Opening Cross: Is Fee-Free Feasible?

This week’s issue is no exception, with almost every possible angle represented, from disputes over fee levels, to consultancies to help you reduce the impact of fees, to trading venues offering fee waivers, and partnerships designed to bring data (and fees) to new audiences in different business areas, as well as ways to make the most of sharing existing data.

The issue kicks off with a follow-up to last year’s story outlining annual fee increases for Thomson Reuters’ data products. Though the fees initially seemed straightforward, some end-user firms complain that the actual increases could potentially be much higher than expected, depending on the level of discount they had received in the past. Certainly, for a vendor, it can be hard to set any kind of standard, harmonized fee if one has not existed in the past. And to its credit, sources say Thomson Reuters has negotiated with some of those firms suffering most from confusion over the new fees and how they affect a firm’s expenditure.

After all, every dollar matters, especially when saving money in one area can free up budget for other projects, or simply contribute to a healthier bottom line.

Hence, having subject matter experts on board who can bring experience of centralizing and managing costs—from negotiation and procurement through to managing inventory and running existing deployments more efficiently—is key. And if you don’t have those resources in-house—for example, if you work at a small firm that has not had a dedicated market data function, or if you work at a sell-side firm whose staffing has been curtailed by the economy—there are third-party firms that will perform that for you, on a full-time or consulting basis. One such firm is Valore Partners, a new venture set up by two former senior bank procurement, expense management and operations executives, Mark Rufeh and Warren Herz, each veterans of Citigroup, Credit Suisse and Lehman Brothers. In fact, Valore recently hired another former Citi data exec, Tom Boran, as head of market data and referential services, showing the value that the firm places on market data projects within its overall remit.

Of course, the importance of good contract management cannot be overstated, even in cases such as Aquis Exchange, which makes its data available for free—at least for now, though chief executive Alasdair Haynes says this will only last until the free data has a measurable competitive impact in terms of attracting more market share, thus rendering incumbent exchanges’ data less representative of the market as a whole, and thus less valuable, forcing those venues to price their data more competitively, and thus (in theory) lowering the cost burden of acquiring pan-European data. Only then will Aquis introduce data fees of its own, Haynes says.

Good data management not only helps lower data fees; it also means that you know who is using what data, when they are using it, and how. Without that knowledge—and without systems that allow firms to act on it—sharing data can be a compliance minefield. However, providers of analytics and risk models are working to increase the amount of content that can be shared within firms and with clients to support collaboration, and reduce errors and operational risk. UK-based portfolio analytics provider StatPro has already rolled out similar capabilities, and Fincad has just added sharing capabilities to its F3 analytics platform.

Ultimately, there are sufficient controls available to prevent the sharing of premium data, and even to support monitoring of what data goes where and how much a firm should pay for redistribution in that manner. However, it may yet emerge that this need to share information ushers in a new era of data fees that encourage rather than restrict the ability to share information, and where fee disputes finally become a thing of the past.