Corporate Advisory

MiFID II – Nearly Two Months in – The Trails and Tribulations of Research Reform

As MiFID II beds down the pressure on the research industry mounts. Banks might see some short-term research-revenue movement due to bill timings whilst others, may seek to shake up their global research operations. Equities trading is also affected and MiFID II might increase the pressure on those already challenged by low volatility with some having closed their European trading units due to insufficient volume.

Meanwhile, data aggregators are emerging as some of the biggest beneficiaries from all of this.

Also larger firms may win a competitive edge over their smaller peers that are less able and therefore less likely to pass on research costs to clients. As a result, smaller managers may lose investment mandates, and the industry may see further consolidation.

Finally, the failure of about 12 of the EU’s 28 countries to fully integrate all of MiFID II into local law has given rise to an unlevel playing field. If the EU rule isn’t localised, it can’t apply directly to companies. Some firm are therefore facing challenges optimising their operations, putting them at a disadvantage compared with peers in countries such as France where the rule has been entrenched in local law by the July 3, 2017, due date. Companies that suffer losses as a result could seek damages from their local government.

Based on article previously appearing on the Bloomberg Professional Services Blog.