Asset Managers Poised to Absorb Research Burdens Imposed Under MiFID II

As MiFID II MiFID II MiFID II stands for the Markets in Financial Instruments Directive, and is the second iteration of a sweeping directive. As such it is known as MiFID II. The original Markets in Financial Instruments Directive (MiFID) became effective in November 2007. It was intended as the foundation of the EU’s Financial Services Action Plan, a comprehensive project to create a single European market in financial services. MiFID is intended to create a level playing field for firms to compete in the EU’s fina MiFID II stands for the Markets in Financial Instruments Directive, and is the second iteration of a sweeping directive. As such it is known as MiFID II. The original Markets in Financial Instruments Directive (MiFID) became effective in November 2007. It was intended as the foundation of the EU’s Financial Services Action Plan, a comprehensive project to create a single European market in financial services. MiFID is intended to create a level playing field for firms to compete in the EU’s fina Read this Term nears, many asset managers are grappling with ways to internalize the new legislation at their businesses. The new rules will obligate the disclosure of research costs, that could lead to some big changes for venues – many asset managers will likely take a hit on these costs.

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Overall, the primary directive of MiFID II will be to support greater transparency across derivatives and futures markets, among others. However, the reporting or disclosure of additional components, i.e. research spending, are could result in some negative consequences in terms of spending and personnel..

Internalized costs

While many portend the potential loss of thousands of jobs in the industry as well as increased costs, a more immediate consequence may simply be asset managers internalizing costs, per a Bloomberg report. Presently, the strategy for Europe’s asset managers remains enigmatic at best, as thousands of these entities are keeping mum with less than a few months to go until the new regime takes effect.

According to a recent survey composite, most asset managers have opted to absorb costs in research spending and analyst reports. This could signal financial strength or perhaps a desire to deter a litany of extra administrative work.

On the opposite side of the fence, the playing field amongst banking entities is far more stratified, with research spending varying wildly. JPMorgan is offering a research package starting at just $10,000 per year – which is billed as the least expensive so far – whereas other groups such as Barclays are offering packages costing as much as $464,000 per year.

However, the vast majority of asset managers in Europe, numbering over 4,000, have not yet disclosed their plans for MiFID II in terms of research costs. With less than four months to go until its implementation, more and more groups will need to decide between taking internal hits and mobilizing cash for research.