Deutsche Börse, the German exchange group, said it wants to make acquisitions that can add capabilities to its analytics and index division which was formed last year.

In September last year Deutsche Börse created Qontigo as a new company through combining index businesses Stoxx and Dax with Axioma, a company it had acquired in 2019 and which provides tools for portfolio construction and risk analytics.

Deutsche Börse said Qontigo can address trends that are reshaping investment management including the growth of passive investing and smart beta and the modernisation of the investment management technology infrastructure.

Gregor Pottmeyer, chief financial officer of Deutsche Börse, said in a results call this morning that Qontigo had €20m ($21.6m) in net revenue in the fourth quarter of last year, which exceeded expectations.

“Net revenues in the analytics business grew 20% in the fourth quarter and 10% in the index business, due to the rise in passives,” he added.

In addition Qontigo last month launched the Stoxx Factor Index suite, which uses Axioma Factor Risk Models to provide control over unintended factor exposures and to verify performance drivers.

Holger Wohlenberg, chief business officer of Qontigo, said in a statement: “The launch of the Stoxx factor index suite truly brings together the analytic and indexing expertise of Qontigo in a clear demonstration of the value of this powerful combination.”

#2019Results: the first months as #Qontigo were a great success. Find out more about how we and @DeutscheBoerse did in 2019 as well as an outlook for 2020. https://t.co/mm4NAVExLN #db1pc pic.twitter.com/9VnYG7dpdv

— Qontigo (@Qontigofinance) February 18, 2020

As part of the formation of Qontigo last year, Deutsche Börse entered into a strategic partnership with General Atlantic. The private equity firm invested $720m (€666m) in Qontigo, which partly financed the acquisition of Axioma.

Gabriel Caillaux, managing director and head of EMEA at General Atlantic, said in a statement at the time: “We have a strong conviction that Qontigo can deliver a fully integrated joint buy-side client proposition that builds upon the indexing and portfolio/risk analytics legacies of the Stoxx and Axioma businesses.”

Pottmeyer said General Atlantic provides valuable input due to their experience of the US market.

“It is good to have an external benchmark,” he added. “General Atlantic also provide good input on mergers and acquisitions as we intend to increase our capabilities in analytics.”

Theodor Weimer, chief executive of Deutsche Börse, said on the call that the group achieved very solid growth in 2019. The firm will continue to consistently pursue its ‘Roadmap 2020’ strategy during the current financial year and anticipates adjusted net profit growth of at least 5% to around €1.2bn.

Weimer added: “Furthermore, the focus on external growth has come to fruition during 2019 – with the acquisitions of Axioma and UBS Fondcenter.”

Funds distribution

Last month Clearstream, Deutsche Börse Group’s post-trade services provider, and UBS agreed on a partnership in investment fund services. Clearstream is acquiring 51% of Zurich-based fund distribution platform Fondcenter from UBS for CHF 389m ($396m).

The newly-combined distribution services will have more than $230bn in assets under administration.

📢 #GrowingTheFamily We are delighted to announce that we will acquire a majority stake in @UBS’s fund distribution platform Fondcenter, integrating it into #Clearstream’s investment #fund services business. https://t.co/1bhFHeDpZl pic.twitter.com/o9iYd8p7ta

— Clearstream (@Clearstream) January 21, 2020

Stephan Leithner, chairman of Clearstream, said in a statement: “Our distributor customers will benefit from extended global fund provider coverage, while asset manager clients will have direct access to UBS GWM premier distribution network as well as access to Clearstream distribution reach. We expect to generate significant synergies from combining our fund distribution businesses.”

Weimer continued on the call that the acquisition of Fondcenter was strategically important to strengthen funds distribution and make the business more scalable. “In the second half of 2020 we expect €60m in net revenue from funds distribution with a 70% EBITDA margin,” he added.

The chief executive said Eurex (financial derivatives) and IFS (investment fund services) segments were the primary contributors to structural growth.

New products as growth drivers: 2019 was a good year for #Eurex. Get all of @DeutscheBoerse’s 2019 results as well as an outlook for 2020 here: https://t.co/HL7u3rI3bx #db1pc pic.twitter.com/1B9TJGlv3v

— Eurex (@EurexGroup) February 18, 2020

“In addition to over-the-counter clearing, structural growth of net revenue in the Eurex segment was mainly a result of new products and pricing models, whilst activities in the IFS segment also rose thanks to new client acquisition,” Weimer added.

