MiFID II research unbundling to go global
Research unbundling requirements, similar to those under MiFID II, could be rolled out globally within 4 years, according to research published by Rsrchxchange.
418 respondents from over 350 different asset management firms, spanning 30 countries, participated in the online survey, conducted by polling company Survation, during Q2 2018.¹
Approximately 83% of US participants believe research unbundling requirements, similar to those introduced under MiFID II, will come into force in the US by 2022.¹
Asia could adopt research unbundling requirements even sooner; over half of respondents expect unbundling to be introduced in Asia within 2 years.¹
Q – “Considering your own jurisdiction, in what time frame would you expect research unbundling to take effect?”
The assumed rationale driving research unbundling varied greatly depending upon the size of the company.
71% of respondents from the smallest firms (those with less than $1 billion dollars’ worth of assets under administration) believe regulatory change will be the main driver, whereas 55.6% of respondents from the largest firms believe the need for unbundling will come from their own internal compliance policies.³
Q – “What do you think will be the driver?”
MiFID II regulation came into effect in January this year. A key aim of MiFID II is to provide greater transparency to investors. As a result, research costs now have to be fully disclosed. This has forced European and UK asset managers to decide whether they will absorb research costs or pass them onto investors. In the main part, the majority of fund groups have decided to absorb research costs, with a few exceptions.¹
As a result of MiFID II legislation, the cost of research has plummeted in order to stimulate consumption. 75% of survey participants believe current low research prices are unsustainable.²
Investors have been one of the main beneficiaries of MiFID II legislation, with 53% of respondents agreeing that ‘research unbundling is a good thing for investors.’²
Vicky Sanders, Co-Founder of RSRCHXchange, says: “Our survey was conducted just months after MiFID II came into effect, the biggest change to the research space in decades. It’s clear that its impact has already been felt in this short time but that there is more the industry needs to do to adhere to the rules and adapt to these changes. If the current price of research is not sustainable, what will happen next to help the industry find equilibrium? It’s interesting to see that market forces are supported by asset managers as the solution for other outcomes, such as the reduction in the coverage of small and mid-cap companies.”²
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Source 1 https://portfolio-adviser.com/mifid-ii-unbundling-to-go-global/
Source 2 https://www.institutionalassetmanager.co.uk/2018/06/12/265187/mifid-ii-driving-global-standards-research-unbundling-says-rsrchxchange
Source 3 http://rsrchxchange.com/uploads/docs/global-research-unbundling-survey-2018.pdf
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All figures correct as at 31.12.2019.