MiFID II reducing volume & quality of research on small and mid-size companies while negatively impacting liquidity

20th April 2018

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Following the implementation of MiFID II in January 2018, a new survey reveals that UK fund managers believe the more stringent financial regulations are having a detrimental impact on small and mid-size quoted companies, both in terms of their research coverage and liquidity in their shares.

According to the survey of 100 UK-based fund managers, carried out for the Quoted Companies Alliance (QCA) and Peel Hunt by YouGov, nearly two-thirds (63%) of fund managers see the overall impact of MiFID II to be negative. 

70% of UK fund managers said they think MiFID II will result in less research being produced on small and mid-cap companies in the future, with half (48%) stressing that they already see less research being published on these companies today. Meanwhile, 45% said they think MiFID II will also lead to a deterioration in the quality of research on small and mid-cap companies, with 74% saying the new regulation will lead to corporate websites becoming increasingly important sources of company information for investors.

As a direct impact, the majority of fund managers (54%) said they believe that MiFID II will also negatively impact the liquidity of shares in mid and small-cap quoted companies, with only 16% saying they think it will have a positive effect in this area. 

Despite the anticipated reduction in research volume and quality post-MiFID II, 54% of fund managers confirmed that they have not reduced their research payments to date. However, 73% believe that it will lead to a reduction in the number of broking houses in the long term.

Tim Ward, Chief Executive of the Quoted Companies Alliance, said:
“MiFID II is the single most impactful change on the public markets for the last 10 years. The unintended consequences are now becoming a reality and market change is inevitable. 

“MiFID II is causing everyone to consider their relationships with each other. Brokers are in the middle of this and it is clear that having the right business model, optimising interaction with both investors and companies, is essential for their future.”

Steven Fine, CEO of Peel Hunt said:
“As we warned prior to the implementation of MiFID II, today’s research confirms that the new regulation is having a detrimental impact on small & mid-cap quoted companies. The reduction in quality research coverage on these businesses is of most concern, as it’s impacting their visibility in the market and restricting liquidity in their shares, which will ultimately hinder their ability to access capital for future growth. 

“We fully expect consolidation in the broking industry to accelerate as the new regulatory environment puts further pressure on research revenues going forward.”

Find the full survey here: The New World of MiFID II - Unintended Consequences: The QCA/Peel Hunt Mid & Small Cap Investor Survey 2018


Between 1st February and 9th March, YouGov conducted an online survey of 100 UK based fund managers to quantify and build on the insight gathered from the initial qualitative phase. The survey lasted approximately 10 minutes and was completed on YouGov’s online platform. All data was collected confidentially. 92% of the sample manage equity funds; AIM (43%) and mid & small-caps (27%) are their main focus. 48% of the sample manage funds of less than £500m and the remaining 52% manage funds of more than £500m.

Between 28th November and 20th December, YouGov also interviewed 11 fund managers by telephone to get a temperature check on the mid and small-cap sector. The quotes that feature throughout this document are taken from these interviews.

Download the press release here (pdf)

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