Under MiFID II rules, research payment accounts (RPA) are allowed to be funded by commission sharing agreements (CSA), although CSA cash cannot be retained by brokers to pay for research.
A consultation by the UK’s Financial Conduct Authority (FCA) has stated research charges deducted through a broker – alongside transaction fees – should be ‘swept’ to an RPA immediately following the transaction.
However, if the research passes through an executing broker, RPA money flows must be ‘ring-fenced’ and separately identifiable.
Chief executive officer at independent research provider ResearchPool, Pedro Fernandes, explained the process the FCA outlined is ‘robust’.
He added: “If [holding CSA money] was possible, it would eventually become a barrier to unbundling, so it creates a level playing field amongst research providers.”
Co-founder of RSRCHXchange, Vicky Sanders, explained “the FCA has left very little wriggle room.”
She added: “The FCA implementation of MiFID II will ensure that a transparent, priced research market emerges and that research becomes a core and fixed cost of doing business.”
The FCA has requested comments on any suggested modifications to RPA rules from the consultation by 4 January 2017.
It will provide feedback in the first half of next year.