MIFID II Overturned
Just saw that the EU overturned this rule/law. I’m new to the industry so don’t know what this means.
Are we back to the glory days of ER? What does this mean for ER in the states?
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Following. Also new to ER
What MIFID 2 is saying is that ER needs to be paid independently and explicitly. Pre-MIFID, ER was added as a 'sweetener service' to clients using the bank's services, most obviously the trading business (I've heard people say ER can sometimes be thrown in as a sweetener service for services like M&A but idk how true that is. Probably just for some small banks to get more business). Therefore, there'd be a conflict of interest if research was used and paid linked to what stocks were being traded (cuz ER used to be paid thru trading commissions).
Now that they're overturning MIFID 2, idk what's this gonna mean.
Some guys argued that MIFID 2 might mean better pay for ER analysts since they now have to charge explicitly for their services. However, some guys also argue that since research is moving more in-house, there wouldn't be too big of a disruption
I heard that MIFID II killed ER…
How? Curious to know. Is that why they overturned it?
I think the logic was that if clients have to pay for research directly, they will choose to cut out some (particularly smaller) firms entirely. Alternatively, clients may also bolster their in-house research as it is seen as more cost effective, when compared to paying for research.
I believe since MIFID only affected Europe, and with most clients being based in the US, the impact was not as significant as people feared. Overall, the impact of MIFID remained limited, but it being overturned is definitely a positive for the industry. On a somewhat unrelated note, I find it ironic that Equity Research firms are heavily regulated, yet politicians freely inside trade.
Great, thanks. That totally makes sense
On an unrelated topic - I’m in my early 20’s and new to the industry so forgive my naivety.
What happened to the days of ER analyst regularly bagging $5-$10 million pay days? Is this just hearsay? I thought MIFID II was what killed the “glory days”. Was it something else? If so, why do people consider ER a dying industry?
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