When news of research costs tied to new mifid ii regulations was initially leaked, it caused gasps among certain market participants. $455,000 was one opening bid for an entire bank’s research library, but if you want to speak with an analyst that might cost an extra $5,000 per hour, with some analysts pricing time at $10,000 per phone call. While this grabbed the headlines, it also garnered snickers. With only 1% of research actually read, could hedge funds and institutional investors justify such costs? With the cost high, others wondered if they might be able to pick and only pay for those analysts they viewed as most valuable? These questions may be answered to a degree with JPMorgan Chase’s recent pricing package.
JPMorgan offers low-cost research with ability to customize options
With a European ban on brokerage commission subsidized research on the horizon, JPMorgan is rolling out both a low-cost package, Bloomberg first reported, citing people with knowledge of the matter.
The largest US bank, with $2.39 trillion in assets, is offering read-only access to its equity research for $10,000 per month. Investors will be able to access Morgan Markets, the only stock analyst portal, but for that price will not be given access to speak with analysts, go to conferences or obtain research from other analysts, such as JPMorgan derivatives analyst Marko Kolanovic. The bank also offers investors the ability to customize the research package based on individual needs.
The $10,000 price tag makes JPMorgan the lowest price to date for bank research to date. Barclays, which initially floated the $455,000 “gold” package offer, also put in play a $39,000 to access limited research with reduced benefits. The wide spread between the product offerings indicates a market may not have been found, as banks and asset managers are reported to be haggling over the price.
JPMorgan, for its part, is also considering offering a $50,000 per year package for basic fixed-income, with the potential to customize the offering to meet individual needs.
A source who worked at Highbridge years ago, told ValueWalk that JPMorgan started was already preparing for mifid ii regulations at that time.
With mifid ii regulations Industry is consolidating, says small cap broker, while others see opportunity
In order to comply with MiFID II regulations, which go into effect January 3, 2018, brokerage firms offering research to asset managers in exchange for their transactional commission business must charge separately for the research and then track its usage.
The impact of mifid ii regulations on large banks and brokerage firms is yet to be fully realized, but Peter Sidoti, a small brokerage that bundled his small-cap stock research to attract clients, says the regulations are creating significant industry consolidations.
Blair Livingston, CEO of Street Contxt, a firm that distributes and monitors institutional research, sees things differently.
The MiFID II regulations are going to create an opportunity for the best research to rise to the top while providing research consumers the ability to actually see how research is being consumed, he told ValueWalk. Street Contxt is backed by numerous hedge funds and institutions, including Point72 Ventures and Portag3.
“Institutional investors want the best research but they also want to gather intelligence based on how that research is being consumed,” Livingston said, pointing to a dynamic marketplace where the best analysts will rise to the top.
While the brokerage end of the business is redefining its product offering, many asset managers, including Vanguard and JPMorgan’s Asset Management division, which is separate from the firm’s brokerage, have announced plans to pay for their internal research out of the firm’s net profits, not subtracting from investor returns.