MiFID to redraw investor research in EU

10.02.17

An overhaul of Eurozone financial-services rules going into effect next year will impact the way investors pay for analyst research, according to Bloomberg.

The action, known as Markets in Financial Instruments Directive, or MiFID, is designed to force money managers acting on behalf of individual investors or pension funds to pay separately for the research and trades services they get from banks.

It’s left the "buy side" figuring out whether to absorb or pass on the cost of buying research and the "sell side" trying to gauge what analysts should focus more on and how to price it right.

Under MiFiD, which starts in January, banks will spend more than $1 billion less on mass-produced research, opting to tailor research to specific companies, according to a report by McKinsey & Co.

This move to make markets more transparent will lead to job cuts among analysts, and undermines firms providing “consensus” estimates. The result could lead to loss of coverage for small- and mid-cap stocks, leading to more dramatic swings in stock prices. (Source: Bloomberg)


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