Buy-side Perspectives Issue 7 | Page 6

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 6 www.buysideintel.com December 2016