How should research related to fixed income, currencies or commodities (FICC) be treated for the purposes of the MiFID II inducements restriction for firms providing portfolio management or independent investment advice (Article 24(7) and (8))?

Answer 9

MiFID II inducements restrictions in Articles 24(7) and (8) do not provide any carve out for third party analytical work on fixed income, currencies and commodities (FICC) or other assets. However, depending on its nature, specific material relating to FICC markets may be capable of being either research that would be acceptable if received in accordance with Article 13 of the MiFID II Delegated Directive, or a minor non-monetary benefit under Article 12 of the same.

ESMA acknowledges that the current lack of established market practices and mechanisms for investment firms to pay for FICC research separately from execution costs may limit certain operational arrangements firms can adopt to comply with Article 13. Primarily, FICC markets do not currently have explicit execution commissions and mechanisms that allow research charges to be deducted alongside transaction fees. ESMA notes that firms still have the option to pay for research themselves, or using a research payment account that is funded by a direct charge to the client, which could be facilitated by a third party such as a depositary or custodian, rather than alongside a transaction.