NEW YORK Feb 23 Interdealer broker NEX Group Plc, formerly known as Icap, has invested in a RSRCHXchange, a London-based startup that runs an online marketplace for research on stocks, as regulatory changes in Europe and pressure on asset management fees spur innovation in the equity research sector.
The investment, led by NEX Group's venture arm Euclid Opportunities, was announced by the companies on Thursday, but the terms of the deal were not disclosed.
The company will use the injection of cash develop the platform and expand its team, said Vicky Sanders, co-founder of RSRCHXchange.
Launched in 2015 RSRCHXchange aggregates research on stocks from brokers and independent research houses on an online platform. The platform contains a series of functions to make it easier for buy side firms to procure and buy research, and track how content is consumed within their companies in compliance with new regulations.
RSRCHXchange is part of a growing cohort of young technology companies looking to profit from new rules on research in the European Union's revised Markets in Financial Instrument Directive (Mifid II), a sprawling overhaul of the bloc's trading rulebook set to come into force in January 2018.
Under Mifid II, asset managers will have to pay for research out of their own pocket, increasing demand for tools that can help vet the quality of the research, assess its value and manage payments. Brokers have traditionally "bundled" the cost of research with trading commissions.
On top of regulatory changes, asset managers have been under pressure to cut fees due to weaker returns, making them more selective about how they spend their research dollars.
"Mifid II research unbundling is a key challenge for our clients and the wider market in 2017," said Michael McFadgen, a managing director at Euclid Opportunities. "RSRCHXchange is bringing next generation technology to solve a complex regulatory challenge."
Founded in 2011, Euclid Opportunities backs young technology companies that can help the NEX Group enhance its products and services. The division is poised to play a more strategically significant role within the group over the coming years as the company increases its focus on electronic broking and financial technology following the sale of its voice broking business to rival Tullett Prebon in December.
Euclid boasts several well-known capital markets fintech companies in its portfolio, with recent investments including financial software developer OpenFin and blockchain startup Axoni. Two of its portfolio companies, analytics company Enso Financial and trade reporting firm Abide Financial, were acquired by NEX Group last year. (Reporting by Anna Irrera)
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