Call for FCA to act now on MiFID II 'peppercorn pricing'

Research body urges crackdown

Russell Napier, co-founder of independent research provider Electronic Research Interchange (ERIC), has urged the Financial Conduct Authority (FCA) to immediately crack down on so-called 'peppercorn pricing' of research, whereby the largest brokers have agreed negligibly low fees with the buy-side in order to retain their business in other service areas.

MiFID II, which came into force on 3 January, requires the cost of research to be unbundled from other services sold by brokers, in order to provide investors with a transparent breakdown of fees. The provision of free research from sell-side firms is now also not permitted, as this would constitute an inducement to trade. Code of conduct unveiled for MiFID II research unbundling The rule changes have already impacted the sector, with recent research from US consulting firm Greenwich Associates revealing fund managers in Europe have cut their research budgets for 2018 by an average of...