Policy effects and accountability: unbundling research and execution under MiFID II

MiFID II introduced new rules governing research provision in EU capital markets. Prior to MiFID II, brokers, research providers and fund managers could bundle their execution and research services and charge their investors higher transaction fees, a practice called 'soft dollars.' MiFID II limits this practice and increases transparency by obliging fund managers to pay separately for research and execution services and to disclose these fees to their investors. In order to ensure compliance by fund managers with the new rules, MiFID II develops an extensive network of private and public accountability channels. These include conflict of interests and complaints mechanisms, the intervention powers of national competent authorities and the sanctions that they can impose. The new research unbundling rules have greatly impacted the research market. The chapter focuses on the effects of the new rules on the buy side, the sell side, the market structure and global actors.