June 6, 2026, marks the start of a new phase in Europe’s research-payment regime, with MiFID II reforms allowing investment managers to use joint-payment arrangements for execution and external research. The change gives buy-side firms more flexibility after years of research unbundling, but it also tests whether firms can rebuild the commission-management, governance and evidence layer needed to use joint payments without recreating the opacity MiFID II was designed to remove.
Before MiFID II, investment managers typically placed trades with brokers and paid dealing commissions that could cover both execution and research. Research could include analyst notes, market commentary, corporate access, conferences, sector insight and other services. The cost was borne by the client through fund transaction charges, but the split between execution and research was often hard to see.That model made research appear free to the investment manager, even though it was paid for through client commission. It also created a conflict. A manager could direct trading flow to a broker because the broker provided useful research, even where another broker might have offered stronger execution. The transparency problem became more visible as commissions became negotiable. The issue was whether the cost, allocation and influence of the research component could be seen, assessed and challenged.
RegTech Insight spoke with Jeff Galvez, Global Head of Commission Management at Liquidnet, about the potential upside for UK and EU buy-side firms as joint-payment arrangements come into effect. The US provides a useful comparison because client commission-funded research continued under commission sharing arrangements (CSAs) and soft-dollar rules while Europe moved through MiFID II unbundling.
MiFID II Legacy
MiFID II changed the operating model from January 2018 by requiring investment managers to separate research payments from execution. Third-party research had to be paid from the firm’s own resources or through a research payment account, rather than sitting invisibly inside dealing commission.
The reforms improved transparency and forced firms to build research budgets, valuation processes and governance. But they also reshaped the research market as many investment managers chose to absorb research costs through their own P&L accounts. That reduced the client-allocation burden but placed pressure on research budgets.
Galvez recalls the change affected both spending and provider diversity. “What we’ve seen in the UK was, since everybody basically went to P&L back in 2018, there was a shrinkage in research budgets and research providers kind of left the field. With less of a diversity in the research space, this could ultimately affect performance,” he says.
MiFID II imposed discipline on a market that had previously operated through relationship-led commission flows. The policy direction has now shifted again. The FCA introduced a joint-payment option for UK MiFID investment firms in 2024 and extended investment research payment optionality to fund managers in 2025. In the EU, reforms under the Listing Act and related MiFID II research provisions now allow for joint payments for execution and research.Operational Rebuild
For investment managers, the challenge is proving that the research component has been identified, budgeted, valued, allocated, disclosed and controlled. That requires a commission-management layer that connects the trading desk, portfolio managers, research consumers, finance, compliance, operations and client reporting. Firms need to know which brokers or providers are being paid, what services qualify as research, how budgets are set, how broker vote or research valuation feeds payment decisions, how costs are allocated across funds and clients, and how evidence is retained.
Since MiFID II, many firms have reduced the teams and processes that once administered client commission-funded research. Where research has been paid from the manager’s own resources, the practical machinery around commission accruals, CSA-like payment pools, broker instructions, reconciliations and client allocation may have atrophied.
Liquidnet’s commission management business sits in that operating layer. The firm acts as an aggregation provider for clients, consolidating commission arrangements across the street and supporting research payments through a centralised process. Its role is not only processing payments, but helping firms manage the administration, reporting and provider controls that sit around research funding.
Changing Research Chain
The reforms coincide with a changing definition of research. Traditional broker research remains important, but investment workflows now include independent research providers, specialist datasets, analytics platforms and AI-supported tools.
Galvez says bulge-bracket brokers remain significant in the payment process, but the provider base is widening. “The bulge brackets are still a very big part of the payment process. What we have seen is an increase in independent providers as well, and obviously within that is the AI-introduced type of research that’s coming up,” he says.
That shift raises a harder governance question. Firms need to decide what qualifies as research, what should be treated as data or technology, and what can be paid for through client commission-funded arrangements. AI-supported tools may strengthen investment decision-making, but they also blur old categories between research, analytics, workflow automation and market data.
The US provides one reference point because CSAs and soft-dollar arrangements remained active there while Europe moved through MiFID II unbundling. Galvez says the new UK and EU direction could help global managers operate more consistent research-payment programmes. “Bringing client commissions back will help align everything globally once again,” he says.
The reforms give investment managers more choice in how they pay for research. The old, bundled model lacked transparency. MiFID II created discipline but reduced flexibility. The new UK/EU joint-payment model will depend on whether firms can combine payment optionality with the budget, valuation, allocation, disclosure and audit standards that investors and regulators now expect.
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