Business Issues
Market data
Trading technology
The risk
Market data compliance became a real topic after 2005, following an audit by the London Stock Exchange at a tier-one US bank.
The LSE found a much broader usage of its data than was being reported and paid for.
The proved under-reporting of data usage led to a GBP 6.4 mln settlement.
News
FISD's Best Practises
The FISD has recognised the complexity for market data consumers as a result of the differences in exchanges' market data agreements. It has therefore published a series of Best Practice Recommenda-tions (BPR) covering topics such as Exchange Contract Guides, Audits and Unit of Count.
Compliance
The legal aspect of market data has gained importance over the last years. The use of market data is subject to many rules. The complexity of these data distribution policies has grown over the years. Vendors and Exchange have different views on topics such as the “Unit of count” and Intellectual Property Rights of the respective data. This has resulted in a wide range of policies and contractual approaches regarding market data usage and fee liability, covering provisions such as “Netting of Data Accesses”, “Usage & Distribution of Derived Data” and “Usage of data in Non-display Applications”.
On top of that, today’s market data consumer firms are faced with an increasing number of audits by data vendors and exchanges. As a result of the complex data distribution rules it is hard for consumer firms to adhere to their contractual commitments, which in many cases causes firms not being compliant with the terms & conditions of vendor agreements and exchanges' data distribution policies. Violating them can be quite expensive to rectify due to penalties and other fees. Recent history has shown several cases in which the user firm has agreed to settle the under-reporting of data-usage by paying a total sum worth several millions of US dollars to a single vendor or exchange!
To support consumer firms understanding the consequences of their data usage TCAM offers Market Data Compliance Services and The Exchange Guide.
