MiFID II linked to rise of smaller brokers

securities researchCapital market changes including how fund managers pay for securities research has been linked to “bulge bracket” brokers losing market share to smaller firms.

The trend is strongest in the mid-cap corporate sector represented by the FTSE 250, where brokers specialising in this space saw the fastest growth in clients paying for their research in the run up to the implementation of the revised Markets in Financial Instruments Directive (MiFID II) in January.

The Adviser Rankings Limited (ARL) data shows that mid-cap specialists have in fact been leading the way in terms of market share gains since November 2012.

In the FTSE 250 space, Numis and Peel Hunt gained the most clients, though Barclays came third (see list below).

UBS, Bank of America Merrill Lynch and Deutsche Bank all saw the largest decreases in FTSE 250 client advisory roles over the past five years, with a combined loss of 31 clients.

Market share gains for smaller firms were also seen outside of the FTSE 250.

The ARL research quotes Steven Fine, chief executive of Peel Hunt, saying: “With the recent implementation of MiFID II changing the way that analyst research is viewed and paid for, it is more important than ever for UK brokers to ensure that they have a strong and growing corporate client base if they want to survive and thrive in today’s increasingly competitive marketplace.”

He said he expected the post MIFID II world to lead to more consolidation.

Increase in FTSE 250 clients 2017 v 2012

Numis (14)
Peel Hunt (11)
Barclays (10)
Citi (3)
Investec (0)
Jeffries (0)
Deutsche Bank (-2)
JP Morgan Cazenove (-9)
BoAML (-9)
UBS (-11)

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