MiFID cost disclosure deadline represents a ‘stark reality’
01 April 2019 London
Image: Shutterstock
John McGrath, CRO at BidFX, a TradingScreen company, explained that the second Markets in Financial Instruments Directive (MiFID II) cost disclosure deadline on Monday 1 April, “represents the stark reality of an investment management world underpinned by intense investor and regulatory scrutiny into costs”.
It was noted that under the next leg of regulation, asset managers must disclose ex-post costs and charges to clients during Q1 2019.
This will represent a challenge, as the Financial Conduct Authority (FCA) has not provided a template for firms to work from.
According to McGrath. , on top of the bid/offer price, asset managers face the unenviable task of uncovering implicit costs that could include commissions and taxes.
McGrath commented: “This presents somewhat of a problem, particularly as what is considered ‘best execution’ is no longer necessarily obtained by trading at the best price, but at the price that represents the best value to the fund. But if these implicit costs can’t be displayed clearly to investors, how does a fund manager harbour any hopes delivering the best possible value?”
He added: “Asset managers have a heavy workflow-driven approach across departments and clients throughout the whole transaction costs process.”
“And while transaction reporting is unquestionably becoming more transparent and much more sophisticated, asset managers still have to evolve at a quick pace beyond this deadline to meet continued regulatory and investor demands.”
It was noted that under the next leg of regulation, asset managers must disclose ex-post costs and charges to clients during Q1 2019.
This will represent a challenge, as the Financial Conduct Authority (FCA) has not provided a template for firms to work from.
According to McGrath. , on top of the bid/offer price, asset managers face the unenviable task of uncovering implicit costs that could include commissions and taxes.
McGrath commented: “This presents somewhat of a problem, particularly as what is considered ‘best execution’ is no longer necessarily obtained by trading at the best price, but at the price that represents the best value to the fund. But if these implicit costs can’t be displayed clearly to investors, how does a fund manager harbour any hopes delivering the best possible value?”
He added: “Asset managers have a heavy workflow-driven approach across departments and clients throughout the whole transaction costs process.”
“And while transaction reporting is unquestionably becoming more transparent and much more sophisticated, asset managers still have to evolve at a quick pace beyond this deadline to meet continued regulatory and investor demands.”
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