The changing market for investment research: The impact of innovations in the payment mechanism on market structure and information flows

Since the collapse of the dot.com bubble in 2000 the market for investment research has undergone substantive change in institutional and legal arrangement on both sides of the Atlantic. The changes in the UK have been driven by the unbundling of brokerage commissions for executing trades from research payments. This has had, and is continuing to have, a significant impact on the market for investment research. Our study examines the impact of this apparently subtle, but controversial and far-reaching, change to the market for information. Based on interviews with practitioners, surveys, examination of policy documents and engagement with professional bodies in specialist conferences we chart the rapid and significant change in the market for information. The change in the pricing mechanism in the UK, US and other markets has resulted in greater choice for the consumers of investment research (largely fund managers) who value diversity of research providers, independence from conflicts of interest and value for money. However, practitioners are concerned that these changes will lead to lower levels of generally available investment research.