Our Secondary Markets Expert Group contributed to our response to the FCA consultation – CP16/29 Markets in Financial Instruments Directive II Implementation – Consultation Paper III.
We noted that less research and fewer brokers involved in the small and mid-size quoted company market had led to lower liquidity, greater share price volatility and higher bid offer spreads. We commented that this had resulted in higher costs associated with raising finance and reduced institutional access, which could culminate in companies questioning the value of being listed on a public equity market.
Regarding the FCA's proposals relating to funding a research payment account (RPA) by collecting charges alongside transaction costs, we noted that any mechanism that requires research charges deducted through a broker alongside transaction fees or costs to be ceded to an RPA on a daily basis would be very difficult for firms to administer effectively and impose considerable administrative burdens.
Therefore, we asked the FCA to consider only requiring research charges deducted through a broker alongside transaction fees or costs to be ceded to an RPA on a quarterly or, alternatively, a monthly basis.
