Forefront Communications

Pensions & Investments: Research Could Be Next for Trading Floor

LiquidityBook

Mark Dowd

Mark Dowd

The next commodity traded on an exchange could be manager research.

Buying and selling investment research in a market is seen by some industry analysts as a natural progression from the current trend of aggregating a variety of research through financial technology. Impending European rules that will require unbundling and disclosure of research costs is only accelerating this evolution, they said.

A manager research exchange “certainly could be interesting,” said Valerie Bogard, equity analyst at TABB Group LLC, New York, and co-author of a 2016 report on U.S. equity trading that included a look at research aggregation technology. “I think something like that could be possible in the next five to 10 years. One of the biggest hurdles in unbundling is quantifying the cost of research. An exchange would make that market-driven.”

Michael Stepanovich, CEO of ONEaccess, a New York-based research valuation provider, said using quantitative and qualitative data to measure broker relationships “is complex, ongoing, and on many fronts. It’s uncharted territory. The good thing about MiFID II is, you can’t argue with transparency. The more information that’s out there lets managers double down on their research costs and value. For managers, part of the broker relationship has been qualitative. (Valuing research) also brings quantitative analysis to inform their vote process for broker selection and give it extra rigor, becoming best practice for managers.”

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