MiFID2 is a gift for European research houses (1/2)

Euro IRP (of which we are a proud member) hosted a meeting with FCA’s boss Andrew Bailey who made a surprising comment: no shrinkage of equity research 14 months into MiFID2. We agree.

Looking at actual live coverage figures (source Bloomberg) before, during and after MiFID2 with the Stoxx600 index as a benchmark, we observe that coverage has not fundamentally decreased, with a net decline of 2.9% between February 2017 and February 2019, for the top 15 research houses*.

Mifid has not hurt the research supply on European equities. However it is clear that the main equity research providers have adopted diverging strategies.

Please note that BofA, CITI, DB and UBS, are not included in this top15 as they no longer give access to their research on Bloomberg.

Here are some key findings:

  • Research offices backed by international CIBs have reduced their coverage for 2 consecutive years: GS, MS, Barclays, SocGen, RBC
  • A decline of all UK flagged houses, Brexit worries may be no stranger to this phenomenon.
  • An expansion of coverage by French and German brokers : Exane, Kepler, Berenberg now clearly in bulge bracket territories for European stocks
  • A clear push from French equity research providers, potentially indicating a fighting mood in a post MiFID and pre Brexit shake-up.The top 15 research providers now concentrate 49% of all the research available vs 44% in 2017.

At the margin, a Franco-German line of alliances may also have emerged:

*The joint research product (Baader Europe) covers 395 Stoxx600 stocks

Stay tuned, more to come on individual stocks and market caps.

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