SI et leviers technologiques

Online research marketplaces: new FinTech companies emerging after the unbundling of research costs imposed by MiFID 2

The EU’s Markets in Financial Instruments Directive (MiFID 2) and Markets in Financial Instruments Regulation (MiFIR) came into force on January 3, 2018, promising to shake up banks and most other financial institutions. This article focuses on the impact of article 13 of the directive, which fundamentally challenges the prevailing model for funding financial analyses and research, paving the way for a new type of FinTech company.


Up until now, research was mainly provided free of charge to clients by brokers and corporate and investment banks on the sell side, which in return hoped to be chosen by buy-side clients to execute their orders. In this case, the cost of the research would be covered by transaction fees. Starting on January 3, 2018, research providers must now explicitly charge for this service. Consumers of the research, mainly investment management companies, must now either pay for the research directly or invoice it to the end-investor through a dedicated “research purchase account” (RPA).


Since 2015, we have seen the rise of online research marketplaces (ORMs), a form of FinTech company competing on the financial analysis and research segment (e.g. Alphametry, ResearchPool and SeedAlpha). These virtual platforms connect research producers with consumers. However, that is not all they do. The value they offer goes well beyond:

  • Facilitated access to a wide range of providers, and in particular independent research providers (IRPs)
  • Research quality assessment and supplier rankings
  • The ability to select the most relevant research reports in a given area
  • Optimized research buying, by identifying the most relevant reports for the investor’s profile, with more granularity
  • An improved client experience, with customizable and more intuitive interfaces
  • Transparent, flexible invoicing: annual subscriptions or unit payments

These new FinTech companies are seeing a vast market open up: although MiFID 2 only applies to European clients, the most likely scenario is that this new transparency model imposed by the EU regulator will be adopted worldwide. This is forcing investment management companies to rethink their research funding models.


MiFID 2 will speed up rationalization in the research market, which has already declined significantly over the last few years: McKinsey estimates a 30% or $1.2 billion cut in research budgets at corporate and investment banks. There is little doubt that research departments will disappear at corporate and investment banks, since few investors will continue to pay for generalist research when it becomes a cost center. Only research that offers real value will continue to attract them.


Interest in online research marketplaces is therefore set to grow: with the drop in budgets for purchasing financial analyses, investment managers, particularly those interested in very specific markets such as SMEs, will want access to sector specialists. ORMs will be in the best position to bridge the gap between investors and specialist niches.


It is easy to see why the quality of research reports is becoming the main purchasing criterion, and here again, ORMs are meeting investors’ needs by introducing very strict quality processes for their analyses.


By creating digital platforms to connect investors with analysts and specialists, ORMs have anticipated the impact of MiFID 2. They will now help companies in the financial sector make the transition from “free” research to a context where real value comes at a cost that must be carefully managed.


First published in FinTech Mag