‘New oil’ or ‘new gold’ are just some of the phrases used to describe the value of data in financial markets. And rightly so. Data fuels every aspect of the trading process.

From the very beginning, trading has always been about information. Whoever has the best and the fastest information gains the edge.

Today, traders are also challenged with managing the sheer amount of data in financial markets. The edge that traders gain now is all about who can consume and make sense of the data the fastest by leveraging technologies such as artificial intelligence.

In the second of three reports on the trading desk of the future, Refinitiv partners with Greenwich Associates to explore data’s impact on financial markets over the next three to five years, including which types of data will be most valuable, who will provide that data, and how traders expect to use it.

The value of data in financial markets

With an overwhelming 85 percent of banks, investors and capital markets service providers planning to increase spending on data management, the value of data in financial markets is clearly increasing.

The quantity and velocity of market data will continue to grow alongside trading volumes and the number of tradable instruments.

At the same time, tolerance for errors and acceptable latency for delivering that data will drop. Large investments in market data infrastructure by those up and down the value chain must continue for the foreseeable future.

Where will this data come from?

In the search for external data, 41 percent of market participants believe that large market data aggregators, like Refinitiv, will continue to act as the primary source of data for trading desks — beating out all other potential providers.

Why? Because they have the power to find, ingest, normalize, aggregate and then redistribute data around the world with high degrees of accuracy, and latency sometimes counted in microseconds.

With so much data to absorb, large financial institutions prefer to get most, if not all, of their information from a single place.

Even as the importance and diversity of alternative data grows, the largest data providers will still act as the market’s de facto aggregators. In this case, cloud computing and easier access to data will be critical capabilities.

Data and analytics go hand in hand

For investing and measuring execution quality, the evolution of analytics is just as critical as acquiring the data itself. In other words, finding data is not enough.

You have to put it to work — to interpret, analyze and utilize existing, new and unstructured data across trading workflows.

As a result, 57 percent of capital markets professionals expect to spend more time analyzing data, and 74 percent believe data analysis to be the most important skill that will be required to work on the future trading desk.

However, spending time with data will mean different things to different people and firms.

Sell-side trading desks will examine customer trading patterns more systematically to help manage relationships, execute algorithms using artificial intelligence to source liquidity, and digitally communicate with clients more and more.

Those on the buy-side, like asset managers and hedge funds, will continue to use data to find investment opportunities, more accurately price illiquid assets, and manage risk.

The power of alternative data

Even as we highlight the value of data, it’s important to recognize that not all data is created equal.

The term encompasses many different types, from market data to reference data. But today, alternative data tops the list of importance.

An overwhelming 95 percent of trading professionals believe alternative data will become more valuable to the trading process in the coming years.

This previously non-existent or largely under-utilized data source provides trading or investing signals that were once analyzed alongside market movements but were not considered relevant to trading or investing.

However, alternative data will only be useful if traders trust the source, driving home the importance of investment, accuracy and speed.

The path ahead for trading workflows

Data is not simply a buzzword. If gathered correctly and interpreted accurately, it’s the path forward for trading.

At Refinitiv, we remain focused on creating value for clients through data that spans the trading workflow, making it easier for traders to see, analyze and act on insight and opportunity.

The changes in data and technology identified in these first two reports are driving an evolution in trading roles and relationships. Our final report will examine these shifts to define critical skills for the trading desk of the future.

Read our full report ‘The Future of Trading: Redefining Data’.

Volumes in closing auctions in Europe will continue to rise by 3% to 4% each year and reach 50% of all European trading activity within eight years, according to analysis by Liquidnet, the global institutional investment network.

Liquidnet projected the increase in volumes in a report, MiFID II Liquidity Landscape: Review of 2019, based on the linear trend over the past two years. The study continued that volumes are climbing faster in certain markets with the Autorite des Marches Financiers, the French regulator, highlighting that 41% of the country’s blue-chip index, the CAC 40, was traded on the close in June last year.

“While the rise in closing activity is of concern in the longer term, market participants have a more pressing problem in 2020 to address how capped names will trade once periodic auctions are no longer admissible,” added Liquidnet. “Both issues will only add to the decline in continuous lit market activity requiring greater analysis to select the most appropriate execution strategy given the potential market impact.”

Tim Cave, analyst at consultancy Tabb Group, said in a blog that closing auctions in Europe have begun to account for as much as 25% of a stock’s average daily trading volume due to the growth of passive investing where funds  are benchmarked to the close.

