The U.K. Financial Conduct Authority will look into the application of the revised Markets in Financial Instruments Directive, or MiFID II, amid concerns about inconsistencies in how the rules are implemented or interpreted by asset managers, the Financial Times reported.
The MiFID II regime, which took effect in January, requires asset managers to separate the cost of research from transaction charges and trading commissions. The FCA wants to review the effect of the rules on the use of research and will write to asset managers, investment banks, specialist brokers and independent providers to request for information about their research pricing models, the FT said.
The regulator also intends to ask firms about governance and decision making in relation to research provisions and to review any outlier models of pricing methodologies, the newspaper wrote, adding that the pricing of corporate access will also be part of the six-month review.
Joshua Maxey, a managing director at Third Bridge, welcomed the review, reportedly saying: "The costs of research packages offered by some of the big banks are totally out of whack with pricing elsewhere in the market."
MiFID II has also resulted in the decline in research prices, with price quotes from some big banks for an entire research offering falling to between $10,000 and $30,000 per year from six-figure charges first considered a year ago, the FT said.
The existence of carve-outs in the rules have also led to legal uncertainties, with content not deemed "substantive" being considered "minor nonmonetary benefit" and would therefore be free, although what exactly constitutes as "substantive" remains unclear, according to the report.