THETRADETECH DAILY news
THE OFFICIAL NEWSPAPER OF TRADETECH 2024
Regulation
FCA tables re-bundling to support more ‘ flexible ’ approach to research
THE UK FINANCIAL CONDUCT AUTHORITY ( FCA ) HAS OPENED A CONSULTATION ON RESEARCH PAYMENT PROCESSES ; PROPOSED RULES SET TO MAKE IT EASIER TO BUY RESEARCH ACROSS BORDERS .
The FCA ’ s latest consultation paper highlights what new investment research funding and payment rules are set to look like , with asset managers given greater freedom of choice in terms of how they pay .
A key aspect of the new rules is the allowance of ‘ bundling ’ of payments for third-party research and trade execution . Prevention of payment bundling was introduced in 2018 under Mifid II due to various concerns , including that it could lead to less disciplined spending on duplicative or low-quality research .
Now , payments would exist alongside those already available , such as payment from an asset manager ’ s own resources or even a dedicated account .
Speaking in an official announcement , Sarah Pritchard , executive director , markets and international at the FCA , said : “ High quality , easily accessible investment research is a vital part of a healthy , dynamic capital market . It supports the decisions investors make .
“ We are proposing to provide more options on how to pay for such research , helping boost competition and making it easier to buy research across borders .”
The ease of cross-border activity is due to the proposed new plans being compatible with rules governing research payments in certain other major jurisdictions , said the watchdog .
According to the watchdog these proposals have been developed following feedback from research providers and end investor representatives , as sell- and buy-side firms , the latter of which was gathered via detailed surveys which collected quantitative evidence .
The analysis showed that asset managers are largely getting the research they need under the current rules , however the FCA added that despite the relative effectiveness of the current set up , it is operationally complex and skewed in favour of larger asset managers , as well as being restrictive to UK asset managers ’ ability to buy investment research produced outside their jurisdiction .
The new rules are therefore set to be more suitable for firms or varying business models and sizes , effectively boosting competition .
The consultation is understood to be closely aligned with the Kent review , published by Hogan Lovells lawyer Rachel Kent , who led the UK ’ s Investment Research Review under the Edinburgh Reforms .
Sarah Pritchard
She published recommendations that the UK government has accepted , which included paving the way for a new ‘ Research Platform ’ that would provide a one-stop-shop for firms looking for research experts .
The FCA is set to produce final rules in H1 2024 , dependent on the quality of the feedback received .
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