“For many buy-side traders, bigger closing auctions aren’t necessarily a bad thing,” he added. “They help centralize more liquidity in a single point in time, maximizing price formation and volume crossed. That said, it is leading to reduced confidence in intra-day prices and, given closing auctions are a natural monopoly, there are concerns they represent a single point of failure.”

The European Securities and Markets Authority’s consultation this month on the impact of MiFID II asked whether the regulator should take any action on increased volumes in periodic auctions. Esma is due to publish a final report on changes to the regulation, which went live in the European Union in 2018, in July.

Cave wrote: “While Esma should be keeping a tab on trends such as the rise of closing auctions, it seems there is little it could do from a regulatory perspective. In any case, there are a number of initiatives already underway which may help slow down or reverse this trend. Several trading venues, including Aquis Exchange, Cboe Europe and Turquoise, have launched or are planning to launch alternative closing order types.”

Liquidnet noted that European liquidity remains fragmented and MiFID II has not increased lit volumes activity, so it is not surprising that the regulation is being reviewed.

“However, exactly how MiFID will be addressed becomes interesting considering possible regulatory divergence between the UK and Europe post Brexit in 2021, planned forthcoming regulatory changes to periodic auctions and the outcome of Swiss equivalence on European trading,” Liquidnet added.

Periodic auctions

Liquidnet continued that Esma ’s opinion will limit the conditions under which periodic auctions can operate which is important as they can account for a third of trading volumes in stocks which have been suspended under the MiFID II double volume caps, which aimed to shift volumes away from dark pools.

Periodic auctions are different from the traditional opening and closing auctions on exchanges as they can last for very short periods of time during the trading day and can be triggered by market participants, rather than the venue. They are considered to be lit trades under MiFID II, as the indicative matched size is published prior to execution.

“Under the ESMA opinion, where the period auction is deemed non-price forming but eligible to operate under the reference price waiver – such as the use of pegged orders or systems that lock in prices at the beginning of an auction – the expectation is that these orders will be subject to double volume cap restrictions, requiring alternative execution strategies to avoid trading on lit markets,” said Liquidnet.

Cave said volumes of periodic auctions have increased under MiFID II, accounting for around 2.5% of on-exchange activity. He continued that requiring periodic auctions to disclose all submitted orders significantly increases the level of data they are required to disseminate and would bring the venues into line with most closing auctions.

“More information would allow users to identify imbalances, participate in auctions and improve their price-forming characteristics,” he added. “The concern is that because periodic auctions are open during continuous trading hours, unlike opening and closing auctions, disclosing too information could jeopardize users’ trading intentions.”

Systematic internalisers

Cave highlighted that the most far-reaching proposal in Esma’s consultation is the potential banning of systematic internalisers. MiFID II banned broker crossing networks and required broker-dealers to set up systematic internalisers in order to provide principal liquidity to clients.

My quick take on ESMA's MiFID II consultation this week which, to be frank, could end up in ripping up the rulebook as it relates to equity trading and starting again… https://t.co/hMMZr5twz6

— Tim Cave (@_TimCave) February 7, 2020

He said both banks and electronic liquidity providers have launched SIs under MiFID II, and Esma estimates that they are responsible for around one-fifth of European equity volume.

“There is clearly merit in reviewing the SI regime, to ensure it is being used for principal activity only and to examine the difficulty in identifying what is truly addressable activity,” Cave added. “That said, removing the regime entirely as an execution mechanism for equities seems a step too far. It would restrict investor choice and remove an important check on exchanges”

Liquidnet said that a greater focus on the definition of addressable and non-adressable liquidity within SI performance calculations could contribute to a better understanding and subsequent improvement in SI execution quality. The report cited a recent study by Big XYT which analysed an institutional order of €10m Munich Re shares traded on December 12th last year.

“Including all trades, the example order represented 2.71% of the days reported turnover, but by removing non-addressable liquidity, the percentage of daily turnover rose to 5.41% requiring a doubling of volume and target participation to complete the order with necessary minimal impact,” added Liquidnet. “Understanding true levels of SI activity will become more important during 2020 given the increase in the number of European SIs registering versus last year and how these will operate in a post Brexit environment.”

The European Forum of Securities Associations said the European Commission should urgently review parts of the systematic internaliser regime in a letter last month.

Along with other trade associations, AFME today published a letter on how areas of #Mifid2 need to be recalibrated to avoid unintended harm to the market and to deliver on the intended outcome of the policy.

Read the letter sent to regulators: https://t.co/JvVUm994Fg

— AFME (@AFME_EU) January 20, 2020

EFSA members said they were concerned by new amendments to the tick-size regime for SIs.

