MIFID II - So transparent

Written by Rowan Ewart-White

22 January 2018


Transparent

19 days since the official advent of MIFID II – what do we know? 

The conclusion from the embers of Koji Nagai's (Nomura's CEO) interview with the FT last week was that the long (almost 3 decades & counting) awaited downsizing of Japanese sell-side industry capacity might start to become a reality in 2018-19.

Among the edited highlights was this gem: 'the current large research house workforce probably cannot be sustained...'.

No kidding. The large investment bank response to MIFID II has been a rush to see who could come up with the lowest annual rate for "basic access" (whatever that means, & nobody seems to know or possibly care) research. By Nov 2017 figures that 12 months earlier had started in the hundreds of thousands of $s had been reduced to $10k (step forward JP Morgan). 

Wasn't the core idea behind MIFID II transparency? That if you got rid of free research (an inducement), & made it more like a supermarket, then we'd all know where we stood? But if $10/20/50k per year doesn't actually reflect the cost of research, is that not also an inducement? 

It's a point Russell Napier makes in Call for FCA to act now on MiFID II peppercorn pricing. We await the FCA's response.


Meantime, over on the buyside, it appears there is a bit more transparency, & it's not all good, with post MIFID II figures showing investors in the UK's most popular funds in 2016 were paying 30% more in fees than previously thought (Asset managers under fire as impact of transaction costs revealed post-MiFID II). The quoted consultant goes on to twist the knife:

"This feeling of grubbiness intensifies when you remember just how hard the industry has kicked against being made to step up to the plate and disclose these charges. This is not anything radical - all they are being asked to do is to tell people what it costs to invest with them."

Meantime the 'interactions industry', which as far as I can work out did not really exist until last year, goes from strength to strength, as the sell-side scrambles to get all their 'high-touch' interactions into the right system (of 12, & counting, available) in the right format in the right timeframe to get paid.

It's enough to make you up sticks & move to the middle of nowhere. Burton-on-Trent for example. Now there's a thought.


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