Russell Napier, co-founder of ERIC (Electronic Research Interchange), comments on the risks of a research price war as MiFID II comes into effect:
Despite a large number of investment firms deciding to pay for their own research under MiFID II, many have yet to agree on a price with their brokers. Costs remain unclear, even at this late stage, and some commentators have questioned whether providers will charge unreasonably low fees for access to their output. While fees for a range of research services have suffered downward pressure since this time last year, peppercorn prices are unacceptable.
The FCA has now confirmed it will act if pricing reaches a stage where research appears significantly undervalued, to the point it could be considered an inducement to use a provider’s other services. The Regulator will want to assess the impact of MiFID II across a variety of areas before deciding whether any remedial action might be necessary. It could take up to 18 months to determine and then intervene in a research market where the product has been undervalued, and measures should be put in place sooner to ensure a fair value for research.
MiFID II has arrived and action must be taken. High quality research is a valuable tool that can be used to meaningfully improve investor outcomes. Devaluing it could harm the end investor, in direct contrast with MiFID II’s ultimate aim.
For more information or to speak to Russell, please contact Matthew Jones/Anthony Cornwell on 020 3761 4427 or firstname.lastname@example.org.
The Investment Banking Scorecard from Thomson Reuters gives you the ‘Fast Facts’ of the week in Investment Banking, as well as a closer look at trends in deal making, with league table movements and regional activity in M&A, capital markets and syndicated loans also included. Please see attached for the matrix of year-to-date IB activity with breakdowns by asset class/region/sector, league tables and top deals.
· Consumer Prod/Svcs M&A activity hits $176.6 billion, up 58% compared to YTD 2016
· Europe Cross-Border M&A is flat compared to a year ago with $529.6 billion in transactions
· Asia (ex. Japan) ECM reaches $230.7 billion, down 1% compared to the last year
· Global Convertibles up 20% compared to the previous year with $92.8 billion in proceeds
· Global DCM activity totals $7.15 trillion, down 1% compared to 2016
· China IG Corp Debt down 17% compared to YTD 2016 with $783.4 billion in debt raised