FISD General Membership Meeting Report

Paris, France Sept. 20-22, 2000

October 16, 2000

Organizations Present

ABN AMRO; Amsterdam Power Exchange; Association Brokers On Line; Bloomberg L.P.; Bridge Information Systems; Brussels Stock Exchange; CBS MarketWatch; Credit Suisse Group; Deutsche Boerse AG; EASDAQ Limited; Equant Network Services; Euronext; FIDES Information Services; FIMATEX; Financial Information Association of Taipei; Financial Times Asset Management; Financial Times Information; FININFO SA; GL Trade; Harco Technology; ING-FERRI Group; IPUG; IS Innovative Software AG; Istanbul Stock Exchange; Jordan & Jordan; JP Morgan Asset Management Services; LA COTE ALPHABETIQUE; Lazard Brothers; London Stock Exchange, Luxembourg Stock Exchange, Merrill Lynch; Moody's; Morgan Stanley Capital International, Inc.; Morgan Stanley Dean Witter; New York Board of Trade; New York Mercantile Exchange; OM Group; Oslo Bors Information AS; ParisBourse SA; PR Newswire Europe; Primark Corporation; Reuters; Rights Management Associates Ltd.; S.W.I.F.T.; SIX AB; Sociedad de Bolsas, S.A.; Standard & Poor's Corporation; State Street Bank & Trust Co.; SWX Swiss Exchange; Taiwan Stock Exchange Corporation; TCB Data; Telekurs Financial Information Ltd.; The Capital Group; The Nasdaq Stock Market, Inc.; Toronto Stock Exchange; Tradepoint Stock Exchange; Victoire Multimedia; Vienna Stock Exchange; Warsaw Stock Exchange; Wellington Management Co., LLP

Thank You

FISD members offer their sincere appreciation to FININFO SA, GL Trade, Victoire Multimedia, and the former ParisBourse SA (now Euronext NV) for their outstanding hospitality as hosts of the FISD general membership meeting in Paris. All Paris meeting presentations are available in Reports main page.

FISD Appointed to SEC Market Data Advisory Committee

The Securities and Exchange Commission has created a federal advisory committee to help evaluate issues relating to the public availability of market information in the equities and options markets. The advisory committee is a result of industry responses to the SEC Concept Release on the Regulation of Market Information Fees and Revenues. Michael Atkin and FISD have been invited to participate on the committee.

According to the invitation letter, the Committee will have a broad mandate to explore both fundamental matters, such as the benefits of price transparency and consolidated market information, and practical issues such as the most effective methods of consolidating market data. Joel Seligman, Dean of the Washington University School of Law in St. Louis, will chair the committee.

Specific areas of focus are expected to be: (1) the value of transparency to the markets; (2) the ramifications of electronic quote generation and decimalization for market transparency; (3) the merits of providing consolidated market information to intermediaries and customers; (4) alternative models for disseminating and consolidating information from multiple markets; (5) how market information fees should be determined, including the role of public disclosure of market information costs, fees, revenues and other matters, and how the fairness and reasonableness of fees should be evaluated; and (6) appropriate governance structures for joint market information plans as well as issues relating to plan administration and oversight.

The Advisory Committee members will consist of a broad cross section of the financial industry. In addition to Atkin, the other participants include:

