Financial firms are resisting European Union regulators' plansto make investors pay for fixed-income market research separatelyfrom trades.

Regulators say the research fee is built into the differencebetween the price at which broker-dealers, such as investmentbanks, buy and sell securities, known as the bid-ask spread. Thebanks counter that research is cost-free for clients, so requiringseparate payment would lead to extra costs for asset managerswithout the narrowing of spreads foreseen by the regulators.

“There is currently no pricing mechanism for fixed-incomeresearch,” Andrew Bowley, head of market-structure strategy, EMEA,at Nomura Holdings Inc. in London, said in an interview. “Thesell-side is not charging; the buy-side is not paying: there is noprice,” he said. “We could double or zero out research spend, andthe trading spread on fixed-income instruments wouldn'tchange.”

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