zerohedge.com / by Tyler Durden / Nov 14, 2017 3:45 AM
Now they tell us…
The imminent prospect – January 2018 – of Mifid II, with the unbundling of research costs, was bad enough in terms of complexity and lower profitability for both the buy and sell sides…never mind disastrous for the analysts who are likely lose their jobs. Now the regulatory powers that be in London are ensuring that collective hatred of them is about to reach a new all-time high. The definition of “research” is to be expanded from the tsunami of analyst reports to the even bigger tsunami of email and Bloomberg messages swapped between sellside salesmen and sales traders and buyside portfolio managers and dealers. According to the FT.
The UK financial watchdog has alarmed some City brokers by saying new rules on payment for investment research could extend to wider sales and trading roles. From January – under European legislation known as Mifid II – asset managers will have to pay financial institutions directly for research instead of combining the cost with trading commissions. To date, the debate has focused on price negotiations for research between banks and asset managers, with the former offering packages that include written reports and direct access to analysts. But some brokers have been caught off guard after the Financial Conduct Authority (FCA) said that content produced by sales traders who take orders on trades and typically advise clients by highlighting trends and “market colour” — would also count as research.
“Whilst this is logically consistent with everything the FCA has said on (research) unbundling, it will still come as a bombshell,” said Richard Balarkas, director of Quendon Consulting and former chief executive of Instinet, an agency broker.
“Most firms will have hoped to sidestep the question of how to charge for all those client-facing employees whose role is neither research nor pure trading.”