EU and UK move toward reinstating bundled payments in investment research amid market rebound

Andrew Quick, global head of execution at Rothschild & Co Global Markets Solutions, says the investment research market is poised for a marked reversal in 2026 as asset managers move back towards joint, or “bundled”, payments for execution and research. According to Mr Quick, engagement with more than 250 UK and EU asset managers shows “a clear change of trend for a move to joint payments for investment research”, a shift he links to the practical shortcomings of the MiFID II unbundling regime and to recent regulatory moves that restore flexibility.

The change he describes is not happening in isolation. In Brussels, the European Securities and Markets Authority has launched a consultation proposing amendments to the MiFID II Delegated Directive to permit joint payments for execution services and research irrespective of issuer market capitalisation, and to tighten rules on the annual assessment of research quality and remuneration methodologies. According to the ESMA consultation, the objective is to align the legislation with new market options while ensuring that joint-pay models do not impede firms’ ability to meet best-execution obligations.

That regulatory momentum follows concrete legal changes at EU level and in the UK. Directive (EU) 2024/2811 amended the MiFID II research regime to allow firms to choose between unbundled and bundled payment models and removed the previous EUR 1 billion market-capitalisation threshold that had limited bundled payments for smaller issuers. In London, the Financial Conduct Authority finalised rules on 9 May 2025 (policy statement PS 25/4) giving UK fund managers the option to pay for research jointly with execution, subject to prescribed conditions and guardrails, as the regulator seeks to improve the research market while protecting investor outcomes.

Empirical studies help explain why the shift has traction with buy‑side firms. An EU study of MiFID II’s impact found that unbundling reduced research budgets and lowered equity research prices, with the greatest coverage losses felt by small and medium-sized enterprises. Industry data for 2024, meanwhile, points to a first sustained increase in research budgets since MiFID II: Substantive Research reported that US budgets rose by 15% in the first half of 2024 and European budgets by 4%, suggesting demand for external research is re-emerging as asset managers deploy more funds for sourcing differentiated insight.

Market participants stress that any return to bundled payments is being pursued with fresh safeguards and different incentives from the pre‑MiFID era. Craig Butterworth, chief commercial officer at Droit, argues firms are taking a “data-first” approach to regulatory decision-making to avoid the operational and compliance costs that previously accompanied poor upstream data quality. He says leading global financial institutions in 2025 have been redesigning onboarding, new-product approval and legal-entity booking processes so that regulatory choices are made earlier and with cleaner data, reducing remediation spend and control incidents downstream.

Paul Humphrey, chief executive at BMLL, frames the debate around the quality and usability of market data that underpins trading and research. He predicts “an irreversible shift in how the industry approaches market data curation and consumption”, with clients demanding high-quality, engineered datasets ready for AI-driven strategies and moving away from the assumption that owning raw data at scale is itself a differentiator. According to Mr Humphrey, the competitive edge will increasingly lie in how firms build on trusted data, not in simply hoarding it, and collaboration to lift data standards will become central.

Industry surveys add nuance to how costs might be allocated under new regimes. A CFA Institute survey found that 53% of respondents expect their firms to absorb research costs rather than pass them to clients, and that very large firms are particularly likely to internalise those expenses. The survey also suggested a continued shift away from bank‑sourced research and a rise in in‑house production, a dynamic that could influence how bundled payments are structured in practice.

Despite the apparent momentum, observers caution that a return to more bundled arrangements will not miraculously resolve underlying market structure challenges. The EU study that documented reduced research budgets after MiFID II also concluded that quality did not systematically decline across the board, indicating the relationship between payment models and research quality is complex. Regulators in the UK and EU have therefore tied flexibility on payment models to requirements for robust quality assessments and oversight to guard against conflicts of interest and to preserve best‑execution standards.

For asset managers and dealing desks preparing contractual arrangements, the immediate implication is operational: firms are already drafting client commission arrangements and commission-sharing agreements to accommodate joint payment models, while building the compliance frameworks regulators now expect. For smaller issuers and mid‑cap markets, proponents say the reforms could revive research coverage and investor engagement that waned under strict unbundling.

Taken together, the regulatory reforms in Brussels and London, the early 2024 rise in research budgets, and bankers’ and data firms’ changing priorities point to a market recalibrating away from rigid unbundling toward a more pragmatic model that seeks to balance access to high‑quality research, transparency and operational resilience. The outcome will depend on how well the new guardrails are enforced and whether asset managers, brokers and data vendors can deliver the higher standards of data and research quality regulators now demand.