Trading technology specialist Fidessa has teamed up with commission management software developer Commcise to develop a solution that will help firms fund RPA’s without violating new rules on commission payments as part of MiFID II.
It is estimated that 75% of European buy-sides pay for research via commission sharing agreements (CSA’s), but under the new rules, Fidessa claims that if firms do not find a another method of funding RPA’s, they will be susceptible to value-added tax.
Traditional CSA’s would have firms agreeing on commission splits prior to executing a trade; however, Fidessa states that its new approach can move these agreements in the post-trade process, which would eliminate any correlation with trade volume or value. Consequently, asset managers are now able to determine exactly how much commission should be added to trades at a fund level, which would respect fund level budgets.
According to Fidessa, new regulation states that buy-sides must clearly demonstrate that the research charge is separately identifiable to the client, in addition to demonstrating that they have robust processes in place for tracking and measuring what was spent.
Steve Grob, Director of Group Strategy at Fidessa, stated: “The approach by Fidessa and Commcise reuses existing CSA infrastructure to simply and effectively solve this funding challenge for the industry”.
Commcise believes that its evolution of the existing CSA model will allow asset managers to determine a research charge independent of their trade execution which will remove any conflict and be calculated in a manner that is not linked to trading value or volume.