Regulation: Mifid II starts to bite
As Mifid II beds down, its impact on the global fixed income research industry is already being felt. There are clear signs that investors are less reliant on research and are using fewer providers than before. As they start to cut costs to implement their own research budgets, providers must ensure that they are getting good value for money.
Promise a child unlimited pocket money and let him loose in a sweet shop and the results are likely to be indiscriminate gorging and extensive wastage. Until very recently, that is more or less what happened in the world of fixed income research.
Whether it was to provide clients with genuine investment insights or to push their own traders’ books or to support their syndicate desks, investment banks in particular showered the investment community with research on fixed income, currencies and commodities.
Jean-François Paren, head of global markets research at Crédit Agricole CIB, says that before the EU’s recast Markets in Financial Instruments Directive (Mifid II), no two business models were the same in the fixed income research universe.
“Historically, there were tons of different business models, ranging from teams based around highly aggressive desk analysts through to extremely niche players,” he says. “What Mifid II does is create a single rule and, potentially, a uniform research profile, which we have previously never had in the fixed income market.”