The Asia Securities Industry & Financial Markets Association has established a dealing commissions working group to assess the impact of global unbundling regulations on the Asian region.
In the US and especially in Europe, regulators have moved to stop fund managers using client funds to pay for broker services – something known as ‘bundling’.
However, ASIFMA – which is part of the Global Financial Markets Association, boasting members such as BlackRock, Goldman Sachs Asset Management and Schroders – believes unbundling could cause headaches in Asia.
Eugenie Shen, managing director and head of the asset management group at ASIFMA, said members expressed concern that European and US regulations to ‘unbundle’ research and commission fees may impact the Asian region adversely.
She said: “The whole idea is that Asia may be different because it is more of an emerging market. It is less developed and it might be that more research is required.
“I do think Asia is different. If you look at China, Malaysia, there is not enough research. Who is paying for the research? It is tricky.”
Shen acknowledges that transparency is “definitely required” but says that fund managers operating in some parts of Asia don’t enjoy the same scale, meaning buy-side firms are often operating at much smaller margins than in Europe or the US.
She said: “If you expect them [fund managers] to pay for research out of their own pockets, it might reduce the desire to acquire the research. I have asked our members, globally, what they want to do.
“They say they want to follow the strictest standard globally, which, to me, is the UK’s FCA and I do think that some of the bigger managers can do this if they have big in-house research teams.
“But what does that do to the smaller guys? They don’t have the scale. In Asia, we need to promote more research and we created this working group to start looking into these issues.”