Rebecca Healey, Liquidnet's Head of EMEA Market Structure and Strategy, dives into understanding how Systematic Internalisers (SIs) will work in practice. The European Securities and Markets Authority (ESMA) Q&A provides some clarification on what SIs are and aren’t, and what characterises SI activity.
The topic of unbundling has been one of MiFID II’s most controversial areas, generating both heated debate and high levels of anxiety. Why? Because it aims to shake apart one of the foundations of modern investment banking: trading with a broker will pay for a broker’s research. As we’ve covered in previous editions of Making MiFID II Work, some of the key aims for the new rules are to bring transparency back to the market, remove conflicts of interest, and eliminate inducements—all with the singular purpose of benefiting the end investor. To achieve this under MiFID II, execution and research will have to be paid for separately, payments will not be tied to the volume and/or value of transactions, and research services will need a pre-agreed budget. Complicating the issue even further is the fact that many firms operate in multiple global regions and cannot simply look to unbundle in Europe alone.