UBS is reporting its netted exchange data usage direct to the London Stock Exchange as part of a new 'per-user' programme, which allows firms to directly report their global real-time terminal inventory to the LSE.
The Exchange has been piloting the direct reporting programme for about six months, says Jarod Hillman, head of real-time data at the LSE in response to client requests for a system that would eliminate double and triple charging of exchange data fees. The LSE programme also includes Borsa Italiana terminal usage.
According to Hillman, a large bank will have a myriad of market data sources, ranging from direct data feeds, market data feeds (such as Bloomberg's B-Pipe and Thomson Reuters Elektron) as well as "closed environment" standalone market data terminals. This set up could result in a single trader, being charged three times to view the same LSE real-time data, he says. The direct reporting scheme is set up around a 'per user' data model, rather than a 'per data feed' model and is intended to address that issue, he adds.
Firms also report their exchange data usage via market data vendors, such as Thomson Reuters and Bloomberg, however, the LSE believes that "billing through the vendors" will not solve the problem of overbilling, says Hillman.
Market data audits, examining the correct use of LSE data, is also "part of" the new programme, adds Hillman. However, banks that opt into the direct reporting service, and pass the rigorous monitoring and reporting criteria, would theoretically "reduce the need for vigorous audits", he says. However, a bank that fails to meet the LSE's criteria for the direct reporting service could also "spark" such an audit, adds Hillman.
Firms opting into the direct reporting scheme must demonstrate to the LSE that they meet adequate internal controls to entitle, monitor and report their usage. This process is usually monitored for about three months before a firm is on boarded onto the LSE service, says Hillman.
About eight firms are currently in the process of joining the optional LSE programme, with UBS being the first bank to go live with the service. The reporting service is aimed at top tier global banks that have multiple users of market data from numerous sources, says Hillman. The service would not be suitable for small or retail firms that rely on a market data from a single vendor source, he adds.
According to the LSE once firms pass the pilot, they will benefit from:
- Reporting directly to the LSE all their global internal display usage of LSE and Borsa Italiana data, regardless of how it is sources.
- Adopting a user-based 'unit of control' allowing firms to only pay one set of exchange fees for an internal user who received the same data from two, or more sources.
- Achieving greater flexibility when implementing real-time market data systems, by removing the cost of paying new additional exchange fees for each new data source.