Vince Julier - June 18, 2018
The Financial Times reported today that the Financial Conduct Authority is concerned over the inconsistencies in the interpretation and application of the Mifid II regulations, which came into force at the beginning of the year. This article considers the role of technology in helping to solve the issues that the implementation of Mifid II has created.
Mifid II makes the cost of investment research transparent. It now needs to be separately charged and priced at a level where it does not become an inducement. This has impacted both asset managers and research providers.
Asset managers now pay for research that they previously obtained for free, and many of them haven’t be able to pass on this additional cost. They need good quality research at an affordable price.
On the other hand, research providers, such as investment banks, brokers and independents, are under servere pressure to provide this research at the lowest possible price. However, if priced below cost it could be deemed to be an inducement and fall foul of the regulators.
FREĠNAN believes that technology can help solve these issues, supporting both asset managers and research providers.
FREĠNAN uses artificial intelligence and web harvesting to automatically create data driven, unbiased, high quality predictive company models. These models give new insight into past performance to and predict a company’s future performance.
FREĠNAN’s engine can analyse more data than is humanly possible, is always on-line, always learning, and is unbiased.
Such automation can help research providers lower their costs and allow their analysts to high-grade their input. The compliance department can then demonstrate their research pricing is not below its cost of production. As FREĠNAN’s engine can be uniquely set up for each research provider, combining the unbiased machine learnt models with human experience, each research provider can still compete on providing the most insightful research to their clients.
As for Asset Managers, in addition to supporting the lower cost of research production, FREĠNAN can directly provide asset managers with a cost-efficient, high quality and totally unbiased alternative analysis of a company. This not only gives asset managers new insight into a company’s performance and its possible future performance. It also allows asset managers to focus their limited research budget more efficiently.
FREĠNAN is currently engaged with a number of clients to help solve some of the issues that Mifid II has created, while at the same time giving them an entirely new, powerful class of predictive company models.