Coordination of Exchange Fee Changes

September 1998

FISD members have adopted a best practice recommendation on coordination of exchange fee changes on a quarterly calendar cycle. The statement is a voluntary guideline and promotes the value of coordination to enable vendors to better plan for changes and to let brokerage firms/banks make more informed entitlement decisions.

During the July 23, 1998 meeting the Executive Committee of IIA's Financial Information Services Division (FISD) strongly endorsed the concept of global alignment of exchange fee changes onto a quarterly calendar cycle.

The Executive Committee believes that increased cooperation and coordination would result in significant efficiency improvements, allowing exchanges and data vendors to better plan for changes as well as enabling customers to make timely and informed entitlement decisions. The FISD recommendation is viewed as a natural extension of the FISD best practice recommendation on Lead Time Notification and Change Management for Market Data.

Background
The global market data industry operates in a dynamic and complex environment. Managing the rapid pace of change -- effectively and efficiently -- is a difficult challenge for exchanges, information providers, vendors and user firms. Real-time market data distribution depends on the close cooperation of many independent organizations and systems. Successfully introducing change depends on adequate notice and good communication among all participants.

In December 1997, FISD members endorsed and published guidelines and best practice recommendations for successfully introducing and managing changes to market data and distribution technology.

Most FISD members have adopted many of these guidelines as part of their standard operating practices. However, many non-member exchanges and vendors have yet to implement these recommendations for exchange fee changes. In addition, even with many exchanges and vendors providing appropriate notice under the FISD guidelines, the sheer volume of changes (over 200 discrete fee changes in 1997) and the increasing number of exchanges going newly fee-liable, is continuing to put great strain on vendors and their customers. As a result, many system administrators spend an overwhelming amount of time processing market data and permissioning changes.

FISD Position
FISD supports the concept of aligning exchange fee change notices with calendar quarters as a practical and sensible approach to implementation of the lead time notification guideline for price changes. This would allow customers to realize the administrative benefits of processing four quarterly reports rather than being compelled to respond to hundreds of individual notifications. The FISD recommendation is as follows:

• Exchanges should use best efforts to implement fee changes and the introduction of new fees with effect from the first day of the calendar quarter (January, April, July, October).
  
  
• Exchanges should strive to give 120 days prior notice to vendors and users of the fee change (as per the FISD lead time recommendation). Notice to vendors and users may run in parallel with any application required for regulatory approval.
  
  
• Vendors should strive to give customers a minimum of 60 days notice (as per the FISD lead time recommendation) before the beginning of the calendar quarter in which fee changes and the introduction of new fees take effect. [Note: Some customers would like notice as soon as the fee change is issued by the exchange to help with internal project planning and entitlement decisions]
  
  
• New fees and fee changes 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 whenever possible.