MiFID II goes global as buy-side implement global unbundling policies

Study from Liquidnet finds that more than half of asset managers have implemented a global policy for unbundling under MiFID II.

Regulatory changes in Europe under MiFID II have already had a global impact a year after they were introduced, as more than half of asset managers have implemented a global unbundling policy, according to research.

A study from Liquidnet, which asked 55 buy-side firms globally about the implications of MiFID II’s unbundling requirements, found that 53% have installed a global policy for the separation of research and execution payments, and a further 20% plan to do so within the next five years.

According to Rebecca Healey, Liquidnet’s head of EMEA market structure and strategy, and author of the study, the global approach to unbundling has been driven by demand for greater transparency from investors.

“It isn’t surprising that unbundling is a global phenomenon just one year after the implementation of MiFID II,” Healey said. “Across the world there has been a growing demand from end-investors to be assured that they are getting value for money, and a need for greater transparency is a direct consequence of this.”

The unbundling of research payments has been a key part of European regulation since MiFID II came into effect on 3 January this year, as asset managers can no longer accept research that has been paid for through execution commissions. Liquidnet also found that the number of research providers the buy-side is using has declined since the unbundling rules came into force, but 55% of asset managers still take research from more than 50 providers globally.

The bulge bracket banks continue to dominate the top research broker lists, with 69% of asset managers choosing global investment banks over regional specialists or independent research providers. However, 77% of buy-side firms are utilising alternative sources of research to traditional research, and 59% are now investing in quants and data scientists.

“Creation of alpha is increasingly driven by technology that offers buy-side firms a quantitative way to assess and evaluate their research which in turn supports data-driven investment decisions,” Healey added.

“We’re already seeing asset managers marry traditional research with insight derived from data analytics. That also means that sell-side services are not going to be used in the same way that they have been in the past, with buy-side firms only selecting services that truly add value.”

«