Most Asset Managers Still Short Of The MiFID II Mark - Survey

Josh O'Neill

6 September 2017

With the implementation date of Europe’s MiFID II lurking just around the corner, just 6 per cent of asset managers are ready to meet best execution requirements designed to reform transparency standards, new data shows.

Yet nearly two-thirds (64 per cent) think they have a cohesive strategy for improving client outcomes mapped out ahead of 3 January, when the second iteration of the European Union’s Markets in Financial Instruments Directive, transposes into law, according to a survey from , a global trading network.

“Best execution no longer means a mere ‘look back and check’ on the outcome of an individual order,” said Rebecca Healey, head of Europe, Middle East and Africa market structure for Liquidnet. “It is now the creation and implementation of a process that enables the trader to be in possession of as much valuable information as possible, throughout the lifecycle of a trade.”

Liquidnet’s study, titled Re-Engineering Best Execution, finds that more than a third of respondents – comprising asset managers operating in Europe and the US – acknowledge that they still have ground to cover in terms of adjusting policies and employing firm-wide formal processes.

MiFID II will introduce wide-reaching changes to the European wealth and asset management industry. For the first time, fund managers will be legally required to “unbundle” the costs of investment research, separating them from trading and service fees.

Results of the survey come as the funds industry moves towards footing the bill incurred by MiFID II, with big players like Vanguard and JP Morgan Asset Management through to smaller firms like T Rowe Price signalling they will cover the costs of equity research after 3 January, 2018.

The survey shows that access to liquidity remains top of asset managers’ shopping lists when scouting for brokers to deal with, and some 70 per cent are now reviewing new liquidity providers aside from their normal brokers. But how firms choose to access liquidity is changing, Liquidnet says, adding that unbundling demands a “strategic re-think” of which brokerage houses to deal with.

And more than two-thirds are no longer influencing their trading decisions based on a broker alone, the study shows, as 35 per cent of asset managers select by strategy and a further 33 per cent make choices through a combination of the two.

For 89 per cent of respondents, ensuring enhanced best execution will require a “significant difference” in approaches to the nuances of policy processes across asset classes and methods of trading, Liquidnet says.