City broker Peel Hunt has set out its plans to cope with the European Union's second Markets in Financial Instruments Directive (Mifid II), which will entail building an internal taskforce comprising up to 10 per cent of the firm's 200 staff.
The move, which Peel Hunt hopes will "support clients through this period of major change", shows just how much brokers are worrying about the new legislation.
A report last week from capital markets consultancy Tabb Group said Mifid II would cause a proliferation of systematic internalisers (investment firms and banks which can execute client orders on their own account). This in turn will put pressure on brokers, who will have to assess the whole offering of systematic internalisers to collect, consolidate and manage multiple price feeds and quotes in real-time.
Brokers are also struggling to assess how the new "unbundling" rules will affect them. When Mifid II comes into force, fund managers will have to pay investment banks and brokers directly for analyst research, instead of bundling this cost in with the trading commission.
Most industry players believe this will lead to fund managers cutting down the number of brokers which they call on, as Standard & Poor's believe it could lead to a decline in research spend by up to 30 per cent by 2020.
“Mifid II is set to transform the way that independent research is accessed when it comes into force next year, through tougher scrutiny of research costs for asset managers and declining research spend across the industry, such that only the most relevant analysts in the City are likely to survive," said Peel Hunt's chief executive Steven Fine.
He added that Mifid II was "the most significant regulatory change to impact the financial markets since the Big Bang".