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MiFID II hits European banks', brokers' commissions by 30%, research shows

The implementation of the markets in financial instruments directive, or MiFID II regime, in January led to a 30% decline in fees for investment banks and brokers across Europe, the Financial Times reported, citing figures from Investment Technology Group Inc.

Fees earned by European firms, excluding those in the U.K., were down in the first quarter to 5.2 basis points from 7.4 basis points a year earlier. U.K.-based traders and brokers saw fees drop 28% in the first quarter of 2018 to 5.8 basis points from 8 basis points in the first quarter of 2017, Investment Technology Group, or ITG, a fintech company, said in its report.

The fall in commissions in other parts of the world has been less than in Europe, ITG said.

Non-profit Financial Inclusion Centre co-director Mick McAteer said the fall in commissions was "encouraging" provided that it resulted in lower management charges for investors.

However, MiFID II may be counterproductive in that it could affect the quality of research turned out by banks and brokers, a senior figure at a large wealth manager told the FT.

Meanwhile, fund managers and brokers believe commissions will rise again, especially with respect to trading in less-liquid stocks.

Unlike large banks that have invested in technology related to "dark pools of liquidity and algorithmic trading solutions," companies such as Numis Securities Ltd. have invested in new trading roles to secure more business from small- and mid-cap businesses, the broker's co-CEO Ross Mitchinson told the FT.

Meanwhile, the Numis Corp. PLC unit's blended commissions continue to fall in 2018, Mitchinson added.