MiFID II Regulation: Payment Model and Compliance Standards
ESMA's MiFID II regulation updates introduce joint payment models for research, enhancing transparency and investor protection through stricter disclosure and conflict management standards.
MiFID II Regulation: Transforming EU Investment-Research Economics
Context and objectives
The Markets in Financial Instruments Directive II (MiFID II Regulation) came into force on 3 January 2018, ushering in the EU’s most far-reaching market-structure reform in a decade. Its investment-research rules pursue four policy goals:
- Transparent pricing of research services
- Reduced conflicts of interest between buy-side and sell-side
- Higher market efficiency through evidence-based trading decisions
- Stronger investor protection across asset classes
From “bundling” to explicit pricing
MiFID II outlawed the historic practice of paying for research with execution commissions, forcing investment firms to choose between:
- P&L model – paying directly from their own resources, or
- Research Payment Account (RPA) – a segregated pool funded by pre-agreed research charges to clients.
By unbundling the two services, regulators sought to eliminate opaque cross-subsidies and the incentive to over-trade simply to receive “free” research.
Market impact of the one-size-fits-all approach
While the unbundling mandate advanced investor protection, it also triggered material side-effects:
- Operational friction in setting up and administering RPAs.
- Direct P&L cost for firms electing not to pass on research expenses.
- Sharp fall in overall research volume, although surviving coverage often improved in quality.
- Notable decline in analyst coverage of SMEs, contrary to the EU’s capital-formation agenda.
Iterative regulatory fine-tuning
Consistent with the EU’s “legislate, observe, adjust” pattern, lawmakers responded to feedback:
Year | Legislative action | Key change |
---|---|---|
2021 | Capital Markets Recovery Package (CMRP) | Targeted exemption allowing bundled payment for issuers < €1 bn market cap to support SME research. |
2024–2025 | European Listing Act | Broader recalibration of research-payment rules, aimed at balancing transparency with market depth and SME accessibility. |
These amendments recognise that the original MiFID II research framework, though sound in principle, proved overly rigid in practice.
Key takeaway: MiFID II Regulation has re-engineered the economics of EU investment research, compelling firms to treat research as a priced service while prompting regulators to refine the rules to preserve SME coverage and market vibrancy.
European Listing Act & MiFID II Regulation: Next-Generation Research Rules
1. Legal framework at a glance
The European Listing Act package, published in the Official Journal of the European Union on 14 November 2024, comprises three texts:
Instrument | OJ citation | Core purpose |
---|---|---|
Regulation (EU) 2024/2809 | L-2024-2809 | Streamlines listing requirements |
Directive (EU) 2024/2810 | L-2024-2810 | Amends Prospectus & Transparency regimes |
Directive (EU) 2024/2811 “Listing Act Directive” | L-2024-2811 | Modifies MiFID II research provisions |
EU-27 must transpose the Listing Act Directive into national law by 4 June 2026, formally updating the Markets in Financial Instruments Directive II (MiFID II Regulation).
2. Game-changer for research funding models
The Listing Act Directive abolishes the €1 billion market-cap ceiling introduced by the 2021 Capital Markets Recovery Package. From transposition onward, any investment firm may combine research and execution payments, regardless of the issuer’s size. Key implications:
- Universal joint-payment option → less administrative friction than Research Payment Accounts (RPAs).
- Cost relief for buy-side firms that previously absorbed research expenses via the P&L model.
- Potential rebound in analyst coverage, especially for small- and mid-cap equities previously sidelined by MiFID II’s strict unbundling.
3. Alignment with the Capital Markets Union (CMU) vision
The reform dovetails with the EU’s CMU objectives to:
- Revitalise SME access to public equity markets by restoring affordable analyst coverage.
- Deepen liquidity through broader information dissemination.
- Enhance the competitiveness of EU venues against global peers.
By integrating flexible research-payment mechanics, the European Listing Act supports a more cost-efficient, attractive listing environment—a critical pillar of CMU.
4. International context and competitive neutrality
- United Kingdom: The FCA reinstated a bundled-payment regime in August 2024, prompting concerns about regulatory arbitrage.
