After last week’s heated industry discussions on the subject of data vendor licenses and IP rights (see commentary on which here), the announcement this week that the final Is have been dotted and Ts crossed on the agreement between Cusip Global Services (CGS) and the European Commission may come as something of a disappointment for some. The agreement regarding the licensing of US ISINs does not appear to go any further than that agreed back in May (see my commentary on which here), which was criticised at the time for not going far enough.
The agreement as it stands is that the data vendor will create and distribute a new data feed of US ISINs (in CGS’ words) “tailored specifically to the needs of certain market participants domiciled in the European Economic Area (EEA)”. What this essentially means is that it has set a limit of an annual charge of US$15,000 for European firms (a “cost recovery” pricing model) and other data vendors (for redistribution purposes) to receive US ISIN record masterfile data in a new standalone format (with no “additional data” included). The aptly named US ISIN Basic Service will be offered “within the next five months” and there will be “reasonable restrictions” around what the data can be used for.
The service will be offered over the next five years, dependent on the vendor continuing to operate as the US National Numbering Agency (NNA), of course. Within a month, CGS’ customers would also have the option to early termination of their customer agreements, which would come into effect the same date as the introduction of the new ISIN service. The new service will include the 12 character ISIN, issuer description, security description, maturity date, coupon rate and currency information and the feed will be updated daily via the internet file transfer protocol.
So, that’s the upshot of the deal that’s been three years in coming, but what will the industry make of it all? Given that a number of industry associations including the European Fund and Asset Management Association (EFAMA) and the UK-based Information Provider User Group (IPUG) raised concerns earlier this year about restrictions being imposed on the usage of this data, they are likely to be wary of this “reasonable restriction” criteria. The deal has also been limited to the EEA area, which is likely to be an issue for some hoping for it to be extended globally. I expect much more to be said on the issue by these associations and others including German asset management association BVI Bundesverband Investment und Asset Management, French Association Francaise de la Gestion Financiere (AFG) and Swiss Information Providers User Group (SIPUG), who have all previously weighed in on the subject, over the coming months.
It will also be interesting to see what impact this decision and the industry response will have on the ongoing EC investigation into Thomson Reuters’ RIC codes and Markit’s credit default swap (CDS) market operations. On the former, the EC is concerned about the vendor’s intellectual property rights with regards to RICs and whether the proprietary nature of these codes means clients are prevented from easily moving from one vendor to another. A common compliant amongst market data practitioners (see recent FIMA discussions for proof of that one).
Will all of this prove to be the last straw for the industry and force its hand to set up its own market data feed (as threatened last week)? I doubt it, but then again, stranger things have happened.