• Harold S. Bradley, Senior Vice President, Investment Management American Century
• Robert G. Britz, Group Executive Vice President New York Stock Exchange
• Andrew M. Brooks, Vice President, Head of Equity Trading T. Rowe Price
• Matthew DeSalvo, Managing Director, Morgan Stanley Dean Witter
• Carrie E. Dwyer, General Counsel and Executive Vice President, Charles Schwab
• Robert H. Forney, President and CEO, Chicago Stock Exchange
• Joel Greenberg, Managing Director, Susquehanna Partners
• William R. Harts, Managing Director, Salomon Smith Barney
• George K. Jennison, Sr. Managing Director, Retail Equity Group, First Union Securities
• Prof. Simon Johnson, Sloan School of Management, MIT
• Edward J. Joyce, President and Chief Operating Officer, CBOE
• Thomas M. Joyce, Managing Director, Head of Equity Market Structures, Merrill Lynch
• Richard Ketchum, President and Chief Operating Officer, NASD
• Prof. Donald C. Langevoort, Georgetown University Law Center
• Bernard L. Madoff, Bernard L. Madoff Investment Securities
• Mark A. Minister, President and CEO, Bridge Trading
• Edward Nicoll, Chairman and CEO, Datek Online Holdings
• Kenneth D. Pasternak, Knight/Trimark Group
• Gerald D. Putnam, CEO, Archipelago
• Peter Quick, President, Derivative Securities, AMEX
• Eric D. Roiter, Senior Vice President and General Counsel, Fidelity
• Devin Wenig, EVP, Marketing Reuters America

Initial SEC Advisory Committee Results

The initial meeting was held on Tuesday, October 10 in the Commission's main offices in Washington DC. The Advisory Committee has been asked to provide a written report to the SEC within one year. The second meeting is being scheduled for this December. According to Advisory Committee Chair Joel Seligman, "the Concept Release emphasized several points:

• Broad public access to consolidated market data was the result of planning and a concerted effort by Congress, the SEC and the exchanges. Prior to the 1970's the exchanges decided who would be entitled to receive market data and the terms of that receipt. The result was the creation of the national market system including a communications infrastructure to disseminate consolidated market data.
  
  
• The economic context of market data has changed dramatically since the early 70's -- the most significant of which were the implementation of new technology allowing retail investors the opportunity to get access to real-time data, the growth of ATS/ECN and the advent of for-profit exchanges. Market data is critical in each of these areas.
  
  
• Professor Seligman outlined the six key policy questions to be considered by the Advisory Committee:

1. Ownership of market information,
2. Appropriateness of the governance structure,
3. Definition of the appropriate data to be consolidated and disseminated by each plan,
4. Determination of the appropriateness of vendor and subscriber fee structures,
5. Appropriateness of pilot programs, and
6. The value of adopting a cost-of-service approach for market data fees.

• There were 33 comment letters filed with the SEC in response to the Concept Release. Almost all supported the importance of consolidated market data. Several suggested that the SEC reexamine the single consolidator plans currently in place. NYSE reinforced its intention (pending SEC approval) to withdraw from the CTA/CA plan. Seligman suggested the Advisory Committee consider two fundamental options:

1. Whether the current arrangements for disseminating market data through the CT, CQ, Nasdaq/UTP and OPRA networks are outdated and whether a new system is needed. If the Advisory Committee recommends this we have to explain the need for a change, why the new model is preferable, how it would work and whether it would require a new legal framework under which to function.
    
2. The current networks should be retained, but that reforms are needed to network governance, fee structures, fee determination, pilot programs, SEC filing requirements; agreements; market data policies, etc.

• Seligman also outlined the two core issues underlining the options above:

1. The transparency of quotes and orders and the terms of competition among market centers. In essence, does mandatory transparency yield the best market structure? Should exchanges continue to be required to make their market data available to everyone on fair, reasonable and nondiscriminatory terms or should they have discretion to decide who gets the data and under what terms and conditions?
    
2. Should the SEC continue to require that market data be displayed in a consolidated format? Or should market participants separately obtain the information made available by the various markets?

• During the open discussion a number of themes emerged:

1. Transparency is good but there is no consensus on the definition of transparency -- particularly by firms that don't want to expose intentions that can move the market.
    
2. Transparency has a real cost (in terms of update rates and capacity) -- its important to make the distinction between more, good, accessible and actionable data.
    
3. Competition (rather than government mandates) will best determine what information will be made available -- with no consensus on whether there should be a comparable and level playing field on the data that is made available.
    
4. The importance of making a distinction between the means of consolidation (i.e. who and how to do it most efficiently) and the value of consolidated data (i.e. display of limit order book).

