It was thought that under MiFID II, broker-dealer banks – who mainly provided securities research and execution services bundled together – would lose out to newer competitors: independent providers for stock and bond research, and possibly to custodian banks for execution.
However, 11 months on from MiFID II’s introduction, our report on the regulation finds that the use of independent houses is down, not up, partly as fund managers invest in their own proprietary research.
Meanwhile, the future of outsourced execution – which would be driven more by MiFID II’s ‘best execution’ rules than unbundling – is still to be seen but is nonetheless anticipated. BNP Paribas Securities Services already won a trade execution mandate from a UK pension scheme back in 2013. At Northern Trust, Gerard Walsh expects best execution to drive even more outsourcing as asset managers look to control costs and increase efficiencies.
And as our French report shows, custodians such as Caceis also anticipate that their services will move more into the front offices of asset managers.
Nick Fitzpatrick is group editor at Funds Europe
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