U.K. Bond Investors Hail Watchdog’s Plan to Axe Costly Research

Fixed-income investors praised plans by the U.K.’s financial watchdog to do away with rules that forced them to pay for research, a change that could save end-investors like pension funds millions of pounds every year.

The Financial Conduct Authority proposed exempting research on fixed-income -- as well as currency and commodities -- from the restrictions imposed by the EU’s MiFID II reforms. Investors complained that the rules cost them money without much benefit.

“We would welcome the change. The rule always seemed more designed for equities and just led to more costs being incurred for us, mostly unnecessarily,” said Azhar Hussain, head of global credit at Royal London Asset Management. “Fixed income got dragged along.”

The revision, which marks the FCA’s first efforts to rewrite the rules since the U.K. left the European Union, applies to one of the most controversial parts of the MiFID II regulations. The U.K. was a strong backer of the rules when the law was originally written.

“It’s ironic that we are dropping it,” Hussain said. “It was the U.K. that had pushed this agenda on Europe.”

The consultation launched on Wednesday and the FCA is asking for comments on consultation paper by June 23. The review is likely to take a few months before any formal decision is taken.

The changes would also include analysts’ work on firms with a market value less than 200 million pounds ($278 million).

“These proposed changes illustrate the inevitable complexities that arise whenever there is a growing divergence of rules across different jurisdictions,” said Daniel Carpenter, head of regulation at Meritsoft.

©2021 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.