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Alternative Market Briefing

Financial firms scramble to meet MiFID II deadlines

Monday, May 01, 2017

Bailey McCann, Opalesque New York:

A mere 36 percent of financial firms are prepared for the implementation of MiFID II in January 2018, according to survey results from corporate finance consultants Duff & Phelps. The results included responses from 183 financial services practitioners in Asia, Europe, and the US.

According to the respondents, the increase in costs to comply with new regulation is making it difficult for financial firms to find enough resources to meet the deadline. The survey says that financial firms spend approximately 4 percent of their budget on compliance as of now, but it could increase to as much as 10 percent by 2022. Budgets are feeling the pinch on both the buy-side and the sell side, as MiFID II requires that buy-side firms set aside a specific budget for research either through client agreements or funded through the firm's P&L. That means that investment managers will have to make an audit of the research they are getting and decide what to keep. For sell-side firms, research will no longer be part of sales and analysts will be under new pressure to produce ideas investment managers are willing to pay for.

"Performance measurement of research ideas will be critical going forward," explains Colin Berthoud, Founding Partner at TIM Group, a London-based trading ideas platform. According to Berthoud, the buy-side is increasingly considering ways to benchmark the value of research to the business, such that they are spending this n......................

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