Firms Drag Heels on MiFID II Research Rulebook Rewrite
MiFID II’s ban on broker-subsidized free research will leave sell-side firms with a multitude of challenges—not least how to price research so as not to lose customers who might direct trading elsewhere, without appearing to incentivize clients to trade. Kirsten Hyde examines the pricing challenges facing buy- and sell-side firms, and the potential fallout from the new unbundling rules.
The expansive MiFID II regulation will take effect from Jan. 3, 2018, and one key aspect—the so-called unbundling rules—is that banks and brokers must charge asset managers an explicit fee for research, rather than bundling the cost into the trading commissions they charged clients.
The aim of the new rules is to protect investors, increase transparency, and reduce conflicts of interest by curbing the use of research as an “inducement” by banks and brokers in exchange for execution and flow. A
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