Sell-side begins research cuts

Banks and brokers are reducing research services provided to smaller buy-side firms.

Banks and sell-side firms are cutting the research they provide to asset managers, according to the head of trading at Allianz Global Investors.

Speaking at TradeTech in Paris, Christoph Mast, global head of equity trading at Allianz, said banks are already repositioning themselves in anticipation of rules that will unbundle research and trading payments.

“We have seen over the last year that the sell-side is already prepared for a world where commissions are increased and they have reduced the research they are providing us,” he said.

“My feeling is the brokers to a large extent are doing their own work to reduce their cost basis.  The sell-side are already positioning themselves for the unbundled world.”

Mahmoud Elarbi, head of HSBC’s central risk book, added that providing services such as research to smaller asset managers would come down to a matter of relevance.

“There is a constant re-organisation of resources aimed towards them [asset managers],” he added.

Allianz’s Mast concluded that, in an ideal world, this would allow larger asset managers to provide their own research to smaller firms that have been dropped by the banks.

Panellists at TradeTech agreed that asset managers will likely to pay for the research they consume directly from their own funds as investors struggle with Mifid II regulations.