MiFID II Unbundling Research: Canary in the Coalmine II
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One year after the implementation of MiFID II, the industry continues to adjust to the challenge of unbundling research from bundled commission payments – and not just in Europe. While the regulatory policy to separate execution and research payments was initially criticized the world over for its potentially detrimental impact on research provision, nearly 60% of the respondents to this study have chosen to implement unbundling globally rather than just to those parts of their organisations impacted by MiFID II.
There is evidence of research providers becoming more selective, focusing on strengths in areas such as regional specialisation or macro or quant content. While retaining access to bulge bracket brokers remains important, as the evaluation process improves, buy-side firms are beginning to rethink how they can maximise budgets, plug gaps in research provision or remove any unnecessary duplication of research to ensure they achieve value for money.
As the provision of research becomes more bilateral and bespoke based on individual client needs above bulge bracket waterfront coverage, specialised 2nd tier brokers are starting to make inroads. This will lead to not only increased competition in research production, but also greater complexity in management of research procurement, leading to further evolution in buy-side processes as the industry adjusts beyond MiFID II.
By Rebecca Healey, Head of Market Structure + Strategy, EMEA