Bundled Research Payments Are Back :

The key structural change is the return of joint payments, enabling execution and research to be bundled within a single commission flow—provided both elements remain separately identifiable, appropriately valued, and subject to robust governance.

Importantly, execution and research sourcing remain decoupled, preserving best execution obligations and competitive dynamics in broker selection.

Commission Sharing Agreements Return as a Core Mechanism

Commission Sharing Agreements (CSAs) are expected to re-establish themselves as a central operational mechanism under the revised regime.

CSAs allow execution to be concentrated with one broker while research payments are allocated across multiple independent providers. This separation of execution and research sourcing is critical to preserving both execution quality and research diversity.

For asset managers focused on small- and mid-cap equities, CSAs offer a practical route to restoring research breadth without reintroducing dependency on bundled broker research models.

Structural benefits of CSAs

• Broaden access to specialist independent research providers
• Decouple execution quality from research sourcing decisions
• Improve transparency and governance of research allocation
• Expand coverage in less efficiently researched segments
• Enable competitive and flexible research procurement

Example: a European small-cap manager may execute trades through a liquidity-optimized broker while allocating CSA credits to a specialist provider covering German industrial equities, improving informational depth without compromising execution quality.

However, CSA frameworks can introduce non-trivial operational demands around allocation logic, valuation, reconciliation, and auditability.

This is where the constraint begins to shift from regulatory design to operational execution.

The Operational Reality: Scalability Becomes the Constraint

While the regulatory framework increases flexibility, it also raises the need operational capacity and efficiency.

To support bundled payments and CSA-based models at scale, asset managers must manage:

• Research budgeting and forecasting
• Commission allocation and attribution logic
• Research valuation methodologies
• Multi-provider payment orchestration
• Broker and provider reconciliation processes
• Audit-ready documentation and reporting
• Governance workflows and approval chains

Individually, these processes are not new. In aggregate, however, they define a materially more complex operating environment.

As a result, the ability to adopt flexible funding models is increasingly determined by the robustness of internal infrastructure rather than regulatory permission.

ESMA’s Direction: From Structure to Evidentiary Governance

ESMA’s April 2025 technical advice reinforces a clear supervisory shift.

The focus is moving from how research is paid for to how its value is demonstrated, documented, and evidenced.

Key expectations include:

1. Research Quality Assessment – formalized frameworks for evaluating research usefulness and impact
2. Governance Structures – clear accountability and senior oversight of research procurement
3. Documentation Requirements – complete traceability of valuation and allocation decisions
4. Best Execution Safeguards – separation between research consumption and execution decisions
5. Internal Controls – continuous monitoring, review cycles, and audit readiness

This represents a transition from procedural compliance to evidence-based governance of research value.

The Technology Layer Becomes Structural Infrastructure

As research funding models become more flexible, operational infrastructure becomes a binding constraint—and a source of differentiation.

Managing CSAs, bundled payments, and RPAs requires precise orchestration of commission flows, valuation frameworks, allocation logic, reconciliation processes, and regulatory reporting.

This is where dedicated systems become essential.

Castine’s Asset Manager Toolkit (AMT) is designed to provide this operational layer, enabling firms to manage modern research workflows in a controlled and scalable environment.

AMT supports:

• End-to-end CSA operationalization
• Research budgeting, forecasting, and valuation frameworks
• Commission allocation, tracking, and reconciliation automation
• Centralized payment workflows and approvals
• Audit-ready documentation and reporting infrastructure
• Governance and compliance oversight across research activity

In practice, the effectiveness of bundled payments and CSA structures is increasingly determined not by regulatory allowance, but by whether firms can operationalize them consistently, transparently, and at scale.

AMT addresses this operational requirement.

Three Structural Trends

1. Active equity managers will lead adoption
   External research dependence makes active equity managers—particularly in small- and mid-cap segments—the primary beneficiaries of increased flexibility.
2. Global firms will seek harmonization
   Multi-jurisdictional managers are likely to converge on unified research funding frameworks across Europe, the UK, and the US.
3. Governance becomes a competitive differentiator
   Firms capable of demonstrating robust valuation methodologies and auditable research governance will gain relative advantage with both clients and regulators.

The competitive frontier is shifting toward operational maturity in research management.

Market Outlook and Conclusion

The Listing Act represents a recalibration of European investment research regulation rather than a reversal of MiFID II.

While unbundling improved transparency and governance, it also exposed structural constraints in sustaining diverse research coverage across markets.

The new regime restores flexibility, but simultaneously raises the operational threshold required to use it effectively.

In practice, a hybrid market structure is likely to emerge, with P&L funding, RPAs, joint payments, and CSA-based models coexisting. Selection will depend on product and client type, strategy and research intensity.

The key differentiator going forward will not be funding model choice, but operational capability to execute it at scale with full governance integrity.

For asset managers, this creates a clear dual imperative: reassess research funding strategy, and ensure the operational infrastructure exists to support it.

Castine’s Asset Manager Toolkit (AMT) sits within this context as the enabling infrastructure layer—supporting firms in operationalizing flexible research funding models with the governance, transparency, and scalability required under the new regulatory regime.