LSE Postpones Introduction of Delayed Data Fees

The fees could have added thousands of pounds to spend by firms that consume delayed data, which is generally provided free of charge.

London Stock Exchange

In letters sent to customers on Jan. 31, LSE and Borsa Italiana said that following "customer feedback," the exchanges have "postponed the implementation of the Other Application Usage License in relation to Delayed Data" effective immediately.

The LSE notified clients of the planned fee for delayed data late last year, leading to confusion among users as to why the exchange would seek to charge for something that the upcoming MiFID II regulation dictates must be provided free of charge. For example at one end of the scale, a firm with between one and three applications receiving real-time and/or delayed UK Level 2 data would pay £6,730. At the top end, an institution with more than 10 applications receiving real-time and/or delayed UK Level 2 data would pay £31,010. There are also delayed data fees for UK Level 1, International Level 1, International Level 2 and Off Book.

On Borsa Italiana, a firm with between one and three applications receiving real-time and/or delayed Borsa Italiana Level 2 A2, A3, A4 or A5 data would pay €6,300. A firm with more than 10 applications receiving the same data would pay €29,030. There are also delayed data charges for Borsa Italiana level 1 (A1) and Off Book.

A data licensing manager at a large European bank says the LSE contacted him late last year, saying that his firm would need to update its real-time market data agreement because the exchange was changing the section of the contract that details "other application usage," which covers use of its data outside of trading applications and non-display usage.

A notification letter was sent out on Sep. 26th for a Jan. 1, 2017 implementation date. Those affected were given a deadline of Dec. 16 to declare their usage to the exchange, the source says. 

When the bank's data team examined the policy, the source says they were surprised to find new terms concerning delayed data usage. "When you looked at the appendix for the subscriptions, they had changed the tiering. The tiering for ‘other applications' was no longer ‘yes' or ‘no,'" he says, but instead required users to detail how many applications within their institution received delayed data.

The source says this change was at odds with how the LSE has provided delayed data in the past. "On all major terminal products, if you get delayed data, it's free of charge. It isn't segregated into a separate product you can buy. It is in with all the other data," the source says, explaining that data vendors pay exchanges for the right to bundle delayed data with their terminal product, "so when clients get the delayed data free of charge on the terminal products... There is no way to control it on the data feed unless they separate it out."

As a result, because neither the bank nor the LSE could find a reliable way to track delayed data usage within the required timeframe, the LSE ultimately suggested that the bank take a "rough guess" at usage levels and provide that as an "honesty statement."

For example, the source says Thomson Reuters told the bank that it would take between 12 and 18 months to unbundle the LSE's data into a separate, delayed product. This would be done by separating individual RICs (Reuters Instrument Codes) and the Permissionable Entity (PE) codes assigned to each data item. Some vendors' data may only include a handful of PE codes, whereas others may have dozens or hundreds, the source says. For example, Thomson Reuters' Eikon product has several hundred PE codes assigned to it because each code relates to specific news segments, FX commentary services, and other value-add data, segregated by asset class, type and country, each with a unique PE.

"At the moment, the LSE data may have unique PE codes. But it might not, in which case all of the RICS must be found and unbundled and given their own unique PE code so they can be identified as LSE data, and as a delayed data item.... This is a huge upheaval to do," the source says. "They would have to unbundle it all, they would have to put licensing rules around it and notify clients that these changes were going to happen, and then put out a code change.... It's a huge amount of work."

Sources tell IMD that one data industry association had sent letters of concern to UK regulator the Financial Conduct Authority and the European Securities and Markets Authority, and another was in the process of drafting a letter when the LSE changed its mind.

LSE officials decline to respond to direct questions, but a spokesperson says, "We can confirm that following customer feedback, London Stock Exchange and Borsa Italiana have postponed the implementation of the Other Application Usage License in relation to Delayed Data."

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