Edison’s position on MiFID II

Our research is classified as minor non-monetary benefit under MiFID II. This applies to all forms of transmission, including email, website and financial platforms such as Bloomberg and Refinitiv. We prominently disclose that we are commissioned to write the research we produce on our notes. Our research is read on a free-to-access basis by institutions across the globe. It has been accessed by more than 5,000 professional investment institutions since MiFID II was introduced and many other market participants including private investors, sell side, advisors and press. The MiFID II rules make provisions for certain content and services to be received by institutional investors without the requirement for payment under the inducement rules. The list includes:

  • Written research that is paid for by the issuer to promote a new issue
  • Written research where there is a contractual engagement to produce this written content on an ongoing basis where the relationship between the issuer and the research provider is clearly disclosed and is made widely available to the general public.
  • Brief, unsubstantiated summaries on company results and upcoming releases and events.
  • Macroeconomic and fixed income research that is freely disseminated with information that is generic in nature.
  • Investor roadshows that are organised by an investor relations officer, or where the issuer pays a third-party provider to organise a roadshow that is made widely available to institutional and other investors.

We do not seek payment from the asset management community and do not have any execution function. Investors can continue to receive our research under the new MiFID II regime without the need for a contract for services to be put in place. This applies to all forms of transmission, including email, website and financial platforms such as Bloomberg and Refinitiv.

We highlight the following to recipients of our research and attendees of roadshows:

  • We do not conduct any execution business, hence we cannot induce our readers to trade with us.
  • Our content is disseminated widely and made freely available to the public through a range of different channels.
  • We do not seek any payment from our readers for our research.

Further clarification was provided by the Andrew Bailey’s keynote speech on MiFID II at the European Independent Research Providers Association:
Other potential unintended consequences

Many have expressed concerns about the potential negative impact of the new rules on the research coverage of smaller companies and the liquidity of their shares on secondary markets.

To ease this potential impact, we took certain steps ahead of MiFID II by:

  1. allowing free distribution of research that supports capital raising events;
  2. allowing issuer-sponsored research – an important source of coverage for smaller companies – to be freely circulated; and
  3. clarifying that research made publicly available cannot be an inducement.

Since implementation, we have watched for changes in coverage of smaller companies.

I think the evidence is, so far, inconclusive, and does not suggest the dramatically negative impact that some predicted.

Data for the 2015-2018 period show that analyst coverage levels on the LSE’s Main Market and on the AIM have remained broadly consistent.

Similarly, LSE order book data for 2018 point to a material increase in trading volumes between 2018 and 2019, especially for small caps, suggesting liquidity has been maintained in the market.”