MiFID has been the focus of the financial sector for a while now and emerging opportunities in the light of new circumstances were created by MiFID but before the sector could shake off its effects, MiFID II was imposed.
The first MiFID was a regulation that aimed to increase transparency in the financial markets in the European Union and standardise the regulatory disclosures required for particular markets. Now with the arrival of MiFID II, these “particular markets” are not so particular anymore, which means that the scope of the regulation is expanding to cover more financial instruments.
MiFID II can be broken down and evaluated using technical terms and professional jargon and since its rollout, many professionals have done this. But fewer professionals have focused on the real-world results of the regulation and what to expect with its implementation. While the MiFID II regulations were intended to achieve a more transparent finance sector and eliminate malicious financial activities like dark pools and OTC trading, there are other real-world consequences of the regulations that provoke anxiety in the sector.
While the regulations have achieved a more transparent market, the preparations for them cost companies an estimated total of $2.1 billion, according to a report by Expand (a Boston Consulting Group company) and IHS Markit. In addition, investment banks’ revenues relating to equity research was predicted to fall by 30% after MiFID II.
When we talk about companies, industries and sectors, we usually tend to overlook the effects on people. Real people who are doing their jobs as best as they can to make a living and embark on a career to become a more significant part of their society. But these effects cannot be overlooked. This is why we are not focusing on the professional aspect of MiFID II regulations. We want to focus on real-life effects and discuss the resultant opportunities.
The Future May Be Bright in Post-MiFID II World
The scene may seem dark and pessimistic right now. But every big change (and even wider social progress) has such dramatic effects. A good example is the automation of industries. When machines started to take over the jobs of real people, societies panicked that machines would take over every single job. However, with new technology came new jobs. Obviously, a single machine can do what 10 or 20 people could do in a shorter timespan, but today we have so many more professions that we didn’t have in the past.
This same fear arises every time a technological advancement is achieved. People fear for their jobs to an extent that they cannot see the opportunities that come with the new circumstances.
The situation here is not a technological advancement; it’s a regulatory change. However, the human reaction against it is very similar. These reactions, while valid in nature, impose tunnel vision and prevent seeing new opportunities.
What Kind of Opportunities MiFID II Create?
First of all, investors and companies will still need investment advice or consultancy services. These new regulations will surely have a ripple effect and cause some changes in the industry but analysts, asset managers will still be a valuable and sought-after asset.
In a way, MiFID II solidifies the expertise of analysts as an independent profession. This will probably cause many companies solely focusing on equity research and analyses to emerge. Many of these professionals can also lend their services to smaller research hubs.
Many banks and companies may have chosen to close their analysis departments and this means that they will no longer provide this valuable service internally, but the need is still there. The wave caused by MiFID II regulations may grow bigger but the storm will blow out in the end. Since the expertise provided by financial analysts and asset managers is still needed, there will be companies seeking after that expertise.
These analysts gathering around smaller analysis companies will probably be deprived of big-budget tools and resources, which were previously provided by the banks when they were still in-house. However, there are still other tools available.
The EquityRT research and analysis platform is one of these tools. It provides all the data needed to conduct thorough equity research and analyses. EquityRT uses extensive measures to validate its data. It doesn’t only collect the data but also news and up-to-date information from other relevant sources. Considering that the EquityRT analysis platform covers 120,000+ Stocks in 120+ Stock Exchanges including both saturated and developing markets, it offers analysts a chance to go on conducting their expertise with the utmost efficiency and accuracy.
Yes, MiFID II regulations are leading to a squeeze on research budgets! But, as long as there is the business of investment, individual investors and companies will still need the research with the highest quality. And investment analysts will always need a thorough and reliable source of information where they can enjoy the best price/performance platform. And EquityRT research platform is one of those resources.