MiFID II Unbundling Relief Period Extended to 2023 by SEC

The US Securities and Exchange Commission has granted a three-year extension to the MiFID II relief period for American firms.

The SEC will allow US brokers to continue bundling execution and research payments for another three years. In October of 2017, the SEC published a ‘no-action letter’, stating that American firms did not need to actively adhere to MiFID II’s unbundling guidelines. This letter was due to expire in July 2020. 

This latest statement by the SEC extends this relief period by three years. This means that, until July 2020, US broker-dealers will not be faced with enforcement action for receiving payments in dollars or through research payment accounts from clients that are subject to MiFID II. 

MiFID II’s unbundling guidelines state that payments for execution and research from third-parties must be separated, or ‘unbundled’. This was implemented in an attempt to protect investors and increase market transparency. While these rules have only been enforced in Europe, a number of Global institutions have chosen to implement the guidelines as well.

When asked to explain his decision, Jay Clayton, Chairman of the American securities watchdog, stated that the SEC needed more time to evaluate the longterm impact of MiFID II’s unbundling guidelines. 

‘The impacts of MiFID II are evolving, as EU authorities and regulators in individual EU member states evaluate its effects and consider whether to modify their rules’, stated Clayton. ‘Today’s extension will allow our staff to continue to monitor the evolving impact of MiFID II and evaluate whether any additional guidance or Commission action is appropriate. In this regard, our staff is focused on ensuring that market participants have flexibility and choice in how they pay for research’. 

Despite Clayton and the SEC’s hesitancy, there is some reason to believe that MiFID II’s unbundling guidelines have been successful. In a report published by the FCA in September 2019, it was claimed that MiFID II’s unbundling rules ‘have improved asset managers’ accountability over costs, saving millions for investors’. 

There is a fair amount of support for the unbundling rules in America as well. According to a survey by TABB Group, only 33% of large US-based buy-side firms were still bundling research and execution payments. They also found that the buy-side in the US are increasingly in favour of implementing the unbundling rules.


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