11 Jul
Recent news flow makes it clear that the asset management industry is moving towards client-funded research, using CSAs integrated with firms’ existing research valuation processes in order to comply with the FCA’s new Joint Payments regime. But for firms considering this path it’s important to understand how evolving tools and workflows have addressed many of the longstanding operational headaches associated with CSAs, especially from the trader’s perspective.
Traders’ Concerns: A Legacy of Complexity
For many traders, the memory of pre-MiFID II CSA implementation is not a pleasant one. The process was often mired in inefficiency, with spreadsheet-driven reconciliation, manual tracking of budgets, and the pressure to direct trades to certain venues simply to fill CSA pots for research payments. This past experience left many with a reluctance to revisit CSAs, especially when execution-only trading and paying research from P&Ls seemed simpler and cleaner.
With this imminent industry shift, traders will have fundamental concerns regarding the workflow from executing a trade to compensating a research provider. They will question how to balance having enough CSA brokers to fulfill budget requirements against the operational burden of working with too many. Some will ask why they can’t keep the status quo – or even why they can’t move alternatively to charging the fund directly, which to the trading desk may seem simpler. These are not just logistical questions, they reflect concerns about autonomy, operational burden, and preserving best execution principles.
Technology Has Changed the Game
The good news is that the landscape has fundamentally shifted. Today’s CSA infrastructure is powered by advanced technology platforms that automate the administrative burden and segregate trading from research payments.
Modern CSA aggregators now enable every trade to be tagged to a strategy, regardless of whether an asset manager operates a single strategy or dozens. This means that research charges can be allocated in a granular, transparent, and automated way—no more manual spreadsheets or guesswork.
Crucially, in this new model, the responsibility for research valuation, budgeting, and payment no longer sits with the trading desk. It is managed entirely by the research and operations teams, just as it has been under the P&L-funded research model. Traders can continue to focus purely on best execution, without needing to worry about hitting budgets or directing flow for research-related purposes.
Addressing the “Low Turnover” Challenge
Another concern often raised is how to manage research funding for strategies that don’t trade frequently. But CSA programmes have become more sophisticated as a result of the technology that supports them. Every trade, regardless of volume, can be tagged appropriately so that research costs are distributed in line with the underlying strategy’s consumption profile. This provides a clear audit trail that supports both compliance and transparency with clients.
Asset managers today must demonstrate that their research spend delivers value to end investor clients. Technology enables this by aligning the funding of research (how research is paid for) with its consumption (which strategies are using it).
Regional Alignment
One of the key objectives of the new rules has been greater alignment and the ability for the buy side to move to a cohesive global process. Some firms have been operating multiple funding and payment approaches across the US and Europe, and it’s become clear that for firms looking to consolidate their processes and return to a more holistic approach to sharing consuming, valuing and funding research, a CSA approach is the only option.
A Better, Cleaner Model
Ultimately, the return to CSAs enabled by technology is not a return to the past, it is very much a leap forward. Asset managers no longer have to choose between administrative chaos and rigid P&L-based models. With the right infrastructure, CSAs provide the flexibility to fund research across varied strategies while allowing traders to maintain their focus on execution quality.
For asset managers weighing the move to a joint payments model, the message is clear: the technological hurdles that once complicated implementation have largely been overcome. The burden has shifted away from the trading desk, and asset managers can now achieve a robust, compliant, and scalable approach to research funding – one that meets both internal needs and external regulatory demands.
