Funding of research under MiFID II

Abstract

From the 6th to the 8th of May 2015, Westminster Research Associates surveyed global investment professionals for the 2015 CSA & Research Usage Survey. Conducted as the European Commission (EC) works to complete the final language of MiFID II, the pan–European regulation whose implementation is expected in January of 2017, the results were a clarion call for leaving well enough alone. Survey respondents were wary of the potential impact that MiFID II could have on the use of commission sharing arrangements (CSAs) to pay for research: 88 per cent of Europe-based respondents and 93 per cent of North America-based respondents say that CSA regulation should remain the same, or be reduced, in their home territory. 67 per cent of buyside respondents said they would use less research if forced to pay cash — a drastic change proposed by the EC and supported by the Financial Conduct Authority. For many years Westminster has commented to regulators and written about the benefits of CSAs; they provide more transparency than bundled proprietary research and help in achieving best execution. These survey results only bolster these contentions, and should make clear that CSAs already provide the transparency, competition and investor safeguards which regulators seek.