No more excuses
RPA administration has also been
relaxed under the final rules. The
FCA said firms would be able to
charge reductions for research
passed into RPA within 30 days
from a transaction taking place.
“We view this approach provides
certainty for firms as to what our
minimum expectations are, which
aligns with current industry good
practice where firms are using
CSAs,” the regulator said.
For firms using third-party research providers, the FCA reiterated payments must be made from a
set budget subject to management
control and assessments of the
quality of the research.
Industry reactions to the final
policy statement have suggested
with no major changes to the rules,
the separation of execution and
research services will likely be
implemented successfully across
the buy- and sell-side.
“There is a sense of déjà vu to
these final words from the FCA on
inducements relating to research.
In fact, these standards don’t look
a whole lot different than current
good practices using CSAs.
“That said, fund managers will
no doubt welcome clarity on which
services do or don’t count as execu-
tion services, and some relaxation
around RPA administration is also
helpful,” said Jack Pollina, global
head of CSA and RPA services at
electronic broker ITG.
Similarly, co-founder at Electronic Research Interchange (ERIC),
Chris Turnbull, said the final unbundling rules provides everything
research providers and asset managers need to act on investment
research under MiFID II.
“There can be no further excuse
for delays. Asset managers who do
not have agreements in place after
the January implementation date
may be cut off by research providers,” he warned.
Pollina added the basic takeaway
from the statement “remains
the same: firms have to pay for
research and execution services
separately - putting the onus on
those service providers to really
prove their worth.”
Ensuring buy-side firms have
good and strong relationships with
their research providers will be
imperative to meeting the January
2018 MiFID II deadline.
Vicky Sanders, co-founder at
RSRCHXchange, explained the
FCA’s final rules make it clear that
firms should have agreements in
place before they receive research
“Some of the heaviest lifting
The industry gained clarifica- tion on MiFID II’s un- bundling and commission
payment regime this July, although
experts agree the final rules leave
no excuse for delay.
The UK’s Financial Conduct
Authority (FCA) outlined its final
rules on MiFID II implementation and clarified which services
are considered execution-related
under the rules.
It said “activities inherent to
facilitating an order and that take
place between the point at which
an order is received and executed
by a firm, and the final settlement”
are considered inherent to the
Therefore, transaction reporting
services offered by a broker as part
of the execution service provided
to clients - as long as the service
does not influence best execution
- would be accepted under MiFID
II. Such a service should be offered
on a standard basis to all clients.
“We view this as consistent with
the nature of the execution service,
which should generally result in
a transaction that is settled and
reported as necessary in line with
regulatory requirements to the
benefit of the client,” the FCA said.
Other services not considered
inextricably linked to the execution
process include third-party trade
analytic tools, order management
systems or RPA administration.
“Firms subject to the enhanced
inducements restrictions would
need to procure such services
separately using their own resources, and could not pay for them
through enhanced execution costs
or research charges passed to their
clients,” it added.
“That said, fund managers will no doubt welcome
clarity on which services do or don’t count as
JACK POLLINA, GLOBAL HEAD OF CSA AND RPA
SERVICES, ELECTRONIC BROKER ITG