Keys to MiFID II Implementation

MiFID II has the power to change the global investment industry. Under the new regulations, payment or receipt of inducements for investment research creates a conflict between the firm’s interests and those of its clients. Put simply, the new rules state that brokerages providing both research and execution services will need to supply and price them separately.

There are three ways an investment firm can pay for research:


  • From its own P&L.

  • Out of commission charges

  • From clients directly.


Under MiFID II, research is defined as original or actionable investment research, macro investment strategy, analyst access, models, indicators and events.


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Here are some of the key MiFID II implementation challenges:

Inducement Rules

Research now has the potential to be considered an inducement to trade. Firms should take all precautions to stop receiving research that they are not paying for in their email inboxes and should consider implementing a research system to centralise research distribution and control access.

CSA Transition

All CSAs must be refunded or transitioned to RPAs by 3 January 2018 with full transparency.

Fund or Firm level RPAs

Firms are allowed under the rules to implement RPAs as long as there is a clear link between payment for research and usage.

U.S. Research Procurement

Firms have more options to use independent and unconflicted research services however irrespective of where research comes from a clear demonstration of unbundled payment for pieces of research is necessary.

Using Vote

Vote can continue to form a part of the research valuation process as long as it’s completed upfront before research is consumed and used granularly on a product-by-product basis.

Tracking and Valuing Research

Move away from email and PDF to digital solutions to make tracking easy.


Risks and Opportunities

MiFID II challenges are many; from requiring firms to make decisions and changes in how they fund investment research budgets as well as requiring firms to track all research services coming into your firm to ensure you are not receiving ‘free’ research either at a firm or fund level.

Specific policies and processes for valuing and tracking research usage will also need to be created; entities found to be breaching any of the requirements of the MiFID II directive do run the risk of financial penalties. Positively, MiFID II should help provide the opportunity to access a broader universe of content, tools and services to support your investment decision making process.

Regulatory Obligations

The MiFID II directive brings together a standardised set of regulatory obligations across different stakeholders:

On one hand, Asset Owners must sign off client money to purchase research services whilst receiving regular evidence of intrinsic research value.

For Asset Management Firms, they must decide how to pay for research (P&L, commission or direct charge) whilst also publishing a research procurement policy. There is also a further need for tracking value, analysing potential providers and re-evaluating them on a regular basis.

Finally, for Independent Research Providers, Broker Dealers & Solution Providers they must all publish a clear rate card for research services and accept payment for research separately from execution. There is also a clear need for high quality, conflict-free research services.

How to be Compliant

After reviewing all the necessary MiFID II challenges and regulations it’s important to think about requirements in the context of you own business. BCA Research can help you become compliant by covering all asset classes and regions with a single integrated and objective research framework. BCA Research solutions can also offer automated usage reports and recordkeeping in line with MiFID II requirements and we always provide transparent pricing for all services including reports, analyst access, analytics and online tools.


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