MDSL Aims to Add Clients, Functions to Index License Manager Product in 2016

MDSL first unveiled ILM—which enables firms to manage index licenses and index data licenses, and to compare vendors, via a dashboard—in beta in 2014, and transitioned it to a web-based platform in 2015. The vendor is now nearing the end of a project to implement ILM at an unnamed Swiss bank, and is in various stages of proof-of-concept projects at other buy-side and sell-side firms.

Now, MDSL plans to add more functionality, such as increasing the different types of fee structure that it supports, says Steve Ellenberg, senior consultant in the vendor’s MDX Consulting division.

“Much of this we can leverage from our MDM (Market Data Manager) platform. We already support tiered fee structures and minimum annual spend, [so] we don’t have to write the code—we just have to move it over,” Ellenberg says. 

Another example is the logic associated with foundational data such as geographic presences or business organization formats for per-user or per-desk permissioning and allocation of fees. Other smaller bits of code that MDSL was able to re-use include the ability to set alarms around specific license parameters and attributes, he says.

The development roadmap for ILM will be driven by prospects and clients, says MDSL chief executive Ben Mendoza, adding that ILM is becoming a “need-to-have” rather than a “nice-to-have,” based on feedback from clients that in the wake of benchmark manipulation scandals, such as Libor, large sell-side firms are no longer allowed to calculate the value of or administer changes to the indexes or structured products they create, he says.

Firms must now outsource calculation, fund administration and other services, and must maintain a detailed inventory of what they have created and ownership. “We’ve traditionally managed commercial compliance—where if you fall foul of commercial compliance, you’re going to get a fine, or if data gets exposed to the public, you have reputational risk also—but if you fail with regulatory compliance, theoretically they [regulators] can force you to shut up shop,” which means a product like ILM is in high demand, Mendoza says. ILM should make clients feel confident that “when the regulator comes in, you can press a button to produce a report that shows all the licenses you have and how you are in control of administrating them, because that’s where it can go wrong,” he adds.

In addition, Ellenberg says that as the “cowboy activities of ‘We’ll trade and get the license later,’ are dying away,” clients have also identified how ILM would be useful for traders who want to ensure they are licensed to use an index before placing a trade. But Mendoza says an independent repository of license information will prevent index providers from taking advantage of clients. “If you go to a vendor and ask ‘Are we licensed for this?’ they’ll be rubbing their hands. How much better is it to have this repository of good data which has the licensing information and details of how you can use the data?” he says.

MDSL will make improvements to the QuickView tool on ILM to make it more attractive to front office staff, especially those trading or structuring index-linked financial products. “We anticipate that some of those additional refinements will probably be suggested by front-office staff who are ILM clients,” Ellenberg adds. 

The vendor also plans to release a custodial model of ILM early next year to serve asset serving companies that use indexes to provide performance reporting and accounting administration information for the small asset managers they service. “They tend to eat the cost because they can’t accurately estimate how much they should charge for each client. And if you can’t identify it, you can’t recover the correct amount, and it’s too much of a risk to incorrectly charge a client,” Ellenberg says.  

MDSL also plans a vendor-facing version of ILM designed to help index data providers forecast and issue invoices—whereas data consumers use it to forecast and pay invoices—and has already embarked on a proof-of-concept with an unnamed vendor. This took place in 2014, and although “early efforts were quite encouraging,” the vendor version has yet to migrate to a web-based version, Ellenberg says, adding that there are a “handful of index sponsors who have recently expressed interest in a vendor-facing version of ILM, and we expect to have development cycles available to begin devoting to this effort in Q3 of this year.”