Executive Summary

Initial Post-MiFID II European Equities Landscape Benefits Global Firms color blocks

Explicit unbundling of research/advisory payment and “best execution” moved to the fore after MiFID II’s implementation in January 2018.

In post-MiFID II initial reviews in Q2 with European buy-side trading desks, the trading share and execution quality leaders shown below indicate that, “Global bulge-bracket brokers, as well as execution-only platforms, have clearly increased relative share and impact to date,” says Greenwich Associates Managing Director Jay Bennett. “This reflects their ability to invest in the necessary technology to offer both high-touch and low-touch execution service capabilities and global liquidity for the larger fund management complexes.”

Initial Post-MiFID II European Equities Landscape Benefits Global Firms color blocks

Explicit unbundling of research/advisory payment and “best execution” moved to the fore after MiFID II’s implementation in January 2018. In post-MiFID II initial reviews in Q2 with European buy-side trading desks, the trading share and execution quality leaders shown below indicate that, “Global bulge-bracket brokers, as well as execution-only platforms, have clearly increased relative share and impact to date,” says Greenwich Associates Managing Director Jay Bennett. “This reflects their ability to invest in the necessary technology to offer both high-touch and low-touch execution service capabilities and global liquidity for the larger fund management complexes.”

EEI 2018 Share and Quality Leaders

Overall trading share is comprised of both high-touch and low-touch commissions gross of any CSA-related trading activity— the latter having shrunk considerably as the majority of larger accounts have chosen to fund research out of their P&L. Bank of America Merrill Lynch’s overall joint leadership in trading share with UBS was boosted by its considerable algorithmic trading share, as was third-place finisher J.P. Morgan. Along with Credit Suisse and Morgan Stanley rounding out the top five, these are the 2018 Greenwich Share Leaders℠ in European Equity Trading.

Research/Advisory Process in Transition

With research/advisory now largely paid for out of buy-side client P&Ls, particularly among larger funds, accounts have narrowed their broker lists. As the research leader and quality table shows, based on initial Q2 reviews with portfolio managers and CIOs in Europe, “Clients have typically concentrated their vote and spend with selected bulge-bracket and more regional providers,” according to consultant Satnam Sohal. Notably, says consultant Tom Jacques, “It is still relatively early days in the research/advisory price discovery and valuation process, so it will be interesting to see how research consumption and then actual vs. budgeted spend unfold, since capacity may change further based on outcomes.”

EEI 2018 Share and Quality Leaders - Research

Overall research/advisory vote share reflects the combined perceived value of each broker’s research product, analyst service, corporate access, and sales service, weighted by the commission size of fund and broker’s ranking. Exane BNP Paribas ranks with Morgan Stanley and J.P. Morgan as a Quality Leader, but does not have quite as much reach in relationship share.

Greenwich Share and Quality Leaders

Greenwich Associates asked the 364 buy-side portfolio managers, analysts and traders participating in the 2018 European Equity Investors Study to name the brokers and providers they use for trade execution and research/advisory services to estimate the share of their businesses allocated to each broker and provider, and to rate the quality of these sell-side firms in a series of product and service categories. Brokers and providers that received client ratings topping those of competitors by a statistically significant margin are named Greenwich Quality Leaders℠.

Consultants Jay Bennett, John Feng, Thomas Jacques, and Satnam Sohal advise on the institutional equity markets globally.

Methodology

From March to May 2018, Greenwich Associates interviewed 209 portfolio managers and 155 traders at European institutions about the research, sales and trading services they receive from their brokers. These portfolio managers and traders were also asked about current market practices, trends and compensation.