- ESMA: Public statements acknowledge the UK shift and the need for “competitive parity” in global research markets.
- Industry feedback: Asset managers and broker-dealers flagged the risk of talent and coverage migrating to less restrictive jurisdictions.
The EU’s revised MiFID II research framework therefore serves a dual purpose: defending investor-protection standards while preserving the EU’s share of global investment-research activity.
Take-away for compliance and strategy
- Legal deadline: plan national-law updates before 4 June 2026.
- Operational impact: review RPAs, client disclosures, and budgeting models in light of the new joint-payment freedom.
- Strategic edge: leverage the broadened rules to re-engage with SME research, strengthen market depth, and align with both MiFID II Regulation and Capital Markets Union goals.

MiFID II Regulation: Reviving EU Research Coverage Without Weakening Investor Protection
1. Why the MiFID II amendments matter
The European Listing Act modifies the Markets in Financial Instruments Directive II (MiFID II Regulation) to serve a dual purpose:
- Stimulate analyst coverage, especially for SMEs, by relaxing the rigid, post-2018 unbundling rules and allowing joint payments for research and execution.
- Preserve core MiFID II safeguards, transparency, conflict-management and client-first principles, so renewed flexibility does not erode market integrity.
2. Primary objective: revitalise the EU research ecosystem
- Flexible payment choices enable investment firms to re-enter segments abandoned under the original unbundling regime, widening research on growth-stage issuers.
- Better SME coverage reduces information asymmetry, supporting CMU goals of innovation, job creation and deeper capital markets.
3. Secondary, but non-negotiable, objective: uphold investor safeguards
Even as research and execution come closer again, the amended MiFID II insists on:
Safeguard | Regulatory requirement | Purpose |
---|---|---|
Formal agreement with research providers | Written contracts defining scope and deliverables | Demonstrates arm’s-length terms and deters inducements |
Transparent remuneration methodology | Documented pricing logic for each research service | Prevents hidden cross-subsidies and over-pricing |
Enhanced client disclosure | Clear explanation of how joint costs are allocated | Lets clients judge value for money |
Annual research-quality assessment | Evidence-based review of usefulness and impact | Ensures research spend benefits portfolio decisions |
Key point: The price paid for research within any joint invoice must not exceed its standalone fair value, a principle aimed at blocking artificial mark-ups that could sway trading behaviour.
4. Operational checklist for compliance under the new MiFID II Regulation
- Update policies & procedures to reflect joint-payment workflows.
- Re-train front-office staff on the boundaries between “acceptable service” and “inducement”.
- Refresh client contracts and disclosures before migrating to bundled models.
- Build annual review templates that benchmark research quality and cost efficiency.
- Document supervisory oversight—regulators will scrutinise both process and outcome.
5. Success factors: balancing flexibility with fiduciary duty
The reforms will be judged on whether firms can deploy new payment freedom responsibly while regulators maintain credible, risk-based supervision. If done well, the updated Markets in Financial Instruments Directive II can:
- Boost research production without reigniting conflicts of interest.
- Deliver sharper investment insights to end-investors.
- Strengthen the EU’s competitive position against jurisdictions with looser rules.
MiFID II Regulation: Post-Listing Act Research-Payment Toolkit
1. Flexible payment menu under the amended Markets in Financial Instruments Directive II (MiFID II Regulation)
The European Listing Act Directive, backed by ESMA’s technical advice, gives EU investment firms three compliant ways to fund third-party investment research:
- Direct P&L payment: the firm pays from its own resources.
- Research Payment Account (RPA): a ring-fenced account funded by explicit client research charges.
- Joint payment for research + execution: a single invoice covering both services.
This shift from the 2018 “one-size-fits-all” unbundling regime lets firms align cost, client preference and compliance complexity with their business model, without breaching MiFID II’s investor-protection ethos.
