European regulators are pressing to unbundle research payments from executions. Experts say that a regulatory overhaul driven by MiFID II has the potential to disrupt the global research industry. FlexTrade’s Ivy Schmerken examines further.
Impact of MiFID II: Unbundling, the Sell Side and Research Trends
Research Disruption?
European regulators are pressing to unbundle research payments from executions. Experts say that a regulatory overhaul driven by MiFID II has the potential to disrupt the global research industry.
Many industry watchers maintain it will put pressure on sell-side firms that support teams of analysts as well as independent research providers. It’s not clear if firms will need to unbundle the menu of research services they provide, including research reports, calls with analysts, corporate access to management teams and conferences.
“The sell side is going to have think about how it produces research and how it’s getting distributed to the client. We will see firms picking the places they want to be in and which sectors they want to cover,” predicted Brad Bailey, director of Celent’s Securities and Investments practice. Clients could see a lot of transitions around the type of companies they cover. “You will see engagement with the buy side on what they are going to do around the research product, and offer clarity around that,” added Bailey. If sell-side analysts were to cut costs and reduce their coverage for small and medium-size enterprises (SMEs), that could impact liquidity, said Bailey.
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