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Aug 07, 2019

US buy side sees impact of Mifid II, reveals study

Industry changes are nevertheless seeing a new wave of innovation

Research unbundling under Mifid II has hit institutional equities in the US, with research showing that buy-side firms have significantly reduced their commission pool over the last few years.

New York-based research and consulting firm TABB Group, which spoke with 100 asset-management trading heads, reveals that investment managers have reduced their US commission pool by 42 percent since peaks in 2015.

The study reveals that the unbundling of research and commissions via the influence of Mifid II has also resulted in a decrease in buy-side research allocation.

Despite Mifid II not being directly enforced upon US investment firms, the impact of larger institutions’ restructuring strategies to separate research and execution commissions have caused the US commission pool to plummet.

Despite such changes, TABB Group says the industry is seeing a new wave of innovation, with brokers overhauling execution infrastructure, asset managers rethinking technology strategies and exchanges developing new ways for the buy side to meet the sell side.

‘While this will be a painful few years, we’ll transition into a leaner, more efficient equities industry,’ says Campbell Peters, research analyst and co-author of the report at TABB Group in a statement.

‘The buy and sell sides will be more automated,’ he states. ‘We’ll leverage new and more interesting data streams to find, quantify and capture alpha, there will be novel ways to trade and the world of institutional investing will become less secretive and more open for the end investor.’