2. Choosing the right model: feature-by-feature comparison
Feature | Direct P&L (Model 1) | Research Payment Account (Model 2) | Joint Payment (Model 3) |
---|---|---|---|
Funding source | Firm’s own capital | Client-specific research levy | Single charge—client-funded or firm-funded |
Key MiFID II articles | Art. 24 (9a)(d)(i); Art. 13 (1)(a) Delegated Dir. | Art. 24 (9a)(d)(ii); Art. 13 (1)(b), 13 (1a)–13 (8) | Art. 24 (9a)(a)–(d) (as amended); Art. 13 (10) |
Core conditions | Act in the client’s best interest | Budget, client consent, no link to trading volume, audit trail | Written provider contract, fair remuneration method, annual research-quality test, client disclosure |
Primary conflict-of-interest risk | Low — firm bears cost | Budget fairness vs. benefit to paying clients | Research spend must not distort execution choices or mask total cost |
Operational fit | Simple, but hits margins | High transparency; admin-heavy | Efficiency gains but needs robust COI and best-execution controls |
3. Practical selection guidance for compliance teams
- Cost vs. transparency: RPAs spotlight research spend but increase back-office burden; P&L absorbs cost quietly yet erodes margins.
- Client perception: High-touch asset owners may favour RPAs for price clarity, while retail-heavy models may opt for firm-funded or bundled charges.
- Regulatory scrutiny: Joint payments demand the tightest controls, documented pricing logic, annual quality reviews and evidence that research is “not substantially overpriced”.
Bottom line: The Listing Act’s amendments to the MiFID II Regulation empower firms with a three-lane payment highway, but whichever lane you choose, you must still steer by MiFID II’s core compass: best execution, conflict mitigation and full-cost transparency.

MiFID II Regulation: ESMA’s Blueprint for the New Research-Payment Era
1. ESMA’s mandate & timeline (2024-2025)
Milestone | Date | Reference | Purpose |
---|---|---|---|
Commission request for technical advice | 6 Jun 2024 | EC letter to ESMA | Align Markets in Financial Instruments Directive II (MiFID II Regulation) with the European Listing Act |
Consultation Paper (CP) issued | 28 Oct 2024 | ESMA35-335435667-5979 | Draft Level-2 wording; open to public comment |
Consultation closed (25 responses) | 28 Jan 2025 | — | Input from firms, research providers, NCAs, trade bodies |
Final Report & Technical Advice published | 8 Apr 2025 | ESMA35-335435667-6290 | Definitive text changes for Article 13 Delegated Directive |
Key point: ESMA’s blueprint converts the Listing Act’s high-level flexibility into concrete, harmonised rules, critical for consistent supervision across the EU under the MiFID II research regime.
2. Article 13 – what changes & what stays
2.1 Enduring RPA safeguards
Paragraphs 1(b), 1a, 2-8 largely re-state and refine existing Research Payment Account duties (budgeting, client disclosure, audit trail, no volume linkage, surplus rebates, etc.). The message: when clients pay directly, transparency remains non-negotiable.
2.2 New link to annual quality review
New § 1b: the MiFID II-mandated yearly assessment of research “shall be based on robust quality criteria.”
Take-away: firms must evidence a structured, criteria-driven evaluation of every research provider.
2.3 Joint-payment clause (game-changer)
Brand-new § 10 embeds the joint-payment option with two hard guards:
- Fair pricing test – research element must not be “substantially more” than a standalone charge.
- Best-execution neutrality – remuneration method must not impede MiFID II best-execution duties.
2.4 Reinforced execution-cost split
Re-framed § 9: execution brokers must show a separately identifiable execution fee; any other service (e.g., research) requires its own charge, free from cross-subsidy.
3. How the market reacted & ESMA’s final stance
Issue | Stakeholder view | ESMA response in Final Advice |
---|---|---|
Level of detail | Majority favoured high-level principles; some feared over-prescription | Retained principle-based wording; avoided granular templates |
Annual quality assessment – comparator clause | Asset managers flagged cost & feasibility of benchmarking against “alternative providers,” esp. in niche sectors | Dropped explicit comparator line; kept the “robust quality criteria” standard only |
“Substantially more” pricing test | Industry wants clarity; fear of subjective enforcement | Kept wording but signalled proportional supervision; firms expected to document reasonable valuation logic |
Administrative burden vs. CMU goals | Broad support for flexibility, caution against rules that could negate it | ESMA balanced investor protection with Listing Act’s objective to revitalise research coverage |
4. Compliance to-do list before Level-2 law lands
- Trace & map Article 13 changes against current policies (RPA, P&L, joint).
