The price of corporate research published by independent providers dropped 8 per cent last year as cut-throat competition from large investment banks continued to squeeze revenues for smaller analytics companies.
Independent research providers have complained to regulators in the UK and Europe that their businesses are being hurt by what they say is unfair competition after large banks slashed the cost of research services in recent years.
“Unfair, anti-competitive pricing by investment banks remains the single most fundamental problem for independent research providers. Seventy-eight per cent of independent research providers believe that urgent regulatory action is needed to address predatory pricing by investment banks,” said Steve Kelly, special adviser at Euro IRP, the trade body which represents 70 independent research providers.
Euro IRP estimates that research pricing by independent providers has on average declined by about 40 per cent since the introduction of the sweeping package of European market rules, known as Mifid II, in 2018.
Under Mifid, asset managers must split the cost of buying research from any trading costs incurred for buying and selling securities, an arrangement known as “unbundling”. This was designed to prevent investment banks and brokers from offering research to portfolio managers as an inducement to direct trading orders to them.
Investment banks responded by slashing the price of their research. JPMorgan, for example, now offers asset managers access to all of its written research output for an annual fee of $10,000, with face-to-face meetings with analysts costing more.
Large banks which primarily earn revenues elsewhere can absorb this drop but smaller, research-focused companies have been left exposed. Some independent providers also believe that investment banks are using research as a loss leader, funding this activity from other parts of their business in order to facilitate the selling of other more lucrative services to clients.
“Research for investment banks is a route to clients to whom many other, much more profitable services can be sold,” said Kelly.
JPMorgan declined to comment.
In April, the Financial Conduct Authority proposed that research produced by independent providers should be exempted from the Mifid rules covering inducements that apply to investment banks.
Prices charged per research assignment vary enormously but Kelly said “declines and ongoing pressure” were widely reported by Euro IRP members, particularly smaller providers.
Richard Kramer, founder and chief executive of Arete Research, an independent provider, said he believed that many investment banks were pricing research services below cost.
“Almost all of the investment banks are cross-subsidising the cost of their research services from other activities,” said Kramer. He also questioned the value of some research. “How are investors well served when 80 per cent of the recommendations by bank analysts are ‘buys’? The research produced by the sycophants and stenographers at investment banks is part of a promotion machine, advertising other banking services,” he said.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
