Since MiFID II’s research unbundling rules came into force in January 2018, with the regulatory intention of eliminating the sellside’s practice of offering investment research as inducements to utilise their execution services by mandating that explicit fees are charged for research, the ‘value’ of research has become a pressing question. Rather than passing these fees onto their clients, most European asset managers have chosen to absorb this cost. This cost is drawing increasing scrutiny from budget holders looking to cut costs in leaner times. To defend their research budget, managers must determine the value derived from the research they consume. However, this is fraught with difficulties and many asset managers are looking to technology providers to help ascertain its real value.

What are your research interations really worth?

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This is not another “demise of the sell-side” article

Since the introduction of MiFID 2 in January of last year, there have been many pieces written by journalists, industry practitioners and other experts on the impact for both buy-side and sell-side professionals. Much of what has been written focussed on shrinking sell-side research budgets, the hit to IRPs, the exodus of research analysts and the general implosion of parts of the industry.

The path of least resistance is the one most trodden ……..

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Authors: Stephen Carney, CEO and John Norris, COO

Impact on market participants

The breadth of the regulation captures, directly and indirectly, a wide range of buy-side firms, varying in size and strategies, as well as their sell-side research services providers (both traditional and independent). Whatever the actual level of preparedness of asset managers and hedge funds some clear trends have emerged in the first eight months of MiFID 2 including:

• Many firms (including the larger global firms) have decided to absorb the cost directly rather than pass this through to the funds
• Smaller firms, themselves not heavy users of research services and rely mostly on access to written content, have also opted to absorb the costs where there is an agreed (or perceived) fixed cost.

In terms of readiness, the decisions around process, technology and overall approach have been impacted by:

Changing behaviours …….. 

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Authors: Stephen Carney, CEO and John Norris, COO

Impact on market participants

The breadth of the regulation captures, directly and indirectly, a wide range of buy-side firms, varying in size and strategies, as well as their sell-side research services providers (both traditional and independent). Whatever the actual level of preparedness of asset managers and hedge funds some clear trends have emerged in the first eight months of MiFID 2 including:

• Many firms (including the larger global firms) have decided to absorb the cost directly rather than pass this through to the funds
• Smaller firms, themselves not heavy users of research services and rely mostly on access to written content, have also opted to absorb the costs where there is an agreed (or perceived) fixed cost.

In terms of readiness, the decisions around process, technology and overall approach have been impacted by:

Changing behaviours …….. 

Download Full Report Here