[ M A R K E T
R E V I E W
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M I F I D
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M
iFID II may be the talk
of the town all across
Europe, but the regu-
lation has been rather less high
profile across the Atlantic, as some
US investors put themselves at risk
with their apathy.
One US-based consultant told
The TRADE that “north of 50% of
investors here have no idea how it
[MiFID II] will impact them”.
Modern regulation tends to fea-
ture many extra-territorial aspects
that could trip up investors outside
of the jurisdiction the regulation
originates from. Similarly, many
firms are now global in nature,
either through owning subsidiaries
or having trading desks in foreign
“If you are trading through an EU
broker or buying research from an
EU institution then you will have to
consider whether it falls within the
scope of the rules.”
DAN SIMPSON, HEAD OF RESEARCH, JWG
markets, or by investing in foreign
securities or simply because their
counterparties have a global pres-
ence.
With all of the above in mind,
it seems likely that there are very
few, if any, US asset managers
who will be entirely unaffected by
MiFID II.
The impact of MiFID on the US
market can be placed into three
broad categories; best execution,
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TheTrade
Summer 2017
market infrastructure and cross-border trading and
research unbundling. Each of these areas will, either
on a compulsory or voluntary basis, change the way
asset managers in North America and other territories
outside the EU do business.
Beginning with best execution, this issue has long
been on the agenda for US firms and is one of the
aspects of MiFID II many will easily identify with. US
asset managers are already obliged to seek out best
execution on behalf of their clients, though MiFID II
makes the rules significantly more demanding.
Domino effect
Increasingly quality of best execution in one jurisdic-
tion has tended to increase standards across the board
elsewhere too as clients become used to higher stan-
dards from one of their asset managers and demand
that others provide the same level of service.
Joe Digiammo, a director at tech consultancy Sapi-
ent, says: “We’re already seeing some trends towards
better best execution in the US, with a growing num-
ber of best ex tools coming to market, firms creating
portfolio manager profiles to help understand the
execution needs of a fund and more TCA being used.”
Dan Simpson, head of research at JWG, adds that for
North American firms executing in the EU, they will
face a much stricter regime than they are currently
used to.
“Best execution will become much more difficult and
technical to prove, with the burden of proof resting on
the asset manager’s trading desk. It will require analy-
sis of a huge amount of market data for any execution
taking place in the EU,” Simpson explains.
He adds that firms must be able to see and under-
stand whether or not they are getting the best price on
a trade.
While market participants are encouraged that firms
are already responding to the tighter rules on best
execution, this remains the tip of the iceberg and is
the one area where firms are by far most prepared re-
garding MiFID II as they will already be familiar with
it from existing US rules on best execution. Simpson