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MiFID II - Potential impact

on Investor Access

· IR,Investor Relations,Mifid II,Sell side,Buy side

What is MiFID II

The Markets in Financial Instruments Directive is the European Union (EU) legislation that regulates firms who provide services to clients linked to ‘financial instruments’ (shares, bonds, units in collective investment schemes and derivatives), and the venues where those instruments are traded.

MiFID applied in Europe from November 2007, and was revised by MiFID II, which took effect in January 2018, to improve the functioning of financial markets in light of the financial crisis and to strengthen investor protection.

It has notably a major impact in the cash equities market.

The IR teams do not see the impact of MIFID 2 yet.

 

How does it affect the corporate access world?

  1. Institutional Investors have always paid for access to Brokers research, but now it's regulated. If the Investor pays for example 25 000 euros, 17 000 euros will be spent on research and the rest on corporate access. The sales team loses part of its "margin” (sales commission).
  2. This means that Investors must now choose which Brokers they want to work with / and that brokers can no longer introduce Issuers to Investors who do not pay for the research. Investors now choose the Broker based on the quality of its research department / analyst and its relationship with the sales team.
  3. For Brokers it means: less revenue because they cannot present as many issuers as before, so less Investors interact with brokers.
  4. For the Issuers this means: less introductions to Investors because the Brokers will now choose which Issuers to cover - i.e. the issuers who attract the most interest (i.e. all Investors want to see a blue chip company but not everyone wants to see a MidCap Issuer) so for medium / small Issuers there will be less help from Brokers and they will have to do more themselves (i.e. contact investors directly or pay for research drafting)
  5. For the Investors: the large ones will continue to be able to pay the research from major Brokers and to have access to all the Issuers, but the smaller ones will not be able to take all the Brokers’ research packages. For big and small investors, setting up the new system is a big issue - they often do not know which Broker they paid for the research and therefore who to accept services from.
  6. Brokers now have a research offering with different tiers (basic option: database access only, medium: basic + group meeting invitation, VIP: medium + 1-1 meetings with CEO/CFO of Issuers).
  7. If the Investor has not paid the package of a Broker but the latter offers him a meeting as part of a roadshow, he can pay a financial concierge fee for access to this meeting. He will receive an invoice. Everything is regulated today. Before Brokers looked at the "consumption" of the Investor (number of lunches, breakfast, meeting) to bill him.

 

How can we help?

IR Teams

Investor targeting and Research notes:

- We work with partners across the globe offer local knowledge of your investor base and potential investors as well experienced analysts to write up research notes on your company

IR coaching services:

- We provide coaching for IR teams on the impact of MiFID II and full IR marketing process for more junior members of the team

 

Brokers

Site visits:

- We complement your corporate access and roadshow desk teams to organize site visits for group of high profile investors

 

Investors

Reverse Roadshows:

- We can help you organize reverse roadshows around the world by providing a dedicated team with experience in organizing roadshows around the world – local knowledge and 24/7 expertise

 

What is MiFID II

The Markets in Financial Instruments Directive is the European Union (EU) legislation that regulates firms who provide services to clients linked to ‘financial instruments’ (shares, bonds, units in collective investment schemes and derivatives), and the venues where those instruments are traded.

MiFID applied in Europe from November 2007, and was revised by MiFID II, which took effect in January 2018, to improve the functioning of financial markets in light of the financial crisis and to strengthen investor protection.

It has notably a major impact in the cash equities market.

The IR teams do not see the impact of MIFID 2 yet.

How does it affect the corporate access world?

  1. Institutional Investors have always paid for access to Brokers research, but now it's regulated. If the Investor pays for example 25 000 euros, 17 000 euros will be spent on research and the rest on corporate access. The sales team loses part of its "margin” (sales commission).
  2. This means that Investors must now choose which Brokers they want to work with / and that brokers can no longer introduce Issuers to Investors who do not pay for the research. Investors now choose the Broker based on the quality of its research department / analyst and its relationship with the sales team.
  3. For Brokers it means: less revenue because they cannot present as many issuers as before, so less Investors interact with brokers.
  4. For the Issuers this means: less introductions to Investors because the Brokers will now choose which Issuers to cover - i.e. the issuers who attract the most interest (i.e. all Investors want to see a blue chip company but not everyone wants to see a MidCap Issuer) so for medium / small Issuers there will be less help from Brokers and they will have to do more themselves (i.e. contact investors directly or pay for research drafting)
  5. For the Investors: the large ones will continue to be able to pay the research from major Brokers and to have access to all the Issuers, but the smaller ones will not be able to take all the Brokers’ research packages. For big and small investors, setting up the new system is a big issue - they often do not know which Broker they paid for the research and therefore who to accept services from.
  6. Brokers now have a research offering with different tiers (basic option: database access only, medium: basic + group meeting invitation, VIP: medium + 1-1 meetings with CEO/CFO of Issuers).
  7. If the Investor has not paid the package of a Broker but the latter offers him a meeting as part of a roadshow, he can pay a financial concierge fee for access to this meeting. He will receive an invoice. Everything is regulated today. Before Brokers looked at the "consumption" of the Investor (number of lunches, breakfast, meeting) to bill him.

How can we help?

IR Teams

Investor targeting and Research notes:

- We work with partners across the globe offer local knowledge of your investor base and potential investors as well experienced analysts to write up research notes on your company

IR coaching services:

- We provide coaching for IR teams on the impact of MiFID II and full IR marketing process for more junior members of the team

Brokers

Site visits:

- We complement your corporate access and roadshow desk teams to organize site visits for group of high profile investors

Investors

Reverse Roadshows:

- We can help you organize reverse roadshows around the world by providing a dedicated team with experience in organizing roadshows around the world – local knowledge and 24/7 expertise

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