Commcise, a commission management provider which has been expanding its research evaluation tools, is launching a new solution designed to help brokers manage their fees associated with research. The move, like the launch by competitor Castine of a similar product, reflects how convoluted research pricing has become post-MiFID II.
The new service, CommciseCS [CS stands for Client Strategy, the groups within banks which usually must contend with research fees], is a cloud-based platform which allows research providers to review, price and publish research event interactions and model asset manager clients’ profitability with various pricing and costing overlays.
The offering organizes client interaction data collected by the research provider, distributing the data to clients with the required frequency and granularity. Its contract management module tracks pricing relationships which are becoming increasingly byzantine, according to Commcise CEO Amrish Ganatra. The buy-side is more often negotiating service levels on a team-by-team basis, where one team may wish only sales support with no analyst access whereas another may only want access to a few analysts in specific sectors.
The software contains budget and receipt management which allows the capture of projected and actual revenues from each client. The pricing and valuation engine enables modelling of theoretical and actual research service prices and costs for each client taking into account subscriptions for low-touch written research and the generally more lucrative high-touch fees based on consumption. These elements can be fed into a broader set of client profitability analytics.
The new service was inspired by the company’s buy-side contract management capabilities which were launched last fall. Commcise realized it could offer much of the same functionality to the sell-side that it had already developed to help asset managers manage and value research consumption.
The company’s revenue model is based on recurring software license fees for its various modules: CommciseBuy. CommciseSell, a version for IRPs and now CommciseCS. At the end of September 2018, Annual Contract Value (ACV) stood at £3.7 million ($4.7 million), more than 6 times the ACV generated in 2016. Most of Commcise’s recent growth has been with US clients not European clients, totaling around 60 buy-side clients currently split approximately 50/50 between Europe and the US.
Commcise sold in December 1018 a majority share to Amsterdam-based European exchange Euronext for £27 million ($34 million) representing 78% ownership.
The firm was founded in 2013 by five technology consultants who decided to productize custom commission management software they had developed for London-based asset managers. The core buy-side product provides automated reconciliation, invoice management, commission budgeting, service history or consumption tracking, valuation engine, research evaluation (“voting”), commission management, share of wallet reporting and fund-level accounting functionality. Because it was developed for the buy side, the platform is integrated with trade execution platforms facilitating the management of commissions at a fund level.
MiFID II promised more transparent research pricing but instead it generated more complex and obtuse research fees. As elaborated in our latest research pricing study, investment banks reacted to MiFID II by assigning subscription fees to written research (often at a low price point), while negotiating premium fees for high touch services such as access to analysts. Although the strategy of negotiating one-on-one premium fees with each client has been largely successful in maximizing research revenues for banks, it is difficult to administer, especially with the added burden of contracting and invoicing research services. In many respects, institutional sales staff have become administrators, alienating some.
Many banks have been upgrading their CRMs to accommodate their new pricing regimes and maintain the sort of information that Commcise is seeking to optimize. Many different outsourced solutions are providing CRM support, such as Singletrack and research authoring platforms like Analec, Blue Matrix and Quark. However, Commcise and its competitor Castine seem to be the first to launch software directly targeting research pricing as a stand-alone activity.
Commcise’s version is informed by its obverse, its buy-side contract management software, which gives it a potential leg up in developing a sell-side counterpart. Research pricing is messy and getting messier, so tools like those being developed by Commcise and Castine appear to be well timed.