MiFID II takes effect
The Markets in Financial Instruments Directive II went live across the European Union on January 3, 2018, after seven years of drafting and a one-year delay. The directive ran to 1.7 million paragraphs of rules, the most ambitious financial-services regulation in EU history. It required transaction reporting on roughly 28,000 fields per trade, mandated unbundled research payments (forcing investment banks to charge separately for analyst reports rather than bundling them with trading commissions), and tightened best-execution requirements across European venues. The unbundling rule alone reshaped the global research industry: research budgets at major US asset managers fell roughly 30 percent in the following two years, and several hundred sell-side analysts lost their jobs.
MiFID II's research-unbundling provision was the most controversial part for the asset-management industry. Before MiFID II, brokers gave research away as part of the trading relationship; the 'soft dollars' that paid for it were largely invisible. After MiFID II, research had to be priced explicitly, and most fund managers concluded they were paying far too much. The unintended consequence was a sharp drop in coverage for small-cap stocks, which had relied on broker research to be visible to institutional investors.
06 · Dodd-Frank
The risk was named in 1994. Brooksley Born, chair of the CFTC, warned that unregulated derivatives could threaten the financial system. She was overruled by Greenspan, Rubin, and Summers. In 2008 the thing she warned about happened. In 2010, two years after the crisis, Congress passed Dodd-Frank.
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