When Mifid II came into force in 2018, its mission was clear: to drive greater transparency across Europe’s financial markets. Chief among its reforms was the unbundling of research and execution costs, ending decades of ambiguity for asset owners over what they were actually paying for. But, as laudable as its aims were, the regulation also ushered in a wave of unintended consequences, particularly for asset managers who were left navigating a patchwork of burdensome operational and compliance requirements.
Jeff Galvez
Now, the FCA is revisiting that framework with a more pragmatic lens. Its latest policy statement marks a significant shift by introducing greater flexibility around how asset managers pay for research. However, while the move opens the door to more efficient global workflows, it stops short of a full rebundling. So, what has really changed, and how should asset managers respond?
New flexibility from the regulator
The FCA’s rule introduces the use of joint payment accounts, a mechanism that effectively reintroduces some elements of commission sharing arrangements (CSA), albeit under a different name. The regulator has made it clear that this is not a return to traditional bundling, but it does acknowledge the operational strain that full unbundling placed on firms.
Now, client commissions can be used to pay for research, but it still requires explicit costing and transparency. In essence, the spirit of Mifid II has been preserved, but the execution is less rigid.
The change reflects years of feedback from across the buy-side, including input from working groups and industry stakeholders. For many asset managers, particularly those with global operations, the FCA’s revision offers a long-overdue recalibration.
Why the shift matters now
Research consumption today is a far cry from what it was when Mifid II was drafted. Asset managers now operate in complex global environments, engaging with multiple research providers across different formats and jurisdictions. The original Mifid II framework made it difficult to scale research programmes globally, forcing firms to create disjointed regional models and often limiting the reach and effectiveness of their investment teams.
This new flexibility helps firms establish a more unified global research strategy. It allows them to move away from rigid budgeting constraints and embrace a structure better suited to today’s market realities. Importantly, the US and APAC never fully adopted Mifid-style rules, meaning they continued using CSAs and bundled approaches with relative ease.
By contrast, UK and EU asset managers were bound by rules that many now regard as unnecessarily restrictive.
At the same time, while regulators may have eased their grip, they have not gone away. Compliance expectations remain high. Firms must still be able to demonstrate value for money, maintain accurate records, and support their practices with audit-ready documentation. The difference now is that the regulatory structure allows for more workable solutions that don’t demand excessive operational overhead.
What asset managers need to understand
Brian Gutierrez
While conversations around rebundling may raise eyebrows, it’s important to stress that the market is not reverting to the pre-Mifid status quo. Rather, what’s changed is the introduction of choice. Asset managers now have the option to pay for research either through their P&L or client commissions, with the proper controls in place.
This shift is particularly impactful for small and mid-sized firms that previously had to fund research from limited internal budgets. Spreading the cost across clients – with clear disclosure and compliance – offers a more sustainable model.
However, the reintroduction of flexibility also requires firms to revisit internal processes, governance, and technical infrastructure. Many organisations lack recent experience with CSAs, and the operational knowledge around managing commission-based research payments has eroded over the past seven years. Firms will need to rebuild this expertise or partner with providers who already have it.
Key considerations for firms
As the market digests this regulatory evolution, asset managers must evaluate whether their current systems can support the necessary level of transparency, documentation, and control. Many firms, particularly in EMEA, no longer have infrastructure built for CSA workflows, given the time elapsed since they were in common use. This includes not only compliance capabilities but also legal, finance, and operational resources.
Firms should also reassess their research procurement models. Under Mifid II, with research spend coming directly from the P&L, many firms applied significant scrutiny to ensure value. That discipline is unlikely to fade, however, the shift back to client-commission funding may require renewed diligence in managing budgets and justifying spend across the client base.
Finally, asset managers should consider whether external providers can help reduce friction in implementing these changes. Outsourcing certain aspects of payment administration, budget tracking, or compliance oversight may offer a scalable path forward without rebuilding entire functions internally.
How Liquidnet is supporting the transition
Liquidnet has been supporting the industry with commission management solutions since 2011, with its Commission Management System (CMS) designed specifically with Mifid compliance in mind. Notably, it’s an offering that remains adaptable to the FCA’s latest guidance and enables clients to automate payment processing, allocate commissions based on defined budget levels, and maintain real-time visibility into their spend.
The integrated tools combine data across trading commissions, payments, and research budgets, helping firms track exactly how much they are paying providers over time and ensure alignment with internal and external expectations.
Beyond functionality, Liquidnet’s CMS is based on a consultative and bespoke approach. With all development and client service managed in-house, the firm can tailor its solutions to each client’s operating model. Whether ingesting third-party consumption data, mapping outputs from different OMS platforms, or partnering with specialist providers, Liquidnet’s focus is on serving as a centralised hub that reduces administrative burden.
Notably, Liquidnet also offers a unique insurance policy that covers client funds held in segregated accounts. The added layer of protection and confidence is a market first, with larger managers looking to centralise global research payment flows able to safeguard and minimise counterparty risk.
Looking ahead
The FCA’s revision of Mifid II’s research payment framework is not so much a reversal as a refinement. It acknowledges that transparency and investor protection need not come at the expense of practicality and global consistency. For asset managers, this opens the door to more efficient, scalable research strategies – but only if they act quickly and decisively.
As the implementation deadline arrives, firms must review their systems, reassess their procurement models, and ensure they are prepared for the operational demands of this new era. For those ready to adapt, the regulatory shift represents more than just a compliance update – it’s a chance to unlock strategic value.