As reported in the media, the QCA welcomes reports that the EU may exempt smaller quoted companies from the MiFID II research unbundling rules in the future.
The QCA is an active member of EuropeanIssuers which has been pushing the EU Commission for this even before MiFID came into effect. QCA Chief Executive Tim Ward was a member of the taskforce for the European IPO Report 2020 which last year provided recommendations to make Europe's public equity markets work better for small and mid-caps. Research was a key issue in that report.
The QCA conducted a survey of small and mid-cap investors and companies towards the end of last year and found that:
- 54% of small and mid-cap companies noticed a decrease in the amount of research produced on their company under MiFID II
- 82% of UK fund managers reported seeing less research being produced on mid and small-caps as a result of MiFID II
- 79% of UK fund managers believe MiFID II has had a negative impact on the liquidity of UK mid and small-cap stocks
The QCA are having constructive discussions on MiFID, and other issues, with UK policymakers. Exempting small and mid-caps in the UK from the unbundling rules would be an obvious step in the right direction. It would result in the wider distribution of small-cap research and incremental liquidity in the markets.
From next year, rules in the UK can be calibrated to suit the needs of the UK more effectively; it's a new regulatory paradigm. We are confident that policymakers in the UK recognise the need to make the equity markets as attractive as they can for small and mid-caps who are so essential for the future of the UK economy.