Client Success Story: Market and Reference Data Compliance - How compliant is your market data use?

Why do exchanges and vendors do audits? 🕵️

Compliance with the terms & conditions of stock exchanges, market data vendors and third party data providers.

Understanding the rationale and reasoning

Traditional stock exchanges are increasingly conducting audits, because they:

👉 Want to address the fact that new ways of (automated) trading are making use of the exchanges’ data that hadn’t been anticipated
👉 Are under pressure from new trading venues such MTF’s (Multilateral Trading Facilities) and want to protect their own franchise
👉 Want to address unlawful, piracy-like use of their data

Vendors are increasingly conducting audits, because they:

👉 See a shift away from their terminals to low-cost market data display providers, to internal display applications, and to non display applications
👉 Want to/need to grow revenues, even in difficult times
👉 Want to be in a bargaining position with the client, to tie them in for the following years (or hit them with a substantial audit claim)

Third party providers (such as broker/dealers and benchmark index providers):

👉 Want to push for wider brand recognition and capitalization
👉 Wish to protect sometimes decades’ worth of proprietary research and analysis
👉 Need to get a (better) return on many years of investment in technology and infrastructure

How compliant is your market data use? 📝

The importance of keeping complete, verifiable records

Distribution of market data via standard Distribution Platforms (e.g. TREP) has its limitations for compliance purposes.

✅ Platforms like TREP and the associated DACS reporting do not go beyond permissioning
of terminals and single instances of (internal) applications and data feeds
✅ As a result there is no standard, automated permissioning system for these applications
and the end-users connected to them

The limitations resulting from the above are not sufficiently compensated; not each and every potential access to the data that is subject of the audit is declared.

✅ because the processes and procedures are not in place
✅ because no existing costs are concerned
✅ because the (internal) applications have often not been developed to allow user enabling/disabling of externally sourced data

Different rules from different data sources ❗

Each entity has its own definition of the T&C concepts

Complying with the Terms & Conditions of one entity is no straight guarantee for compliance with the T&C’s of others!

Recommendations 🚀

Taking the next steps

Recommendations are dependent on the particular issues found at the client firm, buy here are some simplified examples:

1. Set up an administration system on a “per user” basis for application users.
Be in control of your market data spend and/or exposure.

2. Switch all real-time exchanges to delayed
Discuss with business, test appropriateness

3. Liaise with business to check real-time needs for the user group currently authorized
Check in particular FX/MM, Risk, Sales desk

4. Upgrade to a system version that supports Open DACS
Take control over all users. Open DACS is the entitlement system to support user entitlements outside immediate DACS control