High on the long, long list of the late Steve Jobs’ acts of genius was his decision to go against his own instinct and open up the iPhone/iPAD to third-party developers to create the App Store, a true game-changer. That got me to thinking that Thomson Reuters and the EU could be missing a trick with their ongoing correspondence about for extending access to the Reuters Instrument Code (RIC). Rather than focusing on a withering segment of the marketplace – consolidated data feeds – what if Thomson Reuters went the whole hog and opened up RICs to everyone? And then encouraged everyone to develop and market their own applications through the ‘RIC Store’, using RICs to access the data required? Drawing on its 4,000+ list of client developers, the result would be a trading and investment application marketplace. Hedgehogs.net on steroids. Tantalising.
Thomson Reuters quietly released (to clients) its proposals for extending the licensing of RICS on December 14. The proposed licensing extension is the company’s attempt to assuage EU concerns about the potential for abusive market practices around RICs, which – like it or not- have become the de facto standard for identifying instruments and the markets they trade on.
Incredibly, the market has only until January 25 to respond to the proposal, issued just ahead of the Christmas holidays. As such, practitioners are scrambling to get their heads around the proposal, knowing that the stakes may be high.
But help is at hand.
Our friends at Citihub have prepared a comprehensive – and unemotional – briefing paper on the issues involved in the proposed Thomson Reuters licensing extension. They’ve kindly made the paper available for free download by A-Team readers here. Obviously, they’d be happy to talk about how they might be able to help, given the tight timeframes.
Having taken a look, it seems at first blush that the Thomson Reuters proposal is restrictive in terms of its stated intent – namely, to facilitate the ‘switch’ between suppliers of specifically consolidated data feeds – and in its applicability, both geographically and functionally. More on these below.
But to me, what springs to mind is that by focusing on this narrow segment of the business, albeit at the specific behest of the EU, Thomson Reuters may be missing the chance to go on a serious offensive that could change the way our market operates.
If you do consider RICs to be the standard for accessing information on financial instruments – and the fact that customers, competitors and applications developers all want to use RICs appears to bear this out – then doesn’t the EU complaint present Thomson Reuters with a golden opportunity to take the heroic step of licensing the RIC to all for all types of use?
Indeed, releasing RICs into the marketplace – for a reasonable fee – could be the catalyst for a kind of App Store for our marketplace. At a stroke, Thomson Reuters would be heralded as the market’s good guys, while at the same time taking a central commercial role as the licensor of the means to participating in the App Store.
Instead, the current proposal precludes the use of the RIC with the Bloomberg API or with direct feeds, thereby sidestepping two of the most obvious drivers of demand for additional RICs. The number of alternative consolidated feeds these days can be counted on one hand. The agreement also is restricted to Europe, and doesn’t allow for desktop use.
But it’s important to remember that the Thomson Reuters proposal is the company’s response to a very specific EU complaint that addresses the potential for market abuse given Thomson Reuters’ perceived dominance of the market for consolidated feeds. Were the scope opened up to direct feeds, that dominance would evaporate and the EU would not have a case.
Meantime, which firm in its right mind would propose opening up proprietary identifiers to its most direct competitor, in Thomson Reuters’ case Bloomberg? Europe is the EU’s remit, and given the fact that the EC will monitor and regulate any agreed commercial solution derived from this proposal, Thomson Reuters sensibly will want to keep the geographic scope as narrow as possible.
And it’s possible that this proposal itself becomes the catalyst for a discussion about the App Store or something similar – perhaps based on the internal Content Marketplace Thomson Reuters has developed. Indeed, that may be the message to send to the EU ahead of the January 25 deadline.
Somewhat disconcertingly for market practitioners, or so they tell me, the existing proposal appears to require clients to declare the number of RICs they use or will need. Thomson Reuters will negotiate a price accordingly. This process obviously raises the prospect of challenges by Thomson Reuters and fears among clients of the inevitable (and dreaded) audit.
Unsurprisingly, many in the marketplace are nonplussed by the proposed licence extension as is. Practitioners contacted by us are very concerned by the tight timeframe. And competitive suppliers are jumping up and down with rage (answers on a postcard which; although, in truth, what did they expect?). Some even question the EU’s ability to deal with so complex a topic. Clearly, it’s a contentious issue.