The TRADE 56 - Page 52

[ I N T E R V I E W | R I C H A R D Hayley McDowell: What’s your take on MiFID II so far this year? Richard Parsons: The industry has spent so long preparing for MiFID II and now that it has actually hap- pened we are starting to see more of a period of reflection. I think some initial trends are already be- coming evident, especially around unbundling. With more focus on execution and execution quality, firms like Instinet are seen as a beneficiary. From a preparation perspective I would say we were further along the line focusing on equities here in Europe. As a broker we have always focused on services like commission manage- ment or liquidity aggregation and we have seen a natural evolution of the business in that sense. PA R S O N S ] with clients forced to evaluate bro- kers on an execution-only basis to ensure that they have the data and the means to do that. This won’t necessarily result in a consolida- tion of broker lists, but the buy-side will be keen to understand why they are using the broker and what their execution capabilities are in the absence of any other driver. The buy-side’s relationship with brokers is somewhat deeper now than it used to be. Those trends will certainly con- tinue through the first six months of this year and probably longer. Of course the market structure chang- es have been more immediate and starker. We’ve seen some very big changes quite quickly. Shutting down the broker crossing networks “The buy-side’s relationships with brokers is somewhat deeper now than it used to be.” The industry was aware that MiFID II was going to have a big impact, but then as the deadline approached, suddenly there was this realisation that the introduc- tion of MiFID II was going to be a global issue. Global managers were adopting their practices globally to accommodate MiFID II, and because of that, there has been an awful lot of time and money spent by the industry to ensure they were ready. I always thought that MiFID II would have more of an impact during 2018. If you think about the buy-side and how they operate, with voting processes around their broker lists for example, really for the true impact of unbundling, it will probably be the first or second quarter before banks start to see any effects and those votes start coming in. I think we will begin to notice a complete delineation between execution and research, 52 // TheTrade // Summer 2018 (BCNs) and bid and offer books in multilateral trading facilities (MTFs), alongside a rise in large in scale trading, I think clients are continuing even now to adjust their workflows. As clients continue to automate all of their processes or evaluate the impact of these changes, typically the analysis that is done is after the event, but they will continue to change how they trade and it’s up to the brokers to respond to that. HM: There has been talk of po- tential consolidation and ‘deeper partnerships’ amongst sell-side institutions over the next few years. Do you agree this will happen and what could drive this trend? RP: There has been discussion around consolidation on the sell- side for a number of years now, and while some brokers may exit certain parts of the business, I do think that ultimately clients drive the products they are consuming. There will definitely be an adjust- ment to brokers’ business models over the coming year or two. We can take research as one example where there may be more focused changes. On execution again, some brokers will want to be in that business and others won’t. It’s hard to see a future where there won’t be consolidation, but that being said, even at this stage brokers are now looking to outsource parts of their business to technology firms or firms that have a strong technology platform so that they still stay prominent. The winners will probably be the brokers that continue to innovate and ensure they have deep