“The application of the tick size regime above large in scale (other than trades executed at mid-point) will in our view not contribute to the price discovery process for large-in-scale (LIS) trades and may actually inhibit appropriate price formation between systematic internalisers and their clients,” added the letter. “Furthermore, the ability to execute large in scale trades on a sub-tick basis provides meaningful price improvement for clients trading in large sizes which brings benefits to end investors.”

EFSA recommended that tick sizes should not apply to any transactions that are above the LIS threshold and that for all order sizes, the mid-point should remain a valid execution price permitted to trade at a half tick, both on trading venues and with systematic internalisers.

Investing is an important part of retirement.

But for those who make below $50k are not investing in the stock market and struggling to prepare for retirement, according to a new study from Money Crashers, a personal finance advice consultancy, which examines the relationship between socioeconomic status, stock market investing and retirement preparation based on income and education levels.

In its latest survey shared with Traders Magazine, the “2020 Wealth Gap and Investing Study,” an overwhelming majority of high income earners (92%) and those with a postgraduate degree (75%) are investing in the stock market, while only 30% of those at lower income levels and 32% with a high school degree or less are investing.

“The stock market is one of the greatest drivers of economic growth and wealth,” said Andrew Schrage, co-founder and CEO, Money Crashers. “What our findings demonstrate, however, is that the stock market only benefits those with a seat at the table. People who don’t invest are left behind, and the cycle repeats itself. As a result, there’s a large imbalance between those who will be able to retire securely and those who won’t.”

Why is financial inequality rising? Money Crashers shared with Traders Magazine the following research and analysis of investing habits based on the socioeconomic factors of income and education levels:

• Likelihood of investing depends on income and education
• 30% of respondents earning less than $20,000 annually report investing in the stock market. By comparison, an overwhelming 92% of those earning $250,000 or more annually report investing.
• 32% of respondents with a high school degree or less are investing, while 69% with a bachelor’s and 75% with a postgraduate degree report investing.
• Majority of low-income Americans see stock market as unfair
• 66% of those earning less than $20,000 annually believe the stock market favors the wealthy and industry insiders, while 32% of those earning $250,000 or more annually feel the same way.
• Confidence in retirement savings rises with income and education levels
• 79% earning less than $20,000 do not have a retirement account, while only 8% earning $250,000 or more do not have one.
• 56% with a high school diploma or less do not have a retirement account, while 20% with a postgraduate degree do not have a retirement account.
• 96% earning $250,000 or more believe they will have sufficient retirement savings while 33% earning less than $50,000 annually believe they will have enough for a satisfying retirement.
• 50% with a high school degree believe they will have enough for retirement while 62% with a bachelor’s degree or higher believe so.

“In a capitalist society, a certain level of inequality is inherent,” added Schrage. “The question is: What can be done to increase access to financial tools for all Americans, regardless of education or income? This is an issue that needs real work and policy muscle behind it – in the meantime, reputable and easily accessible financial education is a key to closing the gap. With improved financial literacy, Americans can make sound decisions and be good stewards of their money.”

The full report—which includes analysis and additional graphics—is available here.

Methodology

This is the first report of a multi-part series based on a survey of 1,017 adults conducted between July 7, 2019, and November 5, 2019, by Money Crashers. Responses were collected by sharing the survey on social media, email, and online forums and through Prolific’s panel services. For the analysis in this article, only responses from individuals who live in the United States (n=919) were considered. The participants were 48% male and 52% female.

Stock trading could soon be coming to MIAX’s PEARL Exchange.

The options exchange has filed formally filed with the Securities and Exchange Commission on February 6^th to adopt rules to trade equity securities.

According to MIAX PEARL’s website, “PEARL is required to submit to the SEC pursuant to Section 19 of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 19b-4 thereunder, proposed rule changes. MIAX PEARL is required to post its rule filings on its website within two business days after submission. Rule filings are not effective until approved by the SEC, with the exception of certain types of rule filings that may take effect upon filing with the SEC if they meet the conditions specified under Section 19 of the Exchange Act and Rule 19b-4 thereunder. MIAX PEARL will post below pending rule filings submitted by the Exchange, followed by rule changes that have been approved by the SEC or became immediately effective pursuant to the Exchange Act.”

Within the filing with the SEC, PEARL plans to operate an electronic trading system developed to trade equity securities and “leveraging” the Exchange’s technology platform. The fundamental premise of the proposal is that the Exchange will operate its equity market in a manner similar to that of other equity exchanges, with a suite of order types and deterministic functionality that will provide much needed competition to the existing three dominant exchange groups.

