It is no secret that IFLR is passionate about Mifid II. We
have been in a semi-serious relationship with the European
regulation since its inception, and have remained so long
after it came into effect on January 3 2018. It played a
large role in spawning our new sister title, Practice
Insight, which takes a deep dive into how the regulation
– among others – is really being
interpreted by the financial services industry, and helping
to provide clarity.
That being said, as a general rule, Practice Insight's
coverage has been fairly euro-centric. While this might not
come as too much of a surprise given that Mifid II is a
European directive, it is inherently obvious that a
regulatory switchup of this magnitude is going to have an
impact on certain secondary markets, like the US.
See also: Mifid II: market not tapping best execution
Yet getting US market players to talk about how they have
been affected or what changes they have had to make can be
like pulling teeth. "I can put you in touch with our team in
London," they say, or "it doesn't seem to be having too big
an impact on us, yet".
Another US-headquartered – but globally active
– firm said: "Although we continue to monitor this
issue as it impacts our customers, none of the combined
businesses located in the US are directly subject to Mifid
II, and are therefore not impacted. For some of our European
customers who are regulated in the EU as Mifid-authorised
firms, there are certain compliance requirements (like
transaction reporting and transparency requirements) that we
have taken steps to assist them with, but the extent of these
compliance obligations varies."
From that it sounds like there is little to no problem.
But Mifid II is clearly having an effect in the States.
Before last January, Wall Street lobbied heavily to prevent
it from breaking into the US market. That still wouldn't have
solved it; banks with a global footprint have long had to
contend with acting in one fashion in the EU and another in
the US. From the buyside perspective too, there is a growing
reluctance to take such different approaches on either side
of the pond; in the context of research unbundling rules, for
Two years ago the Securities Industry and Financial
Markets Association (Sifma) held a well-attended Mifid
II-dedicated event in New York. Panellists discussed how the
directive would affect brokers and others in the US, as well
as the required clarifications from the Securities and
Exchange Commission (SEC) to ensure a smooth transition.
While on the day senior counsel Vanessa Meeks suggested it
was not the SEC's problem and it would not be providing
assistance, by October the regulator had issued no-action
relief for those directly affected.
So why the lack of concern? This week one of the world's
largest broker-dealers told us that the business had not been
impacted at all.
Sifma, however, seems to know something others don't. In
late March, Kenneth Bentsen, president and chief executive,
wrote an open letter to the securities regulator calling for
permanent relief. "Allowing broker-dealers to charge
separately or receive cash payments for research provided to
both investment managers and institutional investors without
being subject to the Advisers Act creates an even playing
field for investment managers, institutional investors, and
their underlying clients and investors, while ensuring
existing pressures on research are not exacerbated," he
wrote, suggesting that the lack of consistency has been
having a greater impact than others might be letting on.
It has been just over a year now since Mifid II came into
force, yet both the short and long term effects remain
uncertain. The question seems to be, for the US at least, is
this the calm before the storm? Or is the storm simply
See also: Sell-side: Mifid II research pricing and
trial traps are still grey areas
Seeing an impact from Mifid II in the US, please