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R I C H A R D
Hayley McDowell: What’s your take
on MiFID II so far this year?
Richard Parsons: The industry has
spent so long preparing for MiFID
II and now that it has actually hap-
pened we are starting to see more
of a period of reflection. I think
some initial trends are already be-
coming evident, especially around
unbundling. With more focus on
execution and execution quality,
firms like Instinet are seen as a
beneficiary. From a preparation
perspective I would say we were
further along the line focusing
on equities here in Europe. As a
broker we have always focused on
services like commission manage-
ment or liquidity aggregation and
we have seen a natural evolution of
the business in that sense.
PA R S O N S ]
with clients forced to evaluate bro-
kers on an execution-only basis to
ensure that they have the data and
the means to do that. This won’t
necessarily result in a consolida-
tion of broker lists, but the buy-side
will be keen to understand why
they are using the broker and what
their execution capabilities are in
the absence of any other driver.
The buy-side’s relationship with
brokers is somewhat deeper now
than it used to be.
Those trends will certainly con-
tinue through the first six months
of this year and probably longer. Of
course the market structure chang-
es have been more immediate and
starker. We’ve seen some very big
changes quite quickly. Shutting
down the broker crossing networks
“The buy-side’s relationships with brokers is
somewhat deeper now than it used to be.”
The industry was aware that
MiFID II was going to have a big
impact, but then as the deadline
approached, suddenly there was
this realisation that the introduc-
tion of MiFID II was going to be a
global issue. Global managers were
adopting their practices globally
to accommodate MiFID II, and
because of that, there has been an
awful lot of time and money spent
by the industry to ensure they were
ready. I always thought that MiFID
II would have more of an impact
during 2018. If you think about the
buy-side and how they operate,
with voting processes around their
broker lists for example, really for
the true impact of unbundling, it
will probably be the first or second
quarter before banks start to see
any effects and those votes start
coming in. I think we will begin
to notice a complete delineation
between execution and research,
52 // TheTrade // Summer 2018
(BCNs) and bid and offer books
in multilateral trading facilities
(MTFs), alongside a rise in large
in scale trading, I think clients are
continuing even now to adjust their
workflows. As clients continue
to automate all of their processes
or evaluate the impact of these
changes, typically the analysis that
is done is after the event, but they
will continue to change how they
trade and it’s up to the brokers to
respond to that.
HM: There has been talk of po-
tential consolidation and ‘deeper
partnerships’ amongst sell-side
institutions over the next few years.
Do you agree this will happen and
what could drive this trend?
RP: There has been discussion
around consolidation on the sell-
side for a number of years now,
and while some brokers may exit
certain parts of the business, I do
think that ultimately clients drive
the products they are consuming.
There will definitely be an adjust-
ment to brokers’ business models
over the coming year or two. We
can take research as one example
where there may be more focused
changes. On execution again, some
brokers will want to be in that
business and others won’t. It’s hard
to see a future where there won’t
be consolidation, but that being
said, even at this stage brokers are
now looking to outsource parts
of their business to technology
firms or firms that have a strong
technology platform so that they
still stay prominent. The winners
will probably be the brokers that
continue to innovate and ensure
they have deep