The talk is that big asset managers might take a “best practices” approach and apply the EU rules globally, says Kevin McPartland, head of research for market structure and technology at Greenwich Associates, a consulting firm based in Stamford.
“That way doing business could spill over into the rest of the world,” McPartland said.
Getting Paid
Financial firms have been grappling with how to get research departments to pay for themselves for more than a decade now. In the U.S., the sweeping, $1.4 billion settlement with major financial firms in 2003 laid bare conflicts at the heart of the business and prompted a wholesale rethinking of how and why research gets done.
Today equity analysts at big firms tend to be measured -- and paid -- based on trading business they help bring in from asset managers. Some stars have struck out on their own and now charge for research. Others have moved to small firms, hoping for a bigger cut of commission profits.
Yet in many ways the unprecedented steps taken by major central banks in recent years -- from setting ultra-low interest rates to buying trillions of dollars of debt in the open market -- have also made bond strategists less important than they used to be.
“You have to have a free marketplace in order to take advantage of strategists,” said Andy Brenner, head of international fixed-income for National Alliance Capital Markets in New York. “The major role of the strategist will come back, but not for the next three to five years, when central banks exit the marketplace.”
JPMorgan, RBS
At CRT, Ader is trying to figure out how to make research pay after the firm cut back its trading business when plans to become a primary dealer fell through. Since the start of last year, rivals including JPMorgan Chase & Co., Morgan Stanley, Credit Suisse Group AG and Royal Bank of Scotland Group Plc have also either scaled back their fixed-income trading desks or began weighing reductions.
Ader is talking about providing research to money management firms in exchange for a minimum amount of trading.