Deutsche Börse: MiFID II Presents Research Challenges
When the EU Markets in Financial Instruments Directive MiFID II enters into force on 3 January 2018, the rules on the provision of research services will fundamentally change. In addition to banks and investors, this particularly affects listed companies. In order to continue to attract the necessary attention on the capital market in the future, smaller issuers in particular will need to act. This is the conclusion of a paper that Deutsche Börse AG presented jointly today with the German Investment Funds Association (BVI), the German Share Institute (DAI), the German Investor Relations Association (DIRK) and the German Society of Investment Analysts and Asset Managers (DVFA).
Numerous market participants expect the new rules to significantly reduce the demand for research. Compared to today, issuers will have to undertake significantly more effort themselves to ensure that their securities are analysed. In addition, they will need to assure that the content of the analysis itself actually reaches investors by ensuring corporate access – i.e. contact between investors and issuers.
Although this will not have a noticeable impact for large companies, for small and medium-sized enterprises, building and maintaining personal relationships is expected to increase considerably in importance in the future for investor relations managers. Going forward, it will be necessary for them to purchase research to a greater extent. In addition, direct contact with investors, independently of contact set up by brokers, will play a greater role. The paper provides important tips about what issuers should be aware of with regards to these matters.
BVI’s CEO Thomas Richter said, “MiFID II will change quality of research. Investors will consider more carefully in future which analyses are good and how much they want to pay. Small and medium-sized issuers will then have to make an effort to stay on the radar.”
“New rules under MiFID II will, in particular, noticeably reduce the availability of research from small and medium-sized enterprises. In order to be able to continue successfully funding themselves on the stock exchange, the companies will have to adapt to this. Our paper points out what the possibilities are,” said Dr Christine Bortenlänger, Executive Member of the Board at DAI.
DVFA Secretary General and Managing Director Ralf Frank said, “If issuers pay for research out of their own pocket in future, it will be important for them to know the characteristics of quality of research as well as financial analysts and commission their research accordingly. Investors initially are sceptical of research that has been commissioned by the issuer. That’s precisely why the quality has to be right.”
Kay Bommer, Managing Director of DIRK said, “MiFID II means small and medium-sized issuers in particular face the challenge of obtaining research services that previously had been provided for free in another manner. To maintain companies’ own capability in the future, a staffing and monetary upgrade of investor relations activities is needed.”
Renata Bandov, Head of Listing at Deutsche Börse, added, „We already considered that smaller and medium-sized enterprises in particular will face challenges when we were developing our SME segment Scale. That is why we decided that all Scale issuers will receive mandatory research that we commission as the stock exchange. The reports ensure more transparency and visibility for investors.”
Source: Deutsche Börse
Clients want short-dated options to hedge or trade with more flexibility around market-moving events.
Natural Asset Companies are sustainable enterprises that hold the rights to ecosystem services.
Algorithms have become more prevalent in the spot FX market.
The Bitcoin ETN futures are based on ETC Group’s physical Bitcoin ETN.
SDX can operate a stock exchange and a CSD for digital assets in Switzerland.