“The proposed functionality for PEARL Equities is similar to that offered by other equity exchanges, such as the Cboe BYX Exchange, Cboe BZX Exchange, Cboe EDGA Exchange,Cboe EDGX Exchange, IEX, the New York Stock Exchange, NYSE Arca and the Nasdaq Stock Market LLC. However, other than where described below, the text of each of the proposed rules described in this proposal may differ from the rules of the other equity exchanges to provide additional specificity or to conform to the proposed structure of the PEARL Equities rule set.”

Also, all Exchange Members will be eligible to participate in PEARL Equities, MIAX said, provided that the Exchange has specifically authorized them to trade in the System. The system will provide a routing service for orders when trading interest is not available on PEARL Equities, and will comply with all applicable securities laws and regulations, including 3 Regulation NMS,3 Regulation SHO,4 and the Plan to Address Extraordinary Market Volatility.

MIAX PEARL will authorize any Exchange Member who meets certain enumerated qualification requirements to obtain access to PEARL Equities. There will be two basic types of Equity Members: Equity Order Entry Firms and Equities Market Makers. OEFs will be those Equity Members representing orders as agent on PEARL Equities and non-market maker participants conducting proprietary trading as principal. Equities Market Makers are Equity Members registered with the Exchange as Equities Market Makers.

Furthermore, an unlimited number of Equities Market Makers may be registered in each equity security unless the number of Market Makers registered to make a market in a particular equity security should be limited whenever, in the Exchange’s judgement, quotation system capacity in an equity security is not sufficient to support additional Market Makers in such equity security. The Exchange will not restrict access in any particular equity security until such time the Exchange has submitted objective standards for restricting access to the Commission for its review and approval.

Additionally, MIAX PEARL proposed exchange Rule 2606(a)(8) will specify that Equities Market Markers will not be precluded from quoting at price levels that are closer to the NBBO than the levels required by proposed Exchange Rule 2606(a). Proposed exchange Rule 2606(a)(9) will specify that the minimum quotation increment for quotations of $1.00 or above in all Equity Securities shall be $0.01. The minimum quotation increment in the System for quotations below $1.00 in Equity Securities shall be $0.0001.

In order to entice market makers, PEARL Equities Market Makers will receive certain benefits for carrying out their duties. For example, a lender may extend credit to a broker-dealer without regard to the restrictions in Regulation T of the Board of Governors of the Federal Reserve System if the credit is to be used to finance the broker-dealer’s activities as a specialist or market maker on a national securities exchange. Thus, an Equities Market Maker has a corresponding obligation to hold itself out as willing to buy and sell equities for its own account on a regular and continuous basis to justify this favorable treatment.

Data Feeds

Trading is all about data. In its filiing, MIAX PEARL’sProposed Exchange Rule 261325 identifies the data feeds it will utilize for the handling, execution and routing of orders in equity securities, as well as for surveillance necessary to monitor compliance with applicable securities laws and Exchange Rules. PEARL will use direct feeds as it primary source for BYX, BZX, EDGA, EDGX, Nasdaq, Nasdaq BX, Nasdaq PHLX, NYSE, NYSE American, and NYSE Arca. The Exchange will utilize data from the responsible single plan processor as its secondary source of data for these markets. The Exchange will utilize data from the responsible single plan processor as its primary source of data for FINRA’s Alternative Display Facility (ADF), IEX, the Long Term Stock Exchange, Inc., NYSE Chicago, and NYSE National.

PEARL Equities will operate a fully automated, price/time priority execution model, and offer a suite of conventional order types and deterministic functionality that is designed to provide for an efficient, robust, and transparent order matching process.

PEARL Equities will begin to accept orders at 7:30 a.m., Eastern Time, as described below. The System will operate between the hours of 9:30 a.m. Eastern Time and 4:00 p.m. Eastern Time,17 with all orders being available for execution during that timeframe.

The entire SEC filing is available right here: https://www.sec.gov/rules/sro/pearl/2020/34-88132.pdf

Liquidnet, the global institutional investment network, is creating Investment Analytics as a new business to help portfolio managers and analysts get more intelligence into their workflows more quickly.

Vicky Sanders will lead the new division which will be separate from Liquidnet’s core equities and fixed income trading businesses. Sanders was a co-founder of RSRCHXchange, which used technology to aggregate and build a marketplace  for institutional research, and was acquired by Liquidnet in May last year.