- Design valuation models to prove bundled research is fairly priced, benchmark vs. IRP quotes, internal cost curves, peer data.
- Upgrade best-execution dashboards to show venue choice remains cost-competitive despite bundled research.
- Refresh research-quality frameworks—scorecards, KPIs, board reporting, to meet the new “robust criteria” mandate.
- Prepare client comms: clear, plain-language disclosures on whichever payment model you select.
Bottom line: ESMA’s technical package hard-wires the European Listing Act into MiFID II Regulation, preserving investor-protection DNA while giving firms operational latitude. Master the new Article 13 rules now to unlock the benefits of a revitalised, yet compliant, EU investment-research market.
IV. MiFID II Regulation: From Rule-Book to Run-Book
The European Listing Act has expanded the ways EU firms can pay for research, but it also tightened the proof-of-value expectations baked into the Markets in Financial Instruments Directive II (MiFID II Regulation).
A. Crafting a Compliant Remuneration Methodology for Joint Payments
Under Article 24(9a) MiFID II and new Article 13(10) of Delegated Directive 2017/593, every joint-payment contract must embed a pricing method that is:
- Fair-valued — the research slice cannot be “substantially more” than a stand-alone price.
- Best-execution neutral — the fee split must never distort broker or venue selection.
Practical blueprint
Step | What to build | Why it matters under MiFID II Regulation |
---|---|---|
① Shadow-pricing model | Benchmark the research element against IRP quotes, internal cost curves or peer tariffs | Demonstrates the “not substantially more” test |
② Provider-level term sheet | Ask brokers for transparent bundled invoices that show cost-allocation logic | Makes inducement checks and client disclosure simpler |
③ Over-charge guardrails | Consider tiered rates, fee caps or volume discounts for the research component | Adds hard evidence that you prevent excessive pricing |
④ Documentation pack | Store calculations, board approvals and methodology notes in an audit-ready file | Enables NCAs to verify fairness and best-execution neutrality |
B. The Mandatory Annual Research-Quality Review
1. Legal trigger
- Article 24(9a)(c) MiFID II → Annual assessment of research quality, usability and value.
- Article 13(1b) Delegated Directive → Review must rest on “robust quality criteria.”
2. Building the framework
Criterion | What to measure | Sample metrics | Internal evidence |
---|---|---|---|
Analytical quality | Rigor & originality | Forecast-accuracy scores, peer review notes | Portfolio-manager feedback loops |
Usability & timeliness | Fit for strategy; delivery speed | Usage frequency, time-to-market | Research-consumption logs |
Value for money | Benefit vs. explicit/allocated cost | Cost-per-idea, IRP price benchmarks | Shadow-pricing spreadsheet |
Investment impact | Contribution to returns & risk control | Attribution analysis, case studies | Post-trade reviews |
Provider service | Access to analysts & responsiveness | Analyst CVs, query-response SLAs | Internal service surveys |
Execution tips
- Define “robust quality criteria” in a board-approved policy; update annually.
- Where feasible, compare current providers with credible alternatives (Level-1 text still cites this benchmark).
- Link outcomes to budget resets — poor scores trigger renegotiation or provider rotation.
- Keep all data points in a central evidence folder for quick NCA access.
V. MiFID II Regulation: Transparency, Conflicts & Best-Execution Controls
C. Client-Facing Disclosure: Turning Rules into Relationship Capital
MiFID II’s transparency spine does not bend under the new flexibility. Whatever payment route you choose, clients must see and understand how research is funded and how conflicts are tackled.
