Is MiFID II a gamechanger for asset managers or had the game already changed?
It’s pretty clear that the fragmentation of liquidity occurred many years ago and best execution was already a major issue for investment firms long before MiFID II came into force in January 2018. MiFID II’s impact is to ensure that institutional investors that viewed best execution as “nice-to-have”, now regard it as essential. The European Union Directive requires investment firms to take all “sufficient” instead of all “reasonable steps” to obtain, the best possible result for their clients.
Dealing is now so important to investment strategies and so complex that inhouse trading functions are struggling to keep pace. Many investment firms operate with a very slim trading team, which deals securities across multiple asset classes, using multiple data feeds and platforms.
It’s really no longer a one-man job. It’s probably not even a one-team job any more. This is why more and more institutional investors - including larger ones - are outsourcing their dealing to specialist trading providers which not only understand the wide range of securities used today, but are aware of their idiosyncratic needs.