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The MiFID II rules are leading to broader participation in capital markets by Europe’s savers. This will far outweigh the costs, such as the more reduced investment research on small stocks. Recent criticism appears to overlook the broader picture, where the advantages of this revision are starting to become visible.
Early data on the effects of MiFID II indicate that market opening and integration is continuing apace, with further electronification or platform trading in products that had not been within the scope, such as government and corporate bonds, derivatives and exchange traded funds. Banks are also confronted with many more requests for information from clients, as a result of the demand for more transparency on fees and charges, which is where Mifid matters for individuals.
To ensure clarity in fees and to tackle conflicts of interest, MFID II obliges operators to unbundle investment advice from execution. This measure was inspired by the UK’s 2009 retail distribution review and has led to lower charges, an experience duplicated in the Netherlands. An Esma overview revealed that charges on funds reduce returns by up to one-third, and that countries with unbundling requirements, (ie the Netherlands and the UK), see costs of only up to a third of those in the costliest country, Belgium.
Full article on Financial Times (subscription required)