The world’s biggest banks may lose as much as 15 per cent of their revenue from trading stocks in Europe as a result of new rules overhauling the industry that take effect next month, according to research firm Coalition Development.
Total revenue from corporate and investment banking across Europe, the Middle East and Africa may slide 2.6 per cent as a result of the revised Markets in Financial Instruments Directive, or MiFID II, including the slump in cash equities, the research shows. Fixed-income trading and banking, which account for the vast majority of revenue, will fall 4.2 per cent and 1.7 per cent respectively under the rules, Coalition said.
Many companies are unprepared for the impact of MiFID, even as the sweeping overhaul of financial rules threatens to upend business models and add to legal and regulatory costs, analysts have said. The regulations could compound the challenges faced by executives at lenders including Deutsche Bank, Credit Suisse Group and Barclays, who are already struggling to boost revenues in an era of negative interest rates and low volatility.
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“Cash equity revenue will decline across the board. Research will be hardest hit as the buy side will cut how much they pay the industry,” said Eric Li, research director at Coalition. At the same time, the shift to alternative venues will increase banks’ costs, he said. “We will see very painful conversations with banks trying to recover some of these costs via higher fees from their clients.”
The decline may take place over two years, according to the Coalition report. The overall impact on the new rules on banks is limited, Coalition said, because cash equities represents just a small part of most companies’ revenue.
MiFID will force buy-side firms to pay for research separately, rather than receiving it as part of a bundle of services in return for paying trading commissions, in an effort to ensure fund companies act in their clients’ best interests and aren’t swayed by inducements. The change could reduce incentives for investment companies to trade and prompt them to shop around for the best prices.
The stakes are highest for cash equities because research and trading services have historically been more closely intertwined than in fixed income. European institutions paid about US$2.9 billion in cash equity commissions for the 12 months through June, according to Greenwich Associates. Of that amount, 46 percent was used to pay for equity research and advisory services. Banks including JPMorgan Chase & Co have been slashing fees on research to grab a bigger piece of a shrinking pie.
Cash equities, the trading of common stock on public exchanges, has generated about $6.9bn of revenue for the world’s biggest banks so far this year, Coalition data show. Many banks already struggle to turn a profit from the cash equities business, Andrea Orcel, head of investment banking at UBS Group, said at an event in London earlier this year. MiFID will make that task harder and is likely to create “concentration” in the market, he said.
“If you think about cash equities, people say the top five clearly break even and everyone else doesn’t,” said Ms Orcel. “I actually think it’s inside the top five, the top five doesn’t break even. Now you look at this environment. You’ve just moved the bar up.”
Most sought after workplace benefits in the UAE
- Flexible work arrangements
- Pension support
- Mental well-being assistance
- Insurance coverage for optical, dental, alternative medicine, cancer screening
- Financial well-being incentives
What the law says
Micro-retirement is not a recognised concept or employment status under Federal Decree Law No. 33 of 2021 on the Regulation of Labour Relations (as amended) (UAE Labour Law). As such, it reflects a voluntary work-life balance practice, rather than a recognised legal employment category, according to Dilini Loku, senior associate for law firm Gateley Middle East.
“Some companies may offer formal sabbatical policies or career break programmes; however, beyond such arrangements, there is no automatic right or statutory entitlement to extended breaks,” she explains.
“Any leave taken beyond statutory entitlements, such as annual leave, is typically regarded as unpaid leave in accordance with Article 33 of the UAE Labour Law. While employees may legally take unpaid leave, such requests are subject to the employer’s discretion and require approval.”
If an employee resigns to pursue micro-retirement, the employment contract is terminated, and the employer is under no legal obligation to rehire the employee in the future unless specific contractual agreements are in place (such as return-to-work arrangements), which are generally uncommon, Ms Loku adds.
The specs
Engine: 3.0-litre six-cylinder turbo
Power: 398hp from 5,250rpm
Torque: 580Nm at 1,900-4,800rpm
Transmission: Eight-speed auto
Fuel economy, combined: 6.5L/100km
On sale: December
Price: From Dh330,000 (estimate)
NYBL PROFILE
Company name: Nybl
Date started: November 2018
Founder: Noor Alnahhas, Michael LeTan, Hafsa Yazdni, Sufyaan Abdul Haseeb, Waleed Rifaat, Mohammed Shono
Based: Dubai, UAE
Sector: Software Technology / Artificial Intelligence
Initial investment: $500,000
Funding round: Series B (raising $5m)
Partners/Incubators: Dubai Future Accelerators Cohort 4, Dubai Future Accelerators Cohort 6, AI Venture Labs Cohort 1, Microsoft Scale-up
Auron Mein Kahan Dum Tha
Starring: Ajay Devgn, Tabu, Shantanu Maheshwari, Jimmy Shergill, Saiee Manjrekar
Director: Neeraj Pandey
Rating: 2.5/5
Killing of Qassem Suleimani
The candidates
Dr Ayham Ammora, scientist and business executive
Ali Azeem, business leader
Tony Booth, professor of education
Lord Browne, former BP chief executive
Dr Mohamed El-Erian, economist
Professor Wyn Evans, astrophysicist
Dr Mark Mann, scientist
Gina MIller, anti-Brexit campaigner
Lord Smith, former Cabinet minister
Sandi Toksvig, broadcaster
The specs
Engine: 4.0-litre flat-six
Torque: 450Nm at 6,100rpm
Transmission: 7-speed PDK auto or 6-speed manual
Fuel economy, combined: 13.8L/100km
On sale: Available to order now
Volvo ES90 Specs
Engine: Electric single motor (96kW), twin motor (106kW) and twin motor performance (106kW)
Power: 333hp, 449hp, 680hp
Torque: 480Nm, 670Nm, 870Nm
On sale: Later in 2025 or early 2026, depending on region
Price: Exact regional pricing TBA
The biog
Favourite food: Tabbouleh, greek salad and sushi
Favourite TV show: That 70s Show
Favourite animal: Ferrets, they are smart, sensitive, playful and loving
Favourite holiday destination: Seychelles, my resolution for 2020 is to visit as many spiritual retreats and animal shelters across the world as I can
Name of first pet: Eddy, a Persian cat that showed up at our home
Favourite dog breed: I love them all - if I had to pick Yorkshire terrier for small dogs and St Bernard's for big
AIDA%20RETURNS
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How to register as a donor
1) Organ donors can register on the Hayat app, run by the Ministry of Health and Prevention
2) There are about 11,000 patients in the country in need of organ transplants
3) People must be over 21. Emiratis and residents can register.
4) The campaign uses the hashtag #donate_hope
Napoleon
%3Cp%3E%3Cstrong%3EDirector%3C%2Fstrong%3E%3A%20Ridley%20Scott%3Cbr%3E%3Cstrong%3EStars%3C%2Fstrong%3E%3A%20Joaquin%20Phoenix%2C%20Vanessa%20Kirby%2C%20Tahar%20Rahim%3Cbr%3E%3Cstrong%3ERating%3C%2Fstrong%3E%3A%202%2F5%3Cbr%3E%3Cbr%3E%3C%2Fp%3E%0A
TRAP
Starring: Josh Hartnett, Saleka Shyamalan, Ariel Donaghue
Director: M Night Shyamalan
Rating: 3/5
COMPANY PROFILE
Name: HyperSpace
Started: 2020
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
Based: Dubai, UAE
Sector: Entertainment
Number of staff: 210
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
