Markit has integrated its commission management and broker voting software according to a recent article in Wall Street & Technology. The timing of Markit’s release is aided by recent UK regulatory activity, but the longer term future for commission management is clouded by pending European regulation.
In 2011, Markit launched a commission management platform with the backing of a consortium of major investment banks. The platform allows asset managers to reconcile their trading commissions with multiple counterparties and pay for research and brokerage services from the platform.
Markit says its commission management platform currently has 130 asset manager clients with 35 brokers using the platform. Convergex, which acquired Cogent Consulting’s commission management platform in 2009, claims over 500 buy side clients and 144 participating brokers.
Markit’s newly integrated system allows asset managers to compare broker vote results to actual commission payments to look for brokers which are overpaid or underpaid relative to the rankings assigned as part of the vote.
The enhancement is part of larger integration plan announced when Markit hired a new manager, Tom Conigliaro, to head a newly created Trading Services group at the beginning of 2014. Conigliaro’s plan is to integrate commission management, broker voting with trade cost analysis (TCA) and fundamental trading tools. Next on the agenda is integrating Markit’s Calendar module, which notifies investors about conferences, events, analyst one-on-ones, and non-deal roadshows.
Markit’s goal is to create a trading dashboard with alerts such as when transactions hit a certain limit, or liquidity estimates have been breached, for example. One such alert could be budget limits on commissions allocated to specific brokers based on the broker vote system.
The UK Financial Conduct Authority (FCA) has recently implemented regulation requiring asset managers to take steps to better manage client commissions allocated to the purchase of investment research. Markit’s alignment of its broker voting and commission management capabilities is consistent with the recent FCA directives, which is encouraging investors to manage research-related commissions more carefully.
However, the FCA recently threw its support behind pending European regulation which would effectively ban the ability to pay for research through client commissions. If the current draft language in MiFID II is ultimately adopted, the need for commission management tools will diminish, at least in Europe. In the meantime, Markit continues to move forward with its integration plans.