US brokers will be able to continue charging clients separately for research and analysis, as implemented under MiFID II in Europe, for another three years.
The US Securities and Exchange Commission (SEC) issued an extension to its ‘no-action letter’ – first published in October 2017 and due to expire in July 2020 – until July 2023. The move means that broker-dealers will not be faced with enforcement action for receiving payments in hard dollars or through research payment accounts from clients that are subject to MiFID II.
Chairman of the US securities watchdog, Jay Clayton, commented that the SEC needs more time to evaluate the consequences of MiFID II and the extension allows it to continue monitoring its impact.
“The impacts of MiFID II are evolving, as EU authorities and regulators in individual EU member states evaluate its effects and consider whether to modify their rules,” Clayton said. “Today’s extension will allow our staff to continue to monitor the evolving impact of MiFID II and evaluate whether any additional guidance or Commission action is appropriate. In this regard, our staff is focused on ensuring that market participants have flexibility and choice in how they pay for research.”
MiFID II forced payments for execution and research from third-parties to be separated, or unbundled, across Europe. The rules have not been enforced in other regions, but many large asset managers have opted to implement the regime across their business globally.
A survey by TABB Group of US equities asset managers found that of 92 heads of desks polled, only 33% of large firms are still bundling execution and research payments. The analysis also suggested that the buy-side in the US are increasingly in favour of the rules, with many highlighting greater transparency and clarity around research requirements.