Rebundling Unbundling – Will it work?
The publication of the MiFID II refit will lead to a number of changes for the industry. The proposal by the EU Commission to revisit unbundling is subject to a further Consultation Paper1, which raises an important and necessary debate as to whether re-bundling of small and mid-cap research will improve coverage of SMEs. Key issues include:
Operationally re-bundling is likely to be a huge headache for the buy-side;
Providing research based on market cap risks impacting delivery of best execution;
Bulge brackets providing both equity and FI research will have to establish how to compensate analysts;
Just 17% of respondents in Liquidnet’s outreach attributed the decline in small- and mid-cap coverage to MiFID II2;
Just 24% of responding firms were still paying for research only using all-you-can-eat models, with Covid-19 likely to create an even bigger impact;
Research as a product is changing: 61% of respondents have increased their use of data in the investment process; 86% increased their use of ESG data and three-quarters of respondents are contacting companies direct2.
For more on what was finally included in the Special Regulatory Vehicle and the likely impact on research please read the reports below.
Read the summary report here
Read the full report here
The report has been compiled by Rebecca Healey and Charlotte Decuyper of the Liquidnet Global Market Structure team.