Research riches of $1.35bn p.a. may be up for grabs post Mifid II
Greenwich Associates has valued the equity research and advisory market in Europe at about $1.35bn p.a., giving an indication of the sums at stake when Mifid II regulations force companies to break down the cost of analysis in their charges from next year. The company based its estimate on calculations it said showed institutional investors pulled in around $2.9bn in cash equity investment commissions in the year ended 30 June 2017, 46% of which would have been accounted for by research and advisory services.
MiFID II’s unbundling rules will see brokers battle to capture a share of the $1.35 billion a year equity research and advisory market in Europe, according to research.

Greenwich Associates’ latest study revealed European institutional equity investors generated roughly $2.9 billion in cash equity commissions for the 12 months ended Q2 this year.

Of the $2.9 billion, Greenwich estimated 46% was used to compensate brokers and other providers for equity research and advisory services.

This suggests once services are unbundled as required by MiFID II, brokers will find $1.35 billion worth of the equity research cash up for grabs.

Greenwich Associates consultant Satnam Sohal, explained capturing a share of that revenue is more important than ever for brokers, “since both the total amount of commissions generated on European equity trades and the proportion of that total used for research are shrinking”.

Market participants have implied MiFID II’s unbundling requirements will see brokers forced to specialise in either research or trade execution.

A panel at this year’s TradeTech event agreed the move will have a positive impact on the industry as brokers will increasingly demonstrate trade performance and invest specifically in those services.

The head of investment services at Man Group, Alison Hollingshead, told delegates: “You need to be an expert in either research or execution because brokers will no longer be paid for both services.

“You can’t be trading with people to pay for their research anymore, there must be a clear differentiation.”