The big picture
Paying for research via execution commissions will be banned
under MiFID II. Firms must pay for research from their P&L or
use research payment accounts to segregate client money allocated to research costs. Buy-side firms need to set out a research
budget, while, sell-side firms need to provide a pricing model
for their research. Firms are expected to use unbundled cost to
seek out better execution.
The biggest change
Undoubtedly that bundled payment for broker services will no
longer be allowed. Execution, research and other costs must
be split out so firms know what and how much they are paying
brokers for these services.
The biggest difficulty
Adapting to a market that has largely been unpriced towards a
menu-pricing model. Both banks and the buy-side are unsure how much to actually charge for the research, or how to
measure whether they are getting good value from research