MiFID, Re-Bundling and Managing Commission Wallets


Background and Current Observations

UK Chancellor of the Exchequer Jeremy Hunt recently announced that in 2024 he will implement many of the suggested changes outlined in the UK Investment Research Review from Rachel Kent of Hoagland Lovells (Investment Research Review Chair).

Yet, how the industry will adapt to a new rule set, and the walk back of a decade of questionable regulation and its negative unintended consequences, is difficult to predict. 

We have already seen a wealth of legal commentary on the proposed changes along with predictions of what may come.  We expect to see more.  But, as Yogi Berra once said, “it’s hard to make predictions, especially about the future.”  

For example:

  • We don’t know if the many investment managers who chose to pay for research from their P&L will be able to convince their underlying asset owners to again fund research;
  • We don’t know if CCAs and CSAs, ubiquitous in North America and APAC, will be reprised in the EU or the UK;
  • We don’t know if investment managers will flock to the UK or Europe to start new funds or if local companies will decide to list there; and
  • We don’t know if the creation of a research platform or initiatives to scale the production of research will be successful.  The plan to include – and promote – independent research from select sell-side firms via the U.S. Global Analyst Settlement of 2003[1] ended the moment investment banks were no longer mandated to do so. 

While predictions are hard, we can provide several practical observations:

  • No global regulator has followed in the footsteps of MiFID;
  • Outside of the EU and the UK, investment managers continue to embrace sell-side and independent research as well as both bundled and unbundled trading.  We don’t expect this to change; 
  • Commission wallets are down.  Perhaps this changes at the margins, but we are not holding our breath; 
  • Investment managers continue to trim their broker lists and earmark order flow to strategic research and trading partners;
  • Brokers, in turn, continue to cull their client lists and focus on investment managers who meet their revenue and profitability hurdles; and
  • The growth in the use of analytics, data, and innovative technology to manage money is being largely driven by independent research providers (instead of broker dealers).  Most managers will elect to use commissions to pay for this information, thus, the use of CCAs/CSAs will grow.   

Firms that can provide solutions that help investment managers address these trends will see demand for their services. 

How Tourmaline Manages Commission Wallets

Tourmaline’s core business is providing expert trading solutions to investment managers and asset owners of all sizes.  In addition, we fund investment manager research wallets through the use of both bundled and unbundled trading.  The aforementioned industry trends are driving demand for this offering.      

Most investment managers who engage Tourmaline to trade equities, derivatives, or ETFs, also use their execution to fund research.  This includes emerging hedge funds who fully-outsource trading to us and larger managers who seek to expand the reach of their internal trading teams.[2]    

We manage commission wallets via attributed trading, CCAs, CSAs and commission aggregation. Our ability to do this is predicated on our independent buy-side positioning and our scale built over the past 12 years.  These features allow us to pay the sell-side and seamlessly manage a global commission management infrastructure. 

Tourmaline remunerates the sell-side via high-touch execution and we fund internally managed CSAs to pay non-core brokers and independent research providers.  We collaborate with our clients to manage pre-set broker budgets and communicate in real-time to decide the optimal funding path/mix.  Many of our larger clients also fund their Tourmaline CSA via direct trading with away brokers, aggregating commissions into a centralized, anonymous account.  We manage this process with proprietary software and provide detailed reporting, website access, customized service and full transparency for all research funding[3].

We believe having the flexibility to fund research through different channels is imperative to achieving best execution on our client’s behalf. 


Investment managers will continue to lean on experts with a focus on engaging specialist providers and best of breed solutions vs. domiciling numerous disciplines within one organization[4].  The days of the “financial supermarket” are long gone.    

Investment professionals – portfolio managers, analysts and traders – know that good ideas, information, and expertise are not solely found within the walls of their own organizations.   

While we may not soon see a uniform global compliance framework, we expect that global best practices to acquire investment research will include both bundled and unbundled trading and the use of client commissions.  

Providers of outsourced and supplemental trading solutions will need to offer a holistic global research funding infrastructure to compete effectively.     

Tim O’Halloran is a Managing Director with Tourmaline Partners.


About Tourmaline Partners

Tourmaline Partners is the world’s leading trading solutions firm providing outsourced and supplemental trading solutions to asset managers of all sizes.  Tourmaline delivers a 24 x 6 buy-side execution offering in global equites, derivatives and ETFs on behalf of hedge funds, mutual funds, RIAs, family offices, sovereign wealth funds and asset owners.  Clients include emerging managers at launch to those with AUM over $1T.   

Tourmaline’s team comprises over 35 traders averaging 15+ years of experience, based in Stamford, CT, London and Sydney.  Tourmaline is privately held and positioned to not compete with the sell-side in their core businesses of research, banking and prime brokerage.  Tourmaline uniquely funds research through an in-house, proprietary commission management infrastructure including CSAs, CCAs, aggregation as well as attributed trading to meet sell-side research commitments.  Founded in 2011, Tourmaline services 350+ institutional clients, trades in 50+ global markets, is covered by over 400 sell-side brokers and employs over 45+ algo suites – which allow us to access liquidity at all major exchanges, dark pools, and other off-exchange trading venues globally – on behalf of our clients.  Tourmaline’s technology infrastructure is comprised of proprietary tools for order entry, CRM data/analytics, commission management administration and reporting, and industry leading third-party solutions for order handling (OMS/EMS) and TCA. 

[1] The Global Settlement followed joint investigations by the regulators into alleged conflicts of interest between investment banking and securities research at brokerage firms. As a result of the investigation, ten of the nation’s top investment firms agreed to pay $1.4 billion – $387.5 million of it in restitution to be returned to harmed investors through a process overseen by the SEC, and $487.5 million in penalties. Funds were also earmarked for investor education and to help pay for independent research for investors.

[2] Common use cases may be found here

[3] Please request FAQs or a demo here.

[4] Investment managers have historically engaged outside research and technology expertise.  Leaning on experts to augment trading, operations and finance is now becoming institutionalized.