I believe the release of the delegated acts relating to MiFID II in Europe along with the specific interpretation of the rules by France and UK have been so far the key events driving discussion and discourse.
Strictly from the perspective of research procurement at the buy-side (from the sell-side), I believe we are clearly entering an era where research payments (from the buy-side to the sell side) will be divorced from (buy-side) trading activities; globally. Expect some squeeze to overall research spends; but we expect the squeeze to be gradual over the next 2-3 years.
Our technology platforms and offering evolve on a continuous basis, driven my customer feedback as well as our innovation pipeline. We at ANALEC have always maintained an aggressive innovation pipeline as it has helped as add greater value to our customers.
On our investment research management platform, we continue to innovate in the areas of content distribution management and driving entitlements; compliance on some MiFID II and Market Abuse Regulation (MAR) guidelines, wider engagement of social media and mobile platforms for content delivery and improving the client engagement quotient of the overall research business.
On the CRM front, we are innovating in the areas to support MAR (Market Abuse Regulation) compliance on client servicing and communication and driving enhanced client entitlements setting and delivery; insightful management reporting and account review mechanisms to make proactive decisions; and aid the most cost effective resource allocation decisions when it comes to service offerings.
For research providers that have clearly defined their offering and positioning in the market place, in particular many of the independent research providers, I believe they will be able to engage their customers (i.e., asset managers) better and in some cases establish better pricing terms. I will the research provider market place will fragment further rather than concentrate in the hands of few providers.
Research consumers on the other hand will look to be more selective in their research procurement decisions as research payment budgets as established under the proposed Research Payment Account (RPA) mechanism will drive decision-making at their end to get better yield on their research spends. Research procurement and valuation methodologies have yet to be established within any level of consistency or certainty across buy-side organizations; but, expect rapid progress over the course of 2017 in his area.
The big challenge ahead of the buy-side is to have it business processes and procurement policies streamlined in order to comply with MiFID II requirements, within the stated deadlines. I believe each buy-side firm (depending on their complexities) will devise their own specific research procurement and budgeting policies. Within the procurement area would be the need to establish a research service valuation methodology for both consistency and reporting (to their asset owners) requirements.
I believe moving to a CSA-funded RPA structure within the buy-side requires some work (including the provisions under MiFID II to create research spending budgets), but once implemented it would help to drive greater flexibility and transparency to source their research needs.
