MiFID II drives liquidity drought as broker research coverage falls

Mid-cap liquidity suffers most

Almost eight months after the introduction of MiFID II, the regulatory framework has already contributed to a reduction in trading liquidity and broker research across most areas of the market.

MiFID II, which took effect on 3 January, requires buy-side firms to pay for research as an 'unbundled' product, separate from other broker services. BofAML sees analyst exodus as MiFID rules hit research departments The impact has been buy-side firms reducing the amount of external research they consume, leading to cuts in research coverage from the sell-side and ultimately a contraction in stock liquidity. Analysis from research provider Hardman & Co reveals that since the beginning of the year, liquidity levels in the London Stock Exchange main market have fallen by an average o...