ensure their business functions will be compliant with the legislation. It’s a lengthy read, so for those interested purely in research unbundling, TABB Forum has published a handy digest of the proposals.
MiFID II Research Unbundling Delays and Uncertainty
MiFID II was supposed to be implemented in 2017, but because of the size and scope of the proposed regulations, a delay until January 2018 is widely expected. However, the EU authorities are continuing to stall on the detail of the proposals and the confirmation of the new implementation date. A leaked draft of the proposals even suggested that payment for research through commissions will continue to be permitted. The continuing delay and uncertainty are making life extremely difficult for affected firms, who will have to scramble to make the major changes required across their business functions, from client services to IT and HR systems.
This week’s event at Bloomberg focuses on the effects of MiFID II on independent providers of financial research. At ipushpull, we’re helping these publishers (and their subscribers) get ready for the changes with our secure, monitored and access-controlled document distribution platform. It should be a stimulating morning.