The EU MiFID II Regulation introduced in 2018 has been a disaster for brokerage companies and investment investigation providers. Because the costs of investment investigation had to be issued by trade committees, since 2018, sales research agencies have seen their research revenues fall by around 60% to 70%. This is simply a result of the decrease in income at institutional investors and the increasing costs that forced them to lower costs without influencing their performance. And that often meant a much reduced budget to pay for sales research.
In the short term, these cost -saving fund managers helped to keep the costs under control and to protect their business results. Yet over time it became increasingly clear that if no one pays for research, the market as a whole will be influenced in unexpected ways.
Micha Bender and his colleagues published an extensive assessment study in which the impact of MiFID II on European stock markets has been investigated since 2018. They investigated both research provision and market quality, including liquidity.
The first graph below shows the impact of MiFID II on the number of analysts that covers a certain stock. Try not to understand the numbers on the y-axis of the graph, because that is the regression coefficient and focus instead on the direction of the beams. As you can see, the introduction of MiFID II has reduced the average number of analysts that covers a stock that covers considerably in continental Europe, with a huge hit in Eastern Europe (Poles, Hungary, the Czech Republic, Slovenia, Romania and Bulgaria in the study).
Even in Western Europe, which includes the large stock markets of Germany, France, the Netherlands, Belgium, Luxembourg and Austria and Austria, however, fell considerably. In the UK in particular, we did not see a significant decrease in the number of analysts that covers shares.
A result that surprised me in the study was that, in contrast to shares with large caps, small and mid-cap shares (blacksmith), no significant reduction in the number of analysts covering these shares. I expected brokerage companies to cut blacksmith analysts before they cut the coverage of shares with large caps that interest every investor. Nevertheless, it seems that the consideration of the cost-benefits is such that the blacksmith coverage in most of Europe in essence remained unchanged and even somewhat increased in the VK and Eastern Europe.
Change in the number of analysts covering shares since MiFID II
Source: Bender et al. (2025). Statistical significance: * = 10%level, ** = 5%level, *** = 1%level level
It could be claimed that there are too many sales analysts in the world anyway, and that many of them may not have offered any added value; However, that does not seem to be the case.
When the researchers analyzed the change in the market liquidity after MiFID II, they found some relevant results. It is remarkable that the liquidity of the stock market in Europe has fallen considerably since 2018. This is not due to other factors, because the results below are checked for confusing factors. The results below should be interpreted as the decrease in the European trade fair liquidity compared to the US and Canadian shares with comparable characteristics.
Change in trade volume since MiFID II
Source: Bender et al. (2025). Statistical significance: * = 10%level, ** = 5%level, *** = 1%level level
What essentially happens when fewer analysts cover a share is that it takes longer before information spreads on the market, and therefore fewer investors deal with new information. The result is a lower commercial activity and lower liquidity in general (including higher bid-ak spreads). Plus, lower valuations (although that is not tested in the study, but in general we know that a higher liquidity is strongly correlated with higher valuations).
Although MiFID II undoubtedly has increased the cost transport of the cost of costs and possibly enabled institutional investors to save on external research, it has hurt everyone in the long term because European markets have become less efficient and less liquid, which increases the costs for each investor.
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