We’ve spent a lot of time of late discussing Europe’s new MiFID II regulations that will go into effect in January 2018 and require investment banks to charge institutional clients separately for trading commissions and research. As we’ve noted (here and here), initial offer prices are coming in relatively high at around $450,000 per bank…all of which led us to the following conclusions:
Of course, the logical takeaway from these exorbitant offering prices, if they hold, is that institutional clients will ultimately be forced to consolidate their vendors…translation, so long to the small independent research shops. Meanwhile, investment banks will be forced to control costs by trying to focus on writing reports that people actually read (vs. the 1% hit rate they have today). All of which means that those shrinking analysts pools are about to completely collapse. Alas, it seems that we may have been a bit premature in our prediction of an early demise for independent research shops, at least if Sidoti and Rick’s Caberet has anything to say about it. In light of the new regulations that will undoubtedly disadvantage his research firm, Peter Sidoti has embraced a whole new, fundamental-transformed research business model that he hopes will save his business…charging the companies he covers for research about themselves. More from Bloomberg:
With the future of equity research looking shakier than ever, one boutique U. S. firm is betting its turnaround on getting paid by a different customer: the company being covered.
This post was published at Zero Hedge on Jul 28, 2017.
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