U.S. and European banks are spending a total of as much as $20 billion a year on technology to enable fixed-income dealers to comply with new regulations such as MiFID II, according to a report by an advisory firm.
As banks divert their attention and available funds to regulatory burdens, fixed-income traders have become less able to "effectively service" their clients, hurting profitability, Greenwich Associates said in the study, which was conducted in the second quarter and published Wednesday. Some 94 percent of the 46 sell-side traders participating said they're spending more time speaking with compliance.
Under MiFID II rules, which take effect in January, traders in the European Union will have to demonstrate they're executing clients' trades at the best prices and in the right venues. Tracking those details is faster and cheaper when the trades are done by computer and with the help of the technology.
"MiFID II is forcing dealers to upgrade their technology," said Kevin McPartland, head of Greenwich Associates market structure and technology research.