Please join us in congratulating Vicky Sanders, who assumes the role of Global Head of Investment Analytics! https://t.co/lPVX7fSUmp pic.twitter.com/tgaRfjuOKr

— Liquidnet (@Liquidnet) January 30, 2020

Sanders told Markets Media: “Investment Analytics will be building a new application so managers can easily access the data that Liquidnet already has under its roof from the integration of RSRCHXchange, OTAS and Prattle.”

Liquidnet also bought sentiment analysis provider Prattle last year. OTAS Technologies, an artificial intelligence powered buy-side decision support and analytics provider, was acquired in 2017.

“We will use natural language processing, artificial intelligence and advanced search to empower portfolio managers and analysts to find the right content,” she added. “Financial services under-utilise available technology.”

Sanders continued that Investment Analytics aims to help portfolios managers and analysts get more intelligence into their workflows faster.

“There is a lot of demand for alternative data from fundamental managers, who have not been using it in their investment process as much as systematic and quant managers,” she said.

Diversification

Sanders added: “Investment Analytics is an exciting venture to help diversify Liquidnet’s core business and an extension of services for our client base.”

Mike Mayhew, founder of Integrity Research, said on the research consultancy’s blog that it is clear that Liquidnet has been planning to expand its business outside trading for the past few years.

Mayhew continued that appointing Sanders to run the new group makes considerable sense given her experience working with buy-side clients at RSRCHXchange, Marex Spectron and Goldman Sachs.

“The key questions for Sanders and her Investment Analytics colleagues is exactly how to convince potential research and alternative data providers to partner with them, what “must have” solutions they believe they can develop, and how best to commercialize these opportunities,” he wrote. “It will be exciting to watch Liquidnet’s upcoming product development initiatives and future acquisitions as it looks to implement this aggressive new vision.”

MiFID II

Sanders said: “Both the buy side and the sell side are under margin pressure and need to innovate. Trading has been transformed and European Union regulations cast a light on portfolio manager and analyst practices that were unexamined for a long time.”

MiFID II mandated the separation of research payments and trading commissions, which had traditionally been bundled together. There have been concerns that the regulation has had an adverse impact, especially on research for smaller companies.

The AMF, led by chairman  Robert Ophèle , said in a statement this month that it is planning to review the MiFID II research requirements. The French regulator said it had asked Jacqueline Eli-Namer, AMF board member, and Thierry Giami, president of the French Society of Financial Analysts, to analyse the impact of MiFID II on investment research and explore possible areas of improvement.

Eli-Namer and Giami made six recommendations – to support the development of issuer-paid research; to ensure the proper functioning of the research market so that research is not offered too cheaply; authorising research consumers to benefit from separate trial periods; to exempt independent research from the inducement regime; determine the level of proportionality that is most likely to boost the coverage of small and mid-caps and encourage initial public offerings; and to prepare for the emergence of environmental, social and governance research.

The study said research offered at a very low price may be likened to an inducement, the receipt of which is currently strictly regulated by MiFID II.

“The AMF will reiterate this interpretation in its guide as well as inviting clarification of this point in European discussions, ideally in an ESMA Q&A,” said the regulator. “In addition, the AMF will propose the introduction of a concept of “reasonable commercial basis” in the European regulation on research, which would be to bring the price of research into line with its cost of production.”

The regulator said it considers that ESG matters are of major concern and has indicated that in 2020 it will pursue its roadmap for sustainable finance.

“It is essential to ensure that financial analysts have at least basic knowledge of non-financial matters,” said the AMF. “In this regard, the AMF welcomes the report’s recommendation to develop training and certification.”

US research

Sean Tuffy, head of regulatory intelligence, custody & fund services at Citi, said in a report  that MiFID II unbundling is continuing to have an impact in the US. The report, What Does it Mean for FinReg?, said that at the end of last year the US Securities and Exchange Commission extended its relief on the application of MiFID II research unbundling requirements from July 2020 to July 2023.

Tuffy said the industry has generally welcomed the extension because it removes any uncertainty about the relief expiring.

“However, institutional investors and consumer advocates have been pushing the SEC to adopt research unbundling in the US,” he added.

Some global asset managers would like the SEC to allow the option to deploy unbundling in the US, though not necessarily require it, so they have a single research policy for their whole business.

“When announcing the extension, the SEC stated that it needed more time to study the issue,” said Tuffy. “In the meantime, as unbundling becomes more common, the SEC will likely face pressure to come up with a long-term solution for this issue.”