The Mifid II Directive – Changing Research Forever


 

Many Institutions are turning to our services because of Mifid II. We are starting a free trial for Institutions now because so many are asking for help because we cover the entire world, do not have any conflicts of interest, and all reports on trading instruments are entirely written by the computer without human interaction. Given the wealth of lawsuits against banks and brokers for trading opposite their own research, the demands for turning to our systems has become exponential. Two of the top 10 banks are now instructing their clients to simply turn to our services. We are now rushing out the first phase of our Institutional service to try to help in this time of regulatory chaos and need. The key – NO CONFLICTS OF INTEREST, and absolute confidentiality with respect to your portfolio.

The Mifid II EU financial market directive is to begin in 2018, and is changing everything. Financial analysts employed by banks and securities brokerage firm are likely to find themselves without jobs. Hundreds are under threat of losing their jobs due to the new regulations taking hold.  Mifid II will change research forever reducing analytical departments on a grand scale. Banks and brokers will have to explicitly reimburse their expenses for the research, which up until now, has simply been part of the trading costs. A significant part the trading costs have been attributable to the work of financial analysts. Someone has to pay for them to write investment studies and letters, and provide advice to clients – asset managers, large investors and wealthy private individuals. The problem has been that such advice is far too often tainted with conflicts of interests and that has led to major lawsuits and big awards to clients. Even back in the 1980s, the top analyst at Salomon Brothers Wall Street investment bank, would come out with some recommendation and his own firm would be on the opposite side of the trade. Those days of conflicts have come to an end.

The banks and brokerage have not charged for these services until Mifid II. Instead, they have included their research costs in the fees for executed exchange transactions. This has given customers the impression that the entire wealth of financial analysis they receive is free. This will all come to an end very abruptly in 2018.

Indeed, this research use to be provided ONLY to our institutional clients when I was a market-maker back in the 1970s to early 1980s. When I announced that I would retire, clients then insisted that they would pay for the research if I kept it going. Clients offered to pay $2,000 an hour just to be able to still talk to me about the markets. The Wall Street Journal heard about it and asked to interview some of our clients to try to understand what was going on. The journalist called me back and was amazed people were paying for research on this scale. He said clients told him they would pay $10,000 and hour. Obviously, speaking directly to clients on a per minute basis every day was grueling, but also limited to the time in a day. Back then, I dared not explain I had a computer that would analyze the world. It was just too far ahead of the technology curve.

Today, Mifid II is changing research completely and forever. So we are stepping up to meet the challenge for this is the only such system in the world that actually writes real reports and does so by analyzing the entire world. In the future, asset managers will rigorously select what they really need from external analysis and consulting. But they have to justify their budgets for research again to their customers who will have to bear these costs.

Mifid II also affects those Swiss institutes which serve clients in EU countries and Liechtenstein as members of the European Economic Area (EEA). American firms doing business in Europe will also have to comply with Mifid II. Even British firms will have to comply because BREXIT will not save them soon enough.

The downside already is that the small and medium-sized asset managers are deciding to operate with significantly less analysis and go at it on their own. There is only one solution going forward. The research has to be automated to survive. There has to be a separation between the analysis and the asset manager, broker, or banker. Only this way will secure the future.

Our Global Market Watch was designed for Institutional Clients. We can create specific version for your portfolio as well. The primary objective if to provide a quick guide to the trends globally on short-term (daily) all the way to strategic long-term (yearly) investment horizons. You can look at your entire portfolio without having to read hundreds of reports and then remember how each analyst used different style to analyze what was their specialty.

This is from our Institutional Service now available on a trial basis for Institutions. There are general sector pages such as this one on stock indexes around the world. You can quickly see the trend and even when contagions start to emerge. This is the tool that will pick up contagions that you need to quickly react to in order to survive what is coming.

You can then drill down on any single market for a detailed history of the GMW and also into the written analysis generated entirely by the computer with no conflicts of interest.

This is the way of the future. The analysis must be independent, free of human bias, and our models have the LONGEST historical record of actually being in use from the 1970s.

If you are an institutional client, it is time to take a step forward into the future. We will provide a free trial so you get up to speed and understand how to use the model because Mifid II comes into play January 2018.

Our services can be tailored to the size of your institution. We can provide access to all your departments or limit it to just a handful of employees. We have the full gambit globally from asset managers to governments looking at this Institutional service around the globe.

Full service Institutional Services can include seats at the WEC and individual board presentations in house dealing confidentially with you own specific issues. Everything always remains confidential and we provide non-disclosure agreements. You do not have to worry about us trading against your portfolio.

 

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