The Great MiFID II Reshuffle: What is “Quality” Research and How to Produce More of It Despite the Squeeze on Budgets?


The following is a guest article by Jack Kokko, Founder and CEO of AlphaSense, creators of an AI-powered search engine.

With the effective date of MiFID II around the corner, both the buy- and sell-side are challenged to rapidly evolve the model of producing and consuming research. Buy-side firms need greater visibility into the value of the sell-side research they consume in order to spend “smarter” on research, as compelled by new regulations. And sell-side institutions need smart ways to thrive despite the expected reduction in research budgets and the resulting competition for wallet share.

There is a great need for better data-driven insights, so both sides can gain a more granular understanding of the value of published research. If a buy-side firm can understand which brokers deliver the most valuable insights for its unique needs, it can direct its spending accordingly and avoid losing those insights even with tighter budgets.

And if a sell-side firm can publish research targeted to the buy-side’s needs, and do its research more efficiently, it can prevail in the great MiFID-driven reshuffle.

All-You-Can-Eat Research

In comparison to other areas of capital markets, the legacy processes used to create, publish and disseminate research have seen relatively little innovation. A flood of information continues to be sent through email and research aggregators, leaving it to the buy-side consumers to filter through the noise of “all-you-can-eat” research. The sell-side gains little insight into what part of the research delivered value, and what was largely ignored.

The long-established model in the industry has provided the sell-side with embargoed readership data on reports that were opened, but has not provided any visibility as to which reports generated true engagement and which ones got at best a quick glance. Without knowing which part of the research effort produced the most engagement and value, it is difficult to tell where to invest and where to cut spending.

The buy-side needs better consumption analytics to optimize ROI on its research expenditure mix, and the sell-side needs better analytics on the aggregate consumption of its research to optimize its production to meet the needs of the buy-side at a more granular level.

Better Measurement Tools

The utility of readership reporting for both the buy- and sell-side would be greatly improved by moving beyond reporting “clicks” to granular analytics based on true engagement.  Precision would be gained by measuring things such as actual time spent on a report, pages read and interactions within the document itself. Rather than hoping for users to manually give star ratings to a report, why not automatically measure which reports deserved a five-star rating based on actual engagement?

By aggregating engagement data to the company, sector and thematic level, suddenly it becomes clear which parts of the overall research mix are delivering the most value. By understanding what is viewed as quality, both sides will be better equipped to understand the research mix that serves their needs, resulting in a more data-driven broker vote and research procurement process.

Evolving Future for Research – Doing More with Less

As MiFID drives intensified competition for the buy-side’s research wallet, sell-side firms are considering whether to double down – or cut down – on their research departments. There is a third option: by targeting research better to the buy-side’s needs and producing it more efficiently by investing in technology – doing more with less.

The latest research technology can help sell-side analysts more effectively research cross-sectional themes, monitor new information and get to the market first with unique insights without fear of missing something significant. Delivering quality output requires efficiently cutting through vast volumes of information across filings, transcripts and industry periodicals to deliver differentiated perspectives on the themes and factors impacting companies, instead of echoing company announcements.

By leveraging data-driven insights on research consumption and engagement, coupled with new research technology designed to improve analytic efficiency, firms on both the buy- and sell-side can better handle MiFID requirements and upgrade their research capabilities at the same time.


About Author

Sandy Bragg is a principal at Integrity Research Associates. He has over thirty years experience as an investment research professional. Prior to joining Integrity in 2006, he was an Executive Managing Director at Standard & Poors, managing S&P’s equity research business and fund information properties. Sandy has an MBA from New York University and BA from Williams College. Email:

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