Deutsche Börse Readies Algo Data Fees

Deutsche Börse will next year introduce a set of market data fees for use of data in non-display applications, as a result of the growth in algorithmic trading systems, officials say.

"The concept is that we charge a fee for any application, and we have a fee structure for two specific groups: for automated trading and new original works—applications that produce new derived information, like an index or analytics," says Georg Gross, head of front-office data and analytics at Deutsche Börse.

So for example, a firm using data from Deutsche Börse to calculate an index will only pay for the use of that data in their calculation engine, rather than any fee for redistributing the derived data inside its firm or externally to clients, Gross says. "We don't claim any fees for re-distribution… Our customers are creating something new—we don't claim anything with regard to what they do with that information," he says.

"Increasingly our data is consumed by applications," he says. "So I think… that many exchanges including ourselves are working on this issue, because this type of data use is more prominent now."

The knock-on effect of the increase in automated trading applications is that exchanges are seeing a shift away from traditional data display terminal usage—and hence fewer license fees from traditional users. And with numbers of trades increasing—partly as a result of trading algorithms designed to split trades into smaller segments to minimize market impact—exchanges realize that applications will become a large source of future market data revenues.

"It doesn't make sense to charge an individual trader and not charge for an application that can do the work of 10 or 100 traders," Gross says.

The changes come into effect on April 1 next year. Gross says the exchange is currently discussing with customers how to implement the changes to their access control systems to begin administering application fees, or divide their existing application controls into different categories in line with those of Deutsche Börse.

Clients' existing agreements remain in force until April. "Currently… we are supporting them into understanding what the new rules are and what it takes to implement this. We believe they have time until the beginning of April—that we have provided enough lead time—for them to do the work and be compliant from day one," Gross says.

Industry sources say the exchange's original attempt during the summer to introduce the new fees into the data agreements form the start of November met with resistance from user firms, who demanded that the exchange change its timeframes. "Our customers told us 'we need more time for this'," Gross says.

Real-time data from the Frankfurt Stock Exchange will cost E560 per month for Level 1 data and E680 per month for Level 2 data in automated trading applications, E280 and E340 respectively for use in new original works applications, and E56 and E68 respectively per month for use in other miscellaneous applications.

Data from the Eurex derivatives market will cost E250 per month for Level 1 data and E360 per month for Level 2 data in automated trading applications, E125 and E180 respectively for use in a new original works applications, and E25 and E36 for use in miscellaneous applications. User display workstations are still covered by used ID fee schedules.