Europe’s exchanges keep research buzz alive for small companies

European stock exchanges expect it to be harder for smaller companies to create a buzz among investors when brokers produce fewer research notes after new rules come into force next year.
Some exchanges are so worried about the impact on trading they are offering to pay for the research. Others are pushing companies to pay the bill themselves.
Investors often use analysis on a company to decide when to buy or sell a stock. But asset managers are expected to reduce their research budgets when the European Union’s Markets in Financial Instruments Directive (MiFID) II goes live in January.
With an ever-shrinking pot of money to pay for analysis, brokers are cutting their teams and reducing their coverage of the smallest companies.

The region’s biggest exchange, Euronext, already provides free research for some companies, but said it may expand the service to others.
Deutsche Boerse launched a new index for smaller companies earlier this year that provides a basic level of research for all the firms, paid for out of listing fees. Borsa Italiana plans to require all small firms listing after January to pay for their own research.
Coverage of smaller companies has always been patchy...