Equities
Turning a corner?
Elliott Holley, Head of Global Buy-side Research
In the world of equities, the global buy side have highlighted
various different concerns in each region. Some of the
standout events in the last few months include the publication
by both the FCA and French regulator AMF of consultation
papers regarding MiFID II unbundling procedures. ESMA has
also published a Q&A covering the same subject. This is the first
time we see a non-UK national regulator indicating a stronger
stance on MiFID II challenges. At the same time, one can
identify areas of future regulatory arbitrage between the UK
and the EU.
At the same time administrating, compliance continues to
be a challenge. Notably, many buy-side firms are required
internally to explain to their compliance department why they
have paid more than the usual commission. In response to
falling turnover and commission rates, competition over block
liquidity has increased and some firms are now willing to pay
full commission rates for blocks, to ensure the broker does not
go to a rival.
In the United States of America, similar concerns dominated
the Alpha Trader Forum debate in Boston and New York in
H2 2016, where the buy side primarily highlighted concerns
over how to implement a Research Payment Account (RPA)
and how to manage research payments. On a related note,
in Germany the buy side highlighted the Swedish model,
which is considered one or two basis points more expensive
but considered much more efficient than having hundreds
of different Commission Sharing Agreement (CSAs). Likewise
in France, the buy side noted that the UK FCA has a different
approach to corporate access versus ESMA and the AMF in
the EU. The key concerns in the Alpha Trader Forum (ATF) Paris
in H2 included the budgeting process, CSAs versus RPAs given
that France’s regulator is CSA-friendly, and VAT on research.
November 2016
In Asia, the top buy-side concerns are the impact of MiFID II
globally and budgeting commissions. The buy side suggested
that commission management is the biggest issue. They do not
want the quality of services from the sell side to decrease as a
result of falling commissions. The buy side wants to ensure there
is adequate research commission generated which can be
redistributed. There is a need to standardise rates, but at the
moment all that can be done is to standardise those that are
most commonly paid.
In London, the buy side community has shown some support
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www.buysideintel.com
December 2016