One month after the Mifid II tsunami, the City is keeping its head above water

This Saturday, City workers will be able to celebrate surviving through one month of a dreaded new regulatory environment.

Bankers, traders and fund managers were welcomed back from the Christmas break – if they were lucky enough to have one – by the second Markets in Financial Instruments Directive, or Mifid II, touted as the biggest regulatory shake-up in a generation.

Though the new rules had laudable aims, to help increase transparency, reduce costs for investors and minimise market misbehaviour, many across the financial services industry were worried about how this would affect their jobs.

Read more: Day of the Mifids: Controversial EU regulations for the asset management industry finally kick in

A month on, the clues are beginning to emerge as to whether these fears were justified.

What’s changed?

Mifid II spread its tentacles across all areas of capital markets, from investment research to the intricacies of trading.

But some changes have been more measurable than others.

Certain rules attempted to make the world of trading much more transparent, moving business out of “dark pools” – where trades can be executed without being revealed to the market – to regulated exchanges.

Read more: Latest Mifid II hiccup: European regulator delays revealing list of stocks set to be affected by dark pool volume caps

Systematic internalisers (SIs), or investment banks which execute client orders between each other using their own money, have seen their business rocket as dark pool trading volumes have theoretically been capped and opaque broker crossing networks have been banned.

Who are the winners?

These SIs have clearly been one beneficiary of Mifid II – exchanges have even worried they could steal their business. But some of the large investment banks which also offer research will have won in other ways too.

Another aim of Mifid II was to make the investment research market more competitive. It introduced an “unbundling” requirement for fund managers to charge analysts for research, rather than receiving it for free in return for supplying brokers with trading business.

But according to Bobby Johal, of compliance business Cordium: “The regulatory ambition to see a new, fragmented market of smaller high quality providers is yet to be seen.

“If anything, the reverse is true. Firms have reverted to a small number of tried and trusted players in fear of contravening the ban on unsolicited research.”

Read more: Mifid II set to slash analyst jobs and shake up the economics of broker research, according to a new report

And the losers?

It is hard to tell yet how drastically firms will have been affected by the shake-up, and how much they may still innovate to stay ahead.

But Raymond Groen int Woud of Kneip, a platform which helps fund managers comply with regulation when they market and report on their funds, thinks firms that left it too late to think about Mifid II will have struggled at the beginning of the year.

“What we actually observed was a sprint during the last few weeks of 2017 to have the target market information and cost disclosures ready,” he said.

These provisions aim to make it clear to retail investors whether a fund is aimed at them, and allow them to see exactly what they are paying in fees.

Many fund managers have underestimated the difficulty of standardising dates and times, Woud believes.

“We will continue to see teething issues with regards to Mifid II for a short while,” he said. “While some distributors may have given asset managers the benefit of the doubt, if an asset manager is not able to be compliant with Mifid II they are likely to see a drop in sales as well as regulatory compliance issues.”

What does the next year hold?

“We’re now getting to the interesting part of the Mifid II regulation as market structure adjusts to meet the new rules,” said Steve Grob of trading technology firm Fidessa. “Doubtless this will create new categories of winners amongst those firms who can predict these changes and invest accordingly.”

When City A.M. spoke earlier this week to Conservative member of the European Parliament Kay Swinburne, a key author of the Mifid II rules, she revealed that many compromises had been made.

Already the European Union institutions are starting to think about a Mifid III to iron out the creases as they are becoming evident, though she thinks any tweaks will likely be left now until after Brexit.

Until that time, market participants will be left with how to battle with the “best execution” requirement ­– which demands they prove that they have got the best price for their clients.

“We would also expect to see changes in market participants’ behaviour as the best execution obligation is extended to the buy-side and into other asset classes,” said Grob.

Fintech firms have been springing up to help address this challenge, which in turn is providing a host of acquisition and consolidation targets for larger incumbents.

However the trends play out, 2018 looks set to be a busy year.

Read more: MiFID II has gone into effect. At least, some of it has…

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Thomson Reuters introduces Investment Research Marketplace on Eikon to Further MiFID II …

NEW YORK – Thomson Reuters now offers an Investment Research Marketplace on its flagship desktop product Eikon, a solution that enables buy-side firms to purchase research from sell-side contributors designed to inform and complement their investment processes. This solution also helps facilitate buy-side compliance with MiFID II research unbundling requirements.

Thomson Reuters Investment Research Marketplace in Eikon will host subscription based collections of a select number of global sell-side contributors. Buy-side firms will be able to purchase these research collections by contracting directly with Thomson Reuters, and then consume them via Eikon. Any research acquired will be seamlessly integrated with all Eikon research capabilities, including our flagship Advance Research Search, Search & Discover, and Watchlist Pulse.

“In a changing investment management landscape, our buy-side and sell-side clients are looking for new ways to acquire, consume, distribute and monetize research” said Mahesh Narayan, head of Portfolio Management and Research, Thomson Reuters. “This new capability demonstrates our innovative approach to deliver value-driven solutions to our buy-side clients that help enhance the investment process. It also furthers our continuing commitment to provide the market with products that are designed to facilitate MiFID II compliance post-implementation.”

As one of the largest aggregators of real-time research in the world, Thomson Reuters offers a comprehensive portfolio of research-related products for both the buy-side and sell-side, and continues to focus on delivering MiFID II research-related solutions and enhancements on Eikon to help clients prepare. In 2017, Thomson Reuters announced a series of Eikon integrations and enhancements to further align with research unbundling requirements. Thomson Reuters also announced a partnership with Visible Alpha to bring three joint-solutions on to Eikon to track corporate access and sell-side interactions, and a series of search functionality and research management upgrades.

“Accessing research in a seamless way and reaching new users are the two main challenges around MiFID II, this solution will help us to show our independent expertise on a global basis. We consider MiFID II as a strong opportunity for buy-side to open their research providers list to analysts who actually capture alpha,” said Maxime Mathon, head of communications and marketing, AlphaValue.

“We look forward to partnering with Thomson Reuters to further expand our research franchise in Switzerland, Europe, North Americas and Asia”, said Panagiotis “Takis” Spiliopoulos, Managing Director and Head of Research for Bank Vontobel AG.

“Over the past years ABN AMRO has continued to invest in its equity platform. MIFID II, not only generates challenges, such as an increased administrative burden, but also offers new opportunities and business models. We are looking forward to further expand our client base with the help of our dedicated long term partners, such as Thomson Reuters”, said Wim Gille, Head of Equity Research for ABN AMRO.

These tools continue the ongoing series of enhancements and new solutions Thomson Reuters has delivered to the financial industry related to new MiFID II requirements, which were implemented January 3, 2018.

Thomson Reuters

Thomson Reuters is the world’s leading source of news and information for professional markets. Our customers rely on us to deliver the intelligence, technology and expertise they need to find trusted answers. The business has operated in more than 100 countries for more than 100 years. Thomson Reuters shares are listed on the Toronto and New York Stock Exchanges. For more information, visit


Brian Bertsch


Lemuel Brewster


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