Disclosure theme | What MiFID II / Article 13 demands | What “good” looks like |
---|---|---|
Payment method | State clearly: P&L, Research Payment Account (RPA), or Joint Payment. | One-page explainer in onboarding pack + web-portal banner whenever method changes. |
Research-payment policy | Publish a policy detailing info flows for each model. | Interactive PDF with FAQs, infographic of cost flows, periodic e-mail reminders. |
Joint-payment conflicts | Describe how bundled-payment conflicts are prevented/managed. | Visual matrix linking each conflict to a specific control (e.g., segregation of duties, best-execution overrides). |
RPA specifics | Up-front budget, per-client charge estimate; annually, total research costs. | Personalised dashboard: budget vs spend, surplus rebates, provider list. |
D. Re-Engineering Conflict-of-Interest (COI) Defences
The return of bundled payments revives inducement risk. Firms must prove they separate research value-judgments from execution routing.
- Policy precision – Update COI and inducement policies to name joint-payment risks and map them to controls.
- Structural safeguards – Split research-provider selection teams from traders; implement “four-eyes” sign-off on bundled contracts.
- Process controls – Document provider choice using quality & value criteria, never trade volume.
- Disclosure & oversight – Make conflict-handling public; task Compliance and Internal Audit with periodic deep dives.
Regulatory anchor: Article 13(10)(b) insists remuneration “shall not impede” best execution, so COI controls must dovetail with best-execution tests.
E. Best Execution: Still the North Star
Best execution remains the unshakeable duty under MiFID II Regulation. Bundling research cannot inflate total consideration or bias venue choice.
Best-execution checkpoint | Practical proof points |
---|---|
Venue selection driven by price, cost, speed, likelihood | Transaction-cost analysis (TCA) reports comparing bundled vs. unbundled brokers. |
Fair all-in cost | Shadow-price the research slice; show total cost < or = alternative quotes. |
Transparent fee split | Maintain internal ledger reconciling execution fee vs. embedded research value. |
Continuous monitoring | Dashboard alerts when total cost per trade deviates from peer benchmark. |
Dual-control logic:
- Art. 13(10)(a) – research must not be “substantially more” than a stand-alone price.
- Art. 13(10)(b) – pricing must not hinder best execution.
Fail either test and the arrangement flunks MiFID II.
Operational call-to-action
- Embed shadow-pricing engines in your OMS/EMS to flag potential overpricing in real time.
- Refresh execution-policy training, highlight bundled-payment red-lines for trading staff.
- Tie annual research reviews to best-execution outcomes: if research does not improve decisions, renegotiate or exit the provider.
- Package disclosures as a service differentiator, clear dashboards can turn compliance into client-experience value.
Bottom line: The new payment freedom under the MiFID II Regulation is yours to exploit—if you match it with crystal-clear disclosure, next-generation COI controls and data-driven best-execution evidence. Nail these pillars and you transform regulatory duty into competitive edge.

MiFID II Regulation: Building Trust in EU Issuer-Sponsored Research (ISR)
1. Why the Listing Act embraces Issuer-Sponsored Research
Issuer-Sponsored Research (ISR) is analysis commissioned and paid for by the issuer itself. The European Listing Act recognises ISR as a pragmatic tool to:
- Counter the research-coverage gap for SMEs that arose after MiFID II’s 2018 unbundling.
- Boost issuer visibility and, in turn, improve access to public-market capital.
Yet the model is inherently conflicted: the company under review is also the pay-master. The EU therefore couples promotion with strict guard-rails to protect market integrity.
2. Article 24(3c) MiFID II - The EU Code of Conduct for ISR
Pillar | Requirement in the new MiFID II Regulation | Purpose |
---|---|---|
Regulatory basis | ESMA to draft Regulatory Technical Standards (RTS) creating an EU-wide Code of Conduct | Harmonise ISR rules across the Single Market |
Label & distribute | Research branded “issuer-sponsored” may be circulated only if it complies with the Code | Gives investors a trusted badge |
Independence & objectivity | Code will prescribe analyst-independence tests, editorial-control limits, and evidence-based methodologies | Curb promotional bias |
Conflict-management toolkit | Procedures for identifying, preventing, managing and disclosing ISR conflicts | Preserve credibility of conclusions |
Scope of application | MiFID-authorised firms that produce or distribute ISR; ESMA may propose coverage of non-MiFID providers to avoid loopholes | Level playing field |
Transparency channel | Likely alignment with the European Single Access Point (ESAP) for public availability | Ensures equal, free access for all investors |
3. Practical challenges & policy trade-offs
- Proving real independence — issuers pay the bill, so providers must show robust editorial firewalls and publish clear methodologies.
