CFA Institute surveyed US members on what changes they had observed in their businesses since the passage in 2018 of MiFID II in the EU.
The EU’s recently implemented Markets on Financial Instruments Directive II (MiFID II) has changed the way advisers doing business in Europe can pay for research. In response to the potential effects of MiFID II on US firms, some US asset managers have announced they are going to pay for third-party research out of their own funds (rather than through soft-dollar commissions). The US Securities and Exchange Commission has issued three separate no-action letters as it considers how to response to the effects of MiFID II on US markets. CFA Institute’s US Payment for Research and MiFID II Survey sought to measure the extent of these changes in research cost and consumption in the US. The survey also collected demographic information.
Summary of Survey Findings
The survey from CFA Institute found that, since the beginning of 2018, when MiFID II and PRIIPs took effect, 37% of respondents reported that research costs had become “more transparent.” Moreover, 42% said the overall research market has become more competitive, with only 9% arguing it had become less competitive.
Member-respondents were seeing these positive developments even though the majority indicated they were not directly affected by the European rules. The ability to separately shop for research and trade execution, therefore, and to have those costs separately disclosed, ultimately could lead to an even-more competitive marketplace with different overall costs for research than bundled-commission arrangements have produced in the past.
Methodology
The US Payment for Research and MiFID II Survey was fielded to a representative panel of 1,163 currently employed CFA Institute Charterholders residing in the United States, and who have potential understanding, interest and experience with regulations and their effect.
Participants were invited to participate in this electronic survey through two direct email invitations between 27 March and 10 April 2019.
A total of 158 individuals completed the survey; and yielded a response rate of 14 percent. A sample of this size has a margin of error of plus or minus 7.3 percent at a 95 percent confidence level. This means that if the survey was repeated 100 times with different samples from the same population, 95 out of 100 samples would yield a result within plus or minus 7.3 percent of each statistic reported in this study. For example, if an answer is offered by 50 percent of respondents, the results would range between a high of 57 percent and a low of 43 percent for 95 out of 100 other samples from the same population. The data were not weighted.