2018- How are you placed for MiFID 2?

MiFID 2

I have recently been attending numerous events on MiFID 2 and how it will be shaping the new landscape of how brokerage will be conducted.

The main message is that dealing commissions, payment for research and corporate access will be separated completely and the impact will be felt on a global basis (although some brokers in the region may disagree for now).

Spark Plus:

My new venture Spark Plus focuses on assisting corporates who wish to access with the Asian buy-side. Spark Plus also keeps corporate access completely free for the buy-side as we don’t have any conflicts of interest in place.

Going ahead corporate access will not be able to be paid through execution services, but will be priced completely separate. Majority of the fund managers will need to change the way they purchase items such as research and corporate access. Brokers will be enforced to charge separately, which in my eyes is a positive movement as every items will have full transparency and this will reduce the conflict of interest that may exist.

Fund Managers

Managers will be able to purchase auxiliary services through their profit and loss account (e.g raising their management fees) or have a ring fenced account that is dedicated for paying for research and corporate access (this is currently being done in Sweden).

All payments will need to have a clear audit trail. For fund managers a pre-agreed research budget with clients may be rather cumbersome so I feel that most managers will use their profit and loss account to pay for services.

What happens in Asia?

Why am I saying that the rule will have a global impact? For example an Asian broker providing research to managers in the EU will need to price their research separately. Global companies will implement MiFID 2 standards across their board, rather than having multiple different systems and rules to invoice their clients.

The fund managers will also be a lot more selective on what they consume and brokers could use MiFID2 as a new revenue generation tool due to commissions getting squeezed. Players like Spark Plus are already going after the Corporate Access piece. We have seen tremendous demand from corporates as they know their coverage will dry up. Especially small and mid-caps who may not be covered by anyone even pre-MiFID 2.

We are already seeing different players enter the market such as WeConvene and SmartKarma that are acting as platforms to assist the buy-side and sell-side in managing the new landscape.

Banks will be cutting coverage of less popular companies, and this may be rather challenging as the corporates are also clients of the banks for other services. This is an opportunity window for players to come in and provide services to such companies. This is a segment our business is going after.

Corporations realized that they will need to spend more on investor relations coverage, companies will start to actively compete and directly market to the buyside as well as a smaller analyst pool. However many of them have started using specialized corporate access firms like ours to have the investor reach.

In summary I would be very open to be speaking to market participants on their thoughts on MiFID2, also open to collaborations with brokers, and very much happy to host the buy-side at our corporate access days.

Omar Taheri

Founder and CEO

Email: [email protected]

Website: www.sparkplus.org