New regulation spells the end for broker notes
Each weekday morning, shortly after 8am London time, City workers get a cheery "GOOD MORNING" in their inboxes as Anthony Peters's daily note arrives.
In it, the Sol Capital Advisory strategist discusses the previous day's events, economic numbers published or due, and pours scorn on hobby horses including the European Union, central banks and politicians. A similar recipe is used by Bill Blain of Mint Partners, who opens "Blain's Morning Porridge" with a song lyric or quotation, and Deutsche Bank AG's Jim Reid, whose "Early Morning Reid" recounts some part of his home life before turning to the economy, rates, bonds and currencies.
These are just a few examples of the morning-note genre, which is one of the ways investment banks and brokers market their services to potential clients.
In Ireland most notes tend to be more prosaic, but they are a long-standing feature of the market, free to users who sign up to receive them on the assumption that high-quality research notes ultimately bring customers to stockbrokers.
The problem is, under the EU's upcoming Markets in Financial Instruments Directive II (MiFID II), a set of overarching rules for financial services, firms must soon start charging for research - and that may include the morning musings of analysts and strategists.
In the case of stockbrokers, MiFID II aims to unbundle services in order to give clients greater clarity about what they do and don't pay for - and how much they pay.
"MiFID II does allow for what are called minor non-monetary benefits, but this only includes a few, very basic types of informational research," said Hannah Meakin, a financial-services partner in London at law firm Norton Rose Fulbright.
"Certainly, anything that can be described as a recommendation of an investment strategy, or a substantiated opinion or substantial analysis, I think you'd assume is in the investment- research category."
MiFID II is an overhaul of the way markets are overseen. When it comes into force in January, it will impact trading in everything from stocks and bonds to derivatives and commodities as it seeks to increase investor protection and transparency.
"Charging under MiFID is a real, real problem," said Sol Capital's Peters. "Isn't the point of reading research to collect the most diverse range of views on a chosen subject and, hopefully, a few views on some un-chosen subjects too?"