North American buy side expects to unbundle wholesale in 2017
A new survey from independent broker ITG of North American institutional investors suggests that most asset managers plan to fully unbundle all their brokers globally.
The survey looked to initially focus on the expected impact of incoming markets directive MiFID II, which actually also contains segments covering unbundling. Under MiFID II rules, asset managers will be required to explicitly separate, or “unbundle”, their trading commissions from investment research payments. To continue paying for research alongside executions, asset managers will be required to set up a research payment account (RPA).
The survey polled more than 100 buyside professionals who participated in an ITG webinar on the impact of MiFID II regulations on North American asset managers. Only 43% of asset managers expect MiFID II to have a direct impact on them. The regulations apply to asset managers with operations in the EU and may also impact asset managers who have sub-advisory agreements with EU investment managers or that sell and manage European mutual fund vehicles known as UCITS.
However, 59% of respondents plan to continue paying for research using commission sharing arrangements (CSA), while 33% expect to use a combination of both CSA and RPA for payments and 8% plan to set up a new RPA ahead of the MiFID II start date. Even so, while the majority of asset managers do not believe MiFID II applies directly to them, 82% of North American firms plan to fully unbundle all of their brokers globally.
Commenting on the survey findings, ITG’s head of Global Commission Management, Jack Pollina, says, “MiFID II is going to have a significant impact well beyond the shores of Europe, as institutional investors require asset managers to change the way they budget, fund, price and pay for research. North American firms are anticipating these changes and are taking steps now to adapt to the changing expectations of their end investors.”