10 Things You Should Know About MiFID2 Research Unbundling

The unbundling of investment research and execution is one of the most widely anticipated regulations in financial services. On May 19, 2016, the first Paris Investment Research forum took place, organized by AGEFI (financial press) in cooperation with broker ITG and AlphaValue, a Paris-based independent research producer.

Nearly 200 attendees and 22 asset managers, analysts, regulatory and corporate panellists intensely debated how the buy-side and sell-side will operate in the future.

Here are 10 key takeaways from the event.


1 – “There is no market for research”

Pierre-Yves Gauthier, AlphaValue founder and CEO, believes that MiFID2 is pushing the research industry to modernize itself. From the moment research pricing appears, new, more creative offerings will start to emerge, injecting a boost of fresh dynamism into European marketplaces.

2 – “It is now urgent for the industry to get ready!"

The general secretary of the French securities regulator (AMF), Benoît de Juvigny, opened the forum, proclaiming that with the long-awaited delegated acts published since April 2016, the new legal framework is clear. In addition, the AMF stresses that it will essentially translate the EU-level research unbundling directives directly into regulations. Any objection to the European Parliament is unlikely now since a Europe-wide political agreement has been tacitly sealed.

3 – “UK regulators' payment ban for corporate access has lead to the opposite of pricing transparency”

The general secretary of the French securities regulator (AMF), Benoît de Juvigny, opened the forum, proclaiming that with the long-awaited delegated acts published since April 2016, the new legal framework is clear. In addition, the AMF stresses that it will essentially translate the EU-level research unbundling directives directly into regulations. Any objection to the European Parliament is unlikely now since a Europe-wide political agreement has been tacitly sealed.

4 – “Research has never been free”

Sébastien Faijean, Managing Partner at IDMidCaps, an independent boutique covering small and mid-cap companies, still comes across asset managers who think that research is free, or should remain so. It will take some time for industry players who have become used to bundling to acknowledge the true cost – and value – of research. Old habits die hard.

5 – “Independence has not played a big enough role in investment managers' choice of research”

Emmanuel de La Ville, Managing Director and founder of EthiFinance, an independent boutique specialised in Environment, Social and Governance (ESG), regretted that, even with the widely adopted CSA mechanism, too many asset managers have stuck to their “usual" bundled research sources.

6 – “Research innovation cannot come from banks”

Gilles Bazy-Sire, CEO at Equity GPS, thinks that only research producers who are setup to be independent can generate creativity and innovation.

7 – “Over periods of 5 to 15 years, mid-caps out-perform blue chips”

José Berros, Portfolio Manager at La Financière de L’Echiquier, argues against the common thinking that mid-caps are too risky because they’re too volatile, hence generating less risk-adjusted performance. Research coverage for mid-caps is deteriorating fast, laying the ground for wasted investment opportunities in capital markets worldwide.

8 – “In the new economy, prices must be known at all times”

Laurent Dubois, Founder of MyDCA, a soon-to-be-launched Corporate Access Platform, recalls that the consultancy industry teaches us how banks themselves have been the most aggressive in requesting pricing transparency from their suppliers. Research price discovery must evolve in a similar fashion.

9 – “Research will become increasingly quality-oriented”

Pierre-Marie Piquet, Deputy Head of Sustainable Thematic Equity for BNP Paribas AM, described how organizational changes in asset management are pushing portfolio managers towards consuming more specialized, in-depth reports, or even bespoke research.

10 – “Accurate statistics are needed to quantify research value”

Thomas Yasin, a senior European sales representative for FactSet, explained how research consumers are in the need of tools that allow them to accurately measure their consumption, establish compliant reporting, and quantitatively define research value.


Alphametry has published a full report summarizing the speakers' most interesting points.

To learn more, please download our new white paper:

PARIS INVESTMENT RESEARCH FORUM
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THE CHALLENGES OF AN INDUSTRY AGAINST THE WALL

WRITTEN ON 20 JUNE 2016 BY

FABRICE BOULAND, an accomplished entrepreneur, is currently the CEO of Alphametry and a former equity derivatives trader.

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