Confusion reigns as banks scramble to price FX research

LONDON: How much are you worth? For the foreign exchange (FX) and bond analysts covering the world’s biggest markets, how much to charge for their time and research remains in question just a month away from sweeping new rules that require fund managers to pay for these services.

Forcing funds to pay separately for research is one element of the wideranging EU financial markets directive known as “MiFID II”, which is aimed at making European markets more transparent and providing better value for investors. Its complexity has already delayed its implementation by a year.

Having grappled with the issue for the past 18 months, no consensus or preferred pricing model appears to have emerged on macroeconomic, fixed income and foreign exchange research, taking discussions down to the wire.

At least 11 banks said they would be charging for investment research and meetings with analysts when the MiFID II comes into force on Jan 3.

There was a reluctance to talk about charges but several sources said pricing of fixed income research was aimed low. Many said pricing details have not yet been finalised and some said certain elements of research – mostly macroeconomic – would be free via online portals.

“While we’re currently discussing with clients, we’ve not gone public on anything yet,” said a source at an international bank with operations in London, declining to be named.

“I’m hearing from everyone at other banks that pricing isn’t yet fixed. Someone else told me that they didn’t think things would be finalised until March.”

Because banks use research to attract clients, the fallout of MiFID II across asset classes is being watched closely.

But working out prices for forex and fixed income research has proved complex, analysts said.

They added it was hard to assess the impact since a large chunk of clients such as central banks, sovereign wealth funds and certain pension funds will not have to pay under the new rules.

There were also some concerns about the implications for the thousands of analyst jobs in a banking sector already squeezed by the financial crisis and regulation.

The number of analysts at the 12 biggest banks has fallen by 10% since 2012 to 5,981 in 2016, according to data provider Coalition. – Reuters