Small, specialist research firms are concerned that new market rules will see larger providers driving down prices, the Financial Times has reported.
Under the new Markets in Financial Instruments Directive (MiFID II) that will come into force in January 2018, asset managers will have to split the costs of research and trading instead of charging 'bundled' rates for services.
Smaller companies are worried that their larger competitors will use "predatory pricing" to win business, the Financial Times said, citing research by trade body EuroIRP.
"Independent providers see the changes as an opportunity — but in the short term there is great concern over the pressure on pricing, because quite frankly, bankers have deeper pockets than independents," Chris Deavin, EuroIRP's chairman told the newspaper.
"It would not be in the best interests of the end investor and investment returns if independents struggled to survive," he said.
It was reported in July that the European Commission's financial stability team Fisma had contacted some European banks over the price they charge asset managers for research. Fisma is concerned that banks are cutting prices to win contracts, potentially undermining efforts to remove inducements from the sale of research.
MiFID II will revise and update the existing MiFID rules applicable to investment services across the European Economic Area (EEA). The revised regime is designed to take into account developments in the trading environment since the original directive came into force, and also aims to strengthen investor protection and increase market resilience.
The revised rules will also apply to a broader range of financial instruments, trading venues and techniques, notably the use of algorithmic high-frequency trading. These range from global investment banks trading complex securities to fund managers, stockbrokers and independent high street financial advisers providing advice to the general public.
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