As 3rd January gets closer by nearly 1% each day – and by more than 1% in just a couple of weeks’ time – MiFID II creeps up on us. Many will be satisfied with their readiness but, if FTfm is to be believed, there are fish, both big and small, who have not yet decided by what means they will acquire research in the New Year.
As we have pointed out in the past, the new requirements relating to inducements and research constitute the aspect of MiFID II that directly challenges business models of both buy- and sell-side firms. We have now reached crunch time. The undecideds will have to make their election within a very few weeks, with choices increasingly ruled by practicalities.
A key question that has arisen so often in recent months is what needs to be done, to satisfy the new requirements, where firms delegate significant activities to others, based outside the EU. AIMA’s valiant attempt to get FCA agreement to a strict reading of the EU Regulation – that the obligations apply only to the MiFID firm and not to delegates – was never expected to win, but it did elicit an invaluable and carefully considered position statement from FCA. Of course they have had to qualify their comments with references to EU supremacy in this matter, but, even before we get to Brexit, FCA remains the supervisor, which, like possession, counts for nine tenths.
And where do investment banks stand on dividing FI execution costs from research? Good question.