Nomura’s agency-only broker Instinet has applied to the Financial Conduct Authority to become an authorised Payment Institution, enabling it to react to changes in the way research is paid for by institutional clients.
Instinet is hoping that this new status will allow it to offer segregated cash management and payment services to those clients operating ‘hard dollar’ research payment accounts.
In the UK, the Financial Conduct Authority has been keen to embrace proposals outlined in the Markets in Financial Instruments Directive II (MIFID II), which make the case for an end to ‘soft-dollar’ arrangements such as commission sharing arrangements.
CSAs enable fund managers to pay the broker for trade execution and then ask the same broker to allocate a portion of the commission to an independent research provider.
Instinet already offers a commission management service but is hoping to offer the new ‘segregated cash management’ service alongside the existing service.
Adam Toms, chief executive officer of Instinet Europe, said: “Applying to become an authorised Payment Institution enables Instinet to offer clients the flexibility to choose a solution that works for them.”
According to the FCA, Payment Institutions are allowed to make credit transfers, take direct debits and card payments, make cash remittances, offer foreign exchange services and grant credit for periods of up to one year under the Payment Services Regulations.
In a press release, Instinet said its has witnessed commission sharing arrangement balances double between February 2014 and February 2015, although it did not volunteer a figure.