- Contract disclosure — regulators and investors are calling for visibility on ISR fee structures to spot hidden influence.
- Uniform enforcement — ESMA must ensure that research boutiques outside MiFID scope cannot under-cut standards, or regulatory arbitrage will emerge.
- Timely updates — stale ISR is risky; the Code is expected to impose refresh triggers when material facts change.
- Public availability via ESAP — mandatory upload would hard-wire fairness and enable market-wide scrutiny, but issuers warn against added red tape.
- Avoiding SME overload — rules must stay proportionate so that smaller companies still view ISR as affordable.
Action points for issuers & research providers
Stakeholder | Immediate priority | Why it matters under MiFID II Regulation |
---|---|---|
Issuers (SMEs especially) | Budget for ISR that meets Code standards; prepare for public fee disclosure | Builds investor confidence and aligns with Capital-Markets-Union goals |
Research providers | Draft independence policy, conflict matrix and quality-control checklist ready for RTS | Secures the “trusted label” and access to distribution channels |
Investment firms distributing ISR | Update due-diligence workflow to verify Code compliance before circulation | Avoids reclassification as marketing material and potential MiFID breaches |
VI. Impact Analysis of the MiFID II Regulation Reforms
The European Listing Act rewires the Markets in Financial Instruments Directive II (MiFID II Regulation) in ways that ripple across costs, benefits and competitive behaviour. Below is a structured, SEO-optimised breakdown of the expected impact on investment firms, research providers, issuers and the broader EU market.
A. Cost-Benefit Snapshot for Investment Firms & the EU Market
Category | Typical cost drivers | Offset by principal benefits |
---|---|---|
Implementation | One-off policy rewrites, staff training, IT tweaks for remuneration & COI tracking | Greater payment flexibility (P&L, RPA, joint) can lower admin friction long-term |
Annual research-quality review (Art. 24 (9a)(c) MiFID II) | Defining “robust quality criteria”, data collection, documentation | Better insight into value for money, stronger negotiating power with providers |
Ongoing monitoring | Proving “not substantially more” pricing & best-execution neutrality | Revitalised research supply—especially for SMEs—improves liquidity & price discovery |
Regime complexity | Interpreting concepts such as “substantially more” or “robust quality” | Enhanced investor confidence via transparency & accountability boosts brand equity |
Bottom line: ESMA’s own CBA (Final Report ESMA-35-335435667-6290, Annex II) signals that manageable compliance spend should be outweighed by a more vibrant and efficiently funded EU research market.
B. Strategic Shifts You Should Expect
1. Heightened competition among research providers
- Quality as a selling point – Annual assessments keep pressure on analysts to prove actionable insight.
- Evaluation tools proliferate – Expect more free trials, score-carding apps and peer-pricing dashboards.
- Market segmentation – Full-service brokers push bundled “research + execution”; niche IRPs compete on deep sector expertise and price transparency.
2. Prospects for independent research providers (IRPs)
Opportunity lever | Why IRPs can still win under MiFID II Regulation |
---|---|
Superior insight | Mandatory value tests favour providers that demonstrably add alpha |
Unconflicted perception | Some asset owners will prefer research without execution ties |
Specialist coverage | IRPs excel in frontier, thematic or micro-cap niches |
Business-model innovation | Alliances, data-analytics layers, flexible pricing can offset scale gaps |
3. Investor-protection dividend
- Richer disclosures on payment methods, COI handling and research budgets.
- Annual quality audits force firms to drop low-value research.
