Barely a month after implementing a ban on the use of commissions to pay for corporate access, in June, the U.K.'s Financial Conduct Authority stunned the investment community by endorsing a European proposal to sharply curtail the use of trading commissions to pay for research. Stakeholders all along the financial services spectrum have been trying to gauge the likely impact ever since. "If it happens as proposed, it means a sea change in the way markets operate," contends Steve Kelly, who runs opinion surveys of analysts and corporate managers for Extel, a London-based data collection unit of Hong Kong's WeConvene. Among the "unintended consequences," as he puts it, could be substantial declines in the size and frequency of research commissions, reduced coverage and liquidity - particularly for smaller players - and an overall drop in competition. "Is that healthy for the vibrancy of capital markets?" he asks.
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