Skip to main content
MENU
Subscribe
  • Subscribe
  • Account
  • LOGIN
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE Act 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2022 Retirement Income Conference
    • 2022 Managing Pension Risk & Liabilities
    • 2022 WorldPensionSummit
Breadcrumb
  1. Home
  2. Regulation
May 26, 2020 12:57 PM

Trade associations call for MiFID II unbundling exemptions

Sophie Baker
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Flags of the European Union, in a circle, on tall flagpoles
    Getty Images

    Flags of the European Union. Germany's BVI says MiFID II rules have been implemented by Europe's money management industry at 'considerable cost and efforts.'

    Bond research should be exempted from Europe's trading rules, which have caused unintended problems, trade associations said.

    The recommendations and warnings were made in responses by European trade bodies to the European Commission's review of the Markets in Financial Instruments Directive II, which closed to comment May 18.

    MiFID II came into force in January 2018 to promote investor protection, best execution and transparency in Europe's trading markets. One move was to unbundle payments for trade execution and investment research.

    Germany's BVI, which represents the country's money management industry and whose members run more than €3 trillion ($3.2 trillion) in assets, called for bond research to be made exempt from unbundling rules and said small and medium enterprise research coverage should be improved — something already acknowledged by the commission itself.

    The rules have been implemented by the European money management industry "with considerable cost and efforts," the BVI said in its response. "As a result, the research budgets of asset management companies have been cut, the scope of research has been narrowed and the sell-side has adjusted its research offering. One aspect is that rules for passing on research costs to the client are unduly complicated."

    Regarding bond research, "the application of the unbundling rules has only led to additional costs for asset managers. Asset managers now have to make additional payment beyond the spread, without the latter having been reduced by the research cost share," the response said.

    BVI said growing market consensus is that equity research is focusing on liquid stocks while banks and brokers are reducing small-cap equity research. This will lead to deteriorating financing conditions in capital markets for small and medium enterprises.

    The EU should review the unbundling rules, including "how research costs are allocated and ensure appropriate research coverage on SME as well as exempting bond research," BVI said.

    France's Association Francaise de la Gestion Financiere, which represents money managers running more than €4 trillion in assets, warned that unbundling has caused an unlevel playing field between countries that have had to implement the rules and those that have not, "particularly with regard to U.S. players."

    The AFG said U.S. research providers "amortize their costs with American and international customers. This allows them to dump prices for the benefit of their European customers."

    It said a large U.S. bank may sell research as a "read only" service to European investors at a cost of €10,000 per year, whereas French brokers may charge between €30,000 and €50,000.

    There is also a problem when it comes to money managers. "Indeed, when European asset managers make offers to both European and non-European clients, they have to price them the cost of research. The consequence is that the costs of European asset managers appear higher to clients compared to the costs of an American asset manager," the response said.

    European money managers also have to agree on a research budget, with "many French clients (refusing) to pay the research fee."

    The AFG said institutional clients "have all refused to pay for the research" and "one asset management company even had to give up two institutional mandates. To sum up, either the asset manager bears the cost of the research or he loses (his) clients," the response said.

    Small and medium-size money managers cannot afford to cover the cost of research and "are therefore the first to be penalized," the response said.

    Related Articles
    MiFID II unbundling review raises concerns
    ICI Global: Changes needed to European trading rules
    MiFID II leaving European managers behind U.S. peers?
    Recommended for You
    ONLINE_190409845_AR_0_YVLXFPQLEQBO.jpg
    BlackRock offers feedback to SEC on climate-risk disclosure proposal
    SEC_Gensler_i.jpg
    SEC seeks comment on activities of 'information providers'
    SECHQ-Alt_i.jpg
    Energy Capital Partners settles SEC charges over undisclosed expenses
    Strong Demand Drivers Underpin Private Credit
    Sponsored Content: Strong Demand Drivers Underpin Private Credit

    Reader Poll

    June 6, 2022
    SEE MORE POLLS >
    Sponsored
    White Papers
    Nearing the finish line: Ideas on end-state investing for corporate DB plans
    The Meaning of "Portfolio Intelligence"
    Credit Indices: Closing the Fixed Income Evolutionary Gap
    Forever in Style: Benchmarking with the Morningstar® Broad Style Indexes℠
    Crossroads: Politics, Inflation, & Bonds
    Is there a mid-cap gap in your DC plan?
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    June 20, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2022. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE Act 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2022 Retirement Income Conference
      • 2022 Managing Pension Risk & Liabilities
      • 2022 WorldPensionSummit