- Fair-price rule (“not substantially more”) caps client cost and backs up best-execution duty.
4. Closing the SME coverage gap
- Joint payments without a market-cap ceiling make small-cap research commercially viable again.
- Issuer-Sponsored Research (ISR)—when Code-compliant—adds another supply channel.
- Public-sector boosters (e.g., potential EU SME-research funds) may complement private uptake.
5. Toward a harmonised, CMU-friendly rulebook
- High-level rules + ESMA Q&As = flexibility with convergence.
- Consistent interpretation across NCAs is vital to avoid competitive distortions inside the Union.
- Alignment with global norms (e.g., UK’s bundling comeback) preserves EU market attractiveness.
Action Checklist for MiFID II Compliance Leaders
- Map costs vs. benefits in a board paper; secure budget for the one-off uplift.
- Pilot your remuneration methodology on a small broker set; validate “fair-value” logic.
- Stand up a research-quality dashboard that feeds both annual reviews and provider negotiations.
- Engage IRPs and full-service brokers in parallel to build a blended, value-optimised coverage universe.
- Track ESMA Q&As and NCA guidance to fine-tune interpretations of “substantially more” and “robust quality”.
Key takeaway: The Listing-Act amendments transform the MiFID II Regulation from a rigid cost-segregation regime into a value-driven marketplace for EU research, rewarding firms that master transparency, fair pricing and measurable research quality.
VII. MiFID II Regulation: Where EU Investment-Research Goes Next
A. What Just Changed, and Why It Matters
Transformative change | Practical meaning for market participants |
---|---|
Three-lane payment highway | Choose P&L, Research Payment Account (RPA) or Joint Payment for third-party research. |
Joint payments, uncapped | No issuer market-cap ceiling—bundle research + execution for any listed company. |
Conditional safeguards | Formal contracts, fair-value remuneration, conflict governance, client disclosure, best-execution proof. |
Annual quality audit | Mandatory review of research quality, usability, value using “robust quality criteria.” |
Issuer-Sponsored Research (ISR) code | ESMA to craft an EU Code of Conduct—giving ISR a trusted label under the Markets in Financial Instruments Directive II. |
Key takeaway: The era of rigid unbundling is over; the MiFID II Regulation now prizes flexibility coupled with hard-evidence accountability. Firms must document why research is worth the spend and how client interests stay protected.
B. Roadmap for Adaptation & Long-Term Vision
1. Immediate action items
- Gap-analyse current payment models against new Article 13 & Article 24(9a) duties.
- Draft or refine remuneration methodologies—prove the research slice is not substantially more than stand-alone cost.
- Stand up annual review protocols with scorecards tied to performance, cost and usability.
- Refresh client communications—plain-language disclosures on payment choice, COI controls, ISR labelling.
- Engage providers (full-service brokers and IRPs) to renegotiate pricing and quality metrics.
2. Strategic opportunities
- SME coverage renaissance – Joint payments + forthcoming ISR Code can reignite analyst interest in small- and mid-caps.
- Competitive differentiation – Transparent dashboards and rigorous quality reviews become selling points to asset-owner clients.
- IRP resurgence – Independent providers that prove alpha and fair pricing can thrive despite bundled competition.
3. ESMA & NCA oversight
- Expect Q&As and supervisory convergence notes clarifying “substantially more,” “robust quality,” and ISR Code specifics.
- National authorities will assess best-execution data and remuneration evidence—audit-ready records are essential.
4. Long-term vision
The amendments aim to forge an EU research ecosystem that is:
- Resilient – multiple funding models reduce single-point failures.
- Efficient – market-driven pricing and annual audits weed out low-value research.
- Transparent – clients see exactly how research is paid for and how conflicts are neutralised.
- Competitive – alignment with global rules (e.g., UK’s bundling comeback) preserves EU market appeal.
But regulation is never “set-and-forget.” Policymakers will track:
- SME coverage metrics
- Research quality and pricing trends
- Effectiveness of ISR safeguards
Further tweaks to the MiFID II Regulation are likely as the Capital Markets Union project evolves.