Bending to customer pressure, Standard & Poor’s has taken steps to address concerns over its pricing policies for Cusip instrument identifiers by restructuring its pricing and providing some level of transparency.
The new pricing policy provides increased flexibility for European clients, some of whom have raised objections to the charges for identifiers relating to U.S.-centric asset classes that are of limited use to them. In particular it aims to address their concern that usage of Cusip Service Bureau (CSB) identifiers for specific asset classes such as municipal and mortgage-backed data may be minimal or unnecessary.
Qualifying European users – essentially those with a small universe of securities – can now select from a tiered fee schedule (see chart, Page 5). For clients requiring only up to 500 Cusip-based identifiers to be databased in their securities master file, this will continue to be free. Now, users wishing to database Cusip-based identifiers for up to 10,000 securities, albeit a relatively small universe, have a clear pricing guide to follow.
The restructuring follows over a year of sometimes heated discussions with discontented European users. CSB says it has had in-depth discussions over the past few months with clients to “get a better under-standing of their needs regarding the CSB identifiers and database usage”.
The ongoing battle has centered around whether Standard & Poor’s should be charging the level of fees it does with little pricing transparency for its Cusip identifiers, This extends to the use of Cusips embedded into other identifiers, primarily ISINs, for which Standard & Poor’s levies charges, while other regional ISIN numbering agencies do not. This is an issue that has been under investiga-tion by the Association of National Numbering Agencies (ANNA) prompted by its overseer ISO.
The objections are based on some users’ belief that securities identifier schemes are industry standards and therefore should not be leveraged for one organization’s profit, but rather should be operated on the basis of cost recovery. Standard & Poor’s, meanwhile, asserts its intellectual property rights regarding Cusips, a service it has committed to provide over the past 30 years.
The news of the pricing restructuring has been met with mixed reception. Some clients are welcoming Standard & Poor’s move to compromise. A hard core of users in Europe who originally objected to the fees being levied by Standard & Poor’s suggest that although the move is further than they have gone before, it does not address all their concerns.
These users point to the lack of transparency for users with larger universes than 10,000 securities. Says one user, “We cannot effectively manage costs related to Cusip-based identifiers if we don’t know the pricing criteria.” They also point to the continuing ISIN debate which has yet to be resolved.
Darren Purcell, associate director, Cusip Service Bureau, says, “We are working to improve our pricing scenarios to fit the broad market and find ways to be more transparent. For the larger global organizations, each has unique scenarios that are difficult to model on a broad scale, so we prefer to work with these individually to ensure we fully meet their needs. Anyone that may be covered by the new pricing scenarios can contact us to determine the best way forward regarding their existing contracts.”
Cusip is operated by Standard & Poor’s under license from the American Bankers Association.