The forced unbundling of research and execu- tion commissions is among the most contro- versial parts of MiFID II that has led both
the buy- and sell-side to ask one deceptively simple
question; how much does research actually cost?
It seems absurd to think that securities research,
something on which asset managers and investment
banks spend billions of dollars every year, does usually
have a specific price attached to it.
But this peculiar situation has now had its day and,
from January, any firm selling research on financial
securities will need to have a pricing structure. Some
of the first hints regarding pricing have been seen over
the summer, with unconfirmed reports that Barclays
would charge up to £350,000 per year for its top research package. Barclays has said it doesn’t recognise
that figure, but also hasn’t publically commented
on how much it plans to charge clients to access its
reports and analysts.
While this rather large number hit headlines and
raised eyebrows among some, Vicky Sanders, co-CEO
of research platform RSRCHXchange, says it would
be less surprising to those firms who are already
negotiating with the sell-side over their future
“These amounts probably look much bigger
and more alarming to those outside of the
industry than they do to most asset managers. Many firms have begun negotiating their new research arrangements
with their brokers back in Q4 2016 so
they will already be very familiar with the
kind of pricing that will be on offer once
MiFID II comes into force,” she explains.
“The industry spends some $20 billion per
year on equities research globally so when you put
it in context, these amounts don’t seem particularly
unreasonable,” Sanders adds.
It’s worth bearing in mind that top tier subscriptions
to investment bank research will not only include the
full range of their research reports as soon as they are
published, but also valuable access directly to the analysts to discuss their insight into particular securities.
Some firms are likely to push access to their analysts as
a major differentiator and premium service, which will
inevitably attract a high price tag.
Blair Livingstone, CEO and
founder of Street Contxt, a
platform for buying and selling
research, believes the dividing
line between written research and
analysts access will become more
pronounced once Europe unbundles commissions.
“The cost of written content will
be relatively low, but will be used
as a way to market the much higher
cost to access the person who wrote
that content,” he says.
Livingstone predicts tops
analysts and those with highly
specialist knowledge will be able
to command a very high price for
their time. Rapid access is also like-
ly to be priced at a premium, such
as being able to speak to an analyst
immediately after an earnings call.
“Getting insights a day after
earnings are announced would be
cheaper, wheras speaking to some-
one within an hour of the earnings
call will be far more expensive,
there’s a lot of complexity to solve
around offering and pricing ser-
vices,” he explains.
“Buy-side and sell-
side firms have been
negotiating over research
pricing since late last
year and many are now
approaching an end to
VICKY SANDERS, CO-CEO, RSRCHXCHANGE