A number of revisions to both the MiFID II level 1 and level 2 text are underway. Robert Ophèle, Chair of the French Autorité des marchés financiers (AMF), has been outspoken in recent months about further areas of MiFID II that should be revised in future (see his October speech). Some result from seeking to make MiFID II work in a world where the UK will no longer be in the EU. For example, revising the scope of the share trading obligation, or revising the double volume cap thresholds. However, in an interview with the Financial Times today, Mr Ophèle is also calling for a rethink of the MiFID II payment for research rules.
MiFID II requires the unbundling of research fees from dealing commission, which has had significant commercial implications for research providers and asset managers alike. Following the implementation of MiFID II in January 2018, the EU Commission, UK Financial Conduct Authority, and the AMF are all conducting reviews on the impact the rules have had on the market. Could they arrive at different conclusions?
Much of the debate about regulatory divergence between the EU and UK post-Brexit has focused on if, and how, the UK will diverge from the EU. However, regulatory divergence could instead be driven by the EU, with the UK left to consider whether to follow suit. A divergence in this area will have implications for the competitiveness of the UK versus the EU. Given the UK championed the payment for research rules during MiFID II negotiations, French calls for a revision of these rules could emerge as one of the first tests of the extent to which the UK will be able to, or will choose to, diverge from EU rules post-Brexit. This issue also serves as a timely reminder of how different the EU's rule-making will be without the UK at the negotiating table.
We explore some of these issues further in our new paper Brexit: Beyond Day 1 – How will banks reconfigure their capital markets business? I'd welcome your thoughts.
France has long led opposition to the strict unbundling of research costs from trading fees imposed by the new regime — putting it at odds with the UK’s Financial Conduct Authority, which was a driving force behind the changes.