US firms must ensure they are aware of incoming European rules on research unbundling and best execution so they can adapt to global shifts in the way the sell- and buy-side will do business, an audience in New York was told last night.
At The TRADE’s latest MiFID II Pop-up Event, What US Investors Need to Know, industry experts gathered to discuss how some key parts of MiFID II will impact firms in North America.
Research unbundling was among the most significant issues which will an impact on both sides of the Atlantic Ocean.
Tom Wheelan, head of US institutional & derivative sales at Instinet, said: “Buy-side firms that operate globally aren’t going to run multiple different research policies in different jurisdictions, it’s not efficient to do that, so will see a lot of firms looking to use MiFID-compliant research payments in North America as well as Europe.”
Richard Johnson, vice president of market structure and technology at Greenwich Associates, agreed, adding: “in both this and best execution we will see a lot of ‘soft compliance’ from firms in the US, where they more or less bring their standards up to the new bar being set by MiFID II, both to make their global operations more efficient and to demonstrate they are able to deliver a higher level of service to their clients.”
Many firms may also choose to update their best execution policies to bring them in line with MiFID II as a new standard. Best execution is also set to become increasingly important as a result of market structure changes.
Brennan Carley, global head, enterprise proposition and product management at Thomson Reuters, said: “One aspect of MiFID II is that it’s likely to result in more fragmentation and diminishing liquidity and this is going to make it harder to achieve best execution so having a robust approach to this will be important than ever.”
Firms will also need to adopt a more holistic approach to best execution, according to LiquidMetrix’s global head of sales, Henry Yegerman.
“It is important firms have a process in place that is less about hard numbers and more about how execution policy can meet your investment goals in a way that is appropriate,” he explained.
The TRADE would like to thank our sponsors for this event, Instinet and Thomson Reuters.