IIA's FISD Recommends Alignment Of Changes To Exchange Fee Schedules

NEW YORK: The Financial Information Services Division (FISD) of the US Information Industry Association (IIA) has approved a recommendation to align changes to exchanges' fee schedules onto a quarterly cycle.

The statement, aimed both at FISD member and nonmember organisations, encourages exchanges to introduce fee changes and new fees with effect from the first day of the calendar quarter (January 1, April 1, July 1, October 1). It also suggests that exchanges give 120 days' prior notice of any fee changes to vendors and users.

"We need to encourage exchanges to become more disciplined and change the way in which they convey themselves through the mask of the vendor," says Dan Rooney, FISD chairman and senior vice president of the Chicago Board of Trade. However, the FISD recommendation also suggests that notice to vendors and users may run parallel with any application required for regulatory approval. This latter point aims to "start the clock ticking," addressing concerns among US Securities and Exchange Commission-regulated exchanges about adding any additional lead time on top of delays caused by the SEC review process.

The FISD recommendation also has suggestions for vendors. The vendors themselves have admitted that they have not been disciplined enough in conveying price information. In the FISD best-practice document outlining its recommendations, vendors are requested to give customers a minimum of 60 days' notice before the beginning of the calendar quarter in which fee changes and the introduction of new fees take effect. This 60-day period should be interpreted as a minimum and vendors have already indicated they will aim to give as much notice as possible. For their part, customers have expressed their desire for the longest lead-time possible to facilitate internal project planning and entitlement decisions.

The FISD guideline goes further to recommend that for any new fees and fee changes that are not specified in time for the vendors to provide 60 days' notification to customers should be held over to the next quarterly announcement and implementation cycle wherever possible.

FISD Executive Committee members voted to accept the statement on August 19. The FISD itself is not in a position to make industry policy, but aims to provide voluntary guidelines. However, by stressing the importance of the issue at hand and garnering the support of its membership, the organisation can go some way toward encouraging the uptake of the initiative by industry participants, be they FISD members or not.

"We look to create best-practice recommendations and guidelines," says Mike Atkin, vice president, financial information markets, for the IIA. "Many of the projects we undertake result in these best-practice recommendations--we have no role in the implementation of them, however. That is a question for the individual firms. Our overall aim is to improve efficiencies for companies in the financial information industry," he adds. A copy of the recommendation was sent to nonmember firms and Atkin says a positive response was received from many of them.

According to Rooney, "The initiative is a logical extension of our actions last December whereby we identified that exchange price notification was considered a big issue. There are not that many price changes for the major North American exchanges, it permeates well beyond North American borders. The emerging exchanges are the important ones to capture and encourage to support this initiative."

Devin Wenig, director of third-party data at Reuters, is particularly keen for this key initiative to be taken on industrywide so that it becomes a standard. Reuters, for its part, has championed this initiative, as it has constantly faced frustrated clients who despair at the lack of coordination in the industry. The aim of the FISD paper is to give users time to make informed decisions about price changes that are likely to impact their businesses and budgets.

"With over 200 discrete fee changes in 1997 alone, we have some staff whose job is purely to inform customers of fee changes," says Wenig. "Often it is with little notice, but with the quarterly cycle notification, Reuters will be able to send out four reports a year, with adequate notice, instead of over 200."

Wenig believes it's important--given the number of exchanges globally--that they support the FISD initiative. He says it's equally important that secondary and tertiary exchanges take it on board as they make up a large percentage of the overall industry.

"The efficiency of the concept of global alignment of exchange fee changes will only be derived from the volume of exchanges that comply," he says, "not the size or power of the individual exchange." Wenig hopes the initiative will become accepted as an industry standard so that peripheral exchanges will feel encouraged to conform.

A copy of the exchange fee best-practice recommendation, along with further explanations, can be found on www.fisd.net.