The market for investment research is changing
With the potential to affect the largest change to the industry since the Big Bang, MiFID II will dramatically alter the market for investment research across Europe. Academics Alastair Haig and William Rees remind us that we are already in the midst of a fundamental change in the operation of this market. Commission Sharing Agreements (CSAs) were introduced in the UK back in 2006 and enabled providers of research to be separately paid from execution counterparts.
While regulators aren’t pleased with the level of adoption, the introduction of this payment mechanism which enabled research to be unbundled from exeuction has, and continues to, significantly change the market for investment research.
Looking back on the market since 2006, their analysis shows that unbundling has expanded the number of providers used by buy side firms and therefore stimulated a growth in the scale, number and reputation of independent research providers. From their numerous interviews, Haig and Rees find that space exists on client provider lists for a wide range of specialists but not for repetition or regurgitated news.
CSAs have led to much improved market efficiency. The introduction of a European-wide mandate for research unbundling will accelerate the change in the investment research market, in the UK and beyond.