OVER TIME , WE ARE LIKELY TO SEE THE EMERGENCE OF A SMALL NUMBER OF SPECIALIST RESEARCH FIRMS , WHO ARE ABLE TO DIFFERENTIATE THEMSELVES BY OUTPERFORMING THEIR PEERS .
GILES KENWRIGHT , HEAD OF INVESTMENT BANKING REGULATORY PRACTICE , DELTA CAPITA
and making the necessary operational changes to their current processes in order to connect to them .
MiFID II will also subject buy-side firms to new requirements for best execution . Traditionally , firms would be required to produce a report of aggregated costs for the end investor , which would be distributed on a pro-rata basis .
MiFID II will require them to record the costs associated with executing each trade and report this back to the client .
Buy-side firms will also be subject to transaction reporting requirements to an Approved Reporting Mechanism ( ARM ) but they will be able to delegate or outsource this process to a third party , either a sell-side broker or via a trade repository . Whichever option they chose , however , an automated interface will be required to transmit the data .
Those outsourcing the reporting to their sell-side counterparty will need to consider whether they are comfortable sharing detailed information about their clients . Firms will be required to identify and capture the details of client , investment decision maker , algorithm used for investment decision , execution decision maker , algorithm used for execution and short selling indicator . The sheer volume of transactions and data points to be reported will create a need for implementing best-automated data management practices across the board .
Q : WHAT IS THE BUY-SIDE DEMANDING NOW THAT RESEARCH QUALITY IS UNDER GREATER SCRUTINY ?
RA : Buy-side firms will increasingly look for value in the research they purchase . They won ’ t be tied to research from their broker any more so will be able to source intelligence from anywhere in the market . This means that smaller , niche houses will be increasingly attractive compared to the sell-side who many see as conflicted . Access to research will also need to become easier with some advocating the “ exchange ” model of distribution where research from multiple sources is provided through a central hub .
MC : The buy-side will want data and analytic tools to evaluate the research they buy and inform their decisions on what research to purchase .
BM : Managers are no longer willing to expect the siloed and waterfront model for investment research , where bottom-up
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