knowledge 5 June 2026 |

The Long and Winding Road (Back) to Bundling: MiFID II Research Payments

This week saw the publication in the Official Journal of the Delegated Directive that rounds out the changes made to the MiFID II regime regarding the provision of third-party execution and research services by investment firms by the Listing Act Directive. The finalisation of the Delegated Directive took place just a few days before the new regime is due to become applicable.

This briefing explains the key changes introduced by the Listing Act Directive and the Delegated Directive, both of which are due to be applied from 6 June 2026 (however Irish transposing measures are not yet in place), and briefly considers whether these reforms are likely to achieve their stated aim of revitalising the market for investment research on SMEs.

Background – One Step Forward, A Half Step Back

In 2014, MiFID II introduced a requirement to separate payments for research and other investment services, with a view to enhancing transparency, improving the quality of research and mitigating conflicts of interest. However, this ‘unbundling’ regime, as it became known, attracted significant commentary, and indeed criticism. In particular, the change was seen to have had a significantly negative impact not only on the overall size and value of the market for investment research, particularly for smaller issuers, but on the ability of such issuers to attract capital investment.

In response, in 2021 the Capital Markets Recovery Package introduced limited rebundling, permitting joint payments for research for issuers with a market capitalisation below €1 billion. However, this reform was widely considered insufficient: in the main, investment firms chose not to maintain two separate invoicing systems and retained the unbundled approach for all clients.

The 2024 Amendments: Rebundling

As a result, a further row back took place in November 2024, in the form of the Listing Act Directive. It introduced a number of key changes to Article 24(9a) of MiFID II:

• Abolition of the €1 billion market capitalisation threshold for bundled payments. Most significantly, investment firms may now choose to pay either jointly or separately for execution services and research in respect of any issuer, regardless of their market capitalisation.
• Agreement on methodology. Investment firms must agree a remuneration methodology with their research and execution provider(s), indicating how the total cost of research is “generally taken into account” when establishing charges.
• Client notification. Clients must be informed of investment firms’ payment choice and given access to their policies on research payments.
• Annual quality assessment. Investment firms must now assess the quality, usability, and value of the research and its contribution to investment decisions on an annual basis.
• Other Changes. The Listing Act Directive also introduces a number of changes unrelated to bundling with a view, as the Recitals outline, to generally increasing trust in and use of investment research. This includes a new framework for issuer-sponsored research under an ESMA code of conduct and providing for the submission of investment research to the European Single Access Point (ESAP) for information related to financial services, capital markets and sustainability.

Member States are required to transpose these changes by 5 June 2026, with the measures to apply from 6 June 2026.

The Delegated Directive: Technical Provisions

The Delegated Directive sets out the detailed technical requirements underpinning these changes. The vast majority of the Delegated Directive's provisions apply only to firms opting for separate payments, in so far as they update the rules on research payment accounts. The only clear provision which applies irrespective of payment method is the requirement for firms to base their annual quality assessment on ”robust quality criteria” and to take remedial actions where deficiencies are identified.

Notably, these rules are not particularly prescriptive regarding the mechanics of joint payments, reflecting the intention of the ESMA to align with the high-level approach of the Listing Act Directive.

Transposition

The timeline here is somewhat unusual. While the text of the Delegated Directive was adopted on 20 February 2026 and published online shortly thereafter, the Delegated Directive was only published in the Official Journal earlier this week (2 June 2026) and states that it enters into force on 22 June 2026. However, the transposition deadline remains 5 June 2026 and the application deadline remains 6 June 2026.

There is no obvious sign of the transposition of either the Listing Act Directive amendments or – less surprisingly given the date of its publication - the Delegated Directive into Ireland’s MiFID II regime.  To date, ESMA has not issued a statement in respect of how Member States and firms should manage the transposition timing challenges in respect of the Delegated Directive.

Assessment: Has the (Small or Medium Sized) Horse Bolted?

These reforms represent a significant policy reversal, and an acknowledgment that the original unbundling regime brought in by MiFID II caused lasting damage to the research ecosystem, particularly for SMEs. However, it is difficult to ascertain whether and to what extent these changes will reverse the decline.

Structural changes may be irreversible. Since 2018, research teams have been restructured, experienced analysts have left the industry, and firms have built in-house capabilities. Many asset managers have already absorbed research costs and asset owners may resist a return to bundled commissions. Overall, it is hard to know whether rebundling can improve the market picture to any meaningful extent.

The 2021 precedent is not particularly encouraging. The previous rebundling option for sub-€1 billion issuers went largely unused, with the Recitals to the Listing Act Directive pointing out that it failed not only to reverse the decline but to slow it at all. While removing the threshold certainly eliminates the practical difficulties of dual-invoicing, it remains to be seen whether firms will want to amend their existing processes (particularly where there may be an IT cost or client notification requirements).

On the other hand, the experience of the UK since reintroducing bundling in August 2024 is promising. Deloitte has reported that 87% of UK asset managers expect at least half of research budgets to be funded indirectly by clients within two years, a sharp rise from 7% prior to the change.

Other elements of the Listing Act Directive - including the new framework for issuer-sponsored research and the scope for submission of research to ESAP - may also assist in revitalising the industry.

Conclusion

The publication of this Delegated Directive completes the legislative framework for the revised research payment regime, at the EU level at least. While there is no sign of the Irish transposing legislation, once transposed (absent any transition statement from ESMA) investment firms will then have full flexibility to pay jointly or separately for execution and research. Whether this will meaningfully revive SME research remains to be seen. In the meantime, Irish firms should monitor the transposition position closely and begin considering their strategic approach to research payments under the new regime.

Also contributed to by Rory Clarke