• The focus of the next meeting is on alternative models of consolidation.

The Birth of Euronext

FISD members were honored to be present on the birthday of Euronext -- the new pan-European exchange created by the merger of ParisBourse, Amsterdam and Brussels. Euronext will provide a single order book and unified trading platform combined with a single data dissemination system and market data contract. In addition, Euronext will be able to boast a single membership, harmonized listing criteria and a single point of clearing through Clearnet SA. With the merger, Euronext becomes the second largest European exchange after LSE.

The first phase (legal merger) has been completed. The unification of the trading platform, the creation of the single order book and the harmonization of the listing parameters is scheduled for 2Q01. The final phase including a trading platform for derivatives and a single clearing system for cash and derivatives is scheduled for 4Q01.

Dan Bos has been named to the Euronext Executive Committee. Marie-Claude Grussen is responsible for the combined Market Data Division. The new Euronext Distribution Agreement was scheduled to be sent to vendors on September 30, 2000.

The Future of Exchanges

This was FISD's second round of presentations on the nature of the changes that are currently taking place within the financial industry. Mergers, global trading alliances, new exchanges, common clearing, multiple listing, ECN's have dominated the news and are certainly keeping things interesting.

Herbie Skeete (Reuters) appropriately summed up the current environment when he notes that 'the twin irresistible forces of globalization and new technology are radically altering the landscape while the immovable objects of transparency and regulation limit the ways in which alteration can take place.' Herbie points to the blurring of the lines of distinctions between user and vendor -- the erosion of the importance of real estate and geography -- and the cross-market cannibalization enabled by e-commerce opportunities. There has been a lot of posturing and positioning and there are some real barriers to full integration (mainly cost, culture and regulation) -- but his conclusion is that further integration is inevitable. Here are some of the key developments:

• The tidal wave of exchanges that have been working to transform themselves from membership-based to public companies -- driven by profit and the subject to the rules of the marketplace -- including the unwelcome attention by predators.
• Increasing competition from new trading systems and platforms such as ECN's
• Blurring of lines of distinction as users and vendors also become trading platforms
• New exchange concepts such as Jiway and Tradepoint
• Joint ventures between ECN's and exchanges designed to compete with major national marketplaces
• Traditional exchanges involved in the creation of electronic marketplaces beyond their existing securities business (such as the DBAG linkage with EMETRA)
• New e-commerce developments illustrated by such developments as LIFFE's partnership with technology firms
• The creation of global market trading system linkages -- facilitating 24-hour trading and global price discovery -- as evidenced by the exploration of GEM
• Increasing consolidation on the clearing and settlement side to reduce transaction costs -- including the potential linkup between exchanges and clearing organizations

So what of the future? Herbie sees a future dominated by global electronic exchanges operating around-the-clock for the most liquid global securities. The role of traditional exchanges might be then reverted to the original function of capital formation. The key barrier to further integration is regulation -- with the expectation that the function will no longer be given to exchanges but rather to supranational regulators under the auspices of bodies such as the EU.

Market Data Policy Project

There has been significant progress made on the Market Data Policies Project (MDPP) over the course of the summer. Here's a summary of where things stand:

• The standard template (representing the overall structure of the database) has been completely revised. The questions have been abbreviated and simplified. The differences in customer classification have been reconciled.
• The database itself now contains detailed policy information from over 30 exchanges around the world. The information has been reviewed and verified -- and is now ready for publication.
• The library of standard reports on key policy questions now stands at 40. Once the product is released, members will be able to run these reports for any exchange -- or group of exchanges -- in the database.
• FISD has added exchange fee schedules to the database. We currently have fee schedules for 75 exchanges. The fee schedules will be harmonized with the policy database -- but will be published as released and verified by the exchange.
• FISD is also building a library of original source documentation (contracts and policy statements) that will be tied directly to the MDPP -- so that all references in the database will include a link to the original contract language.

The working database is available as an ACCESS file for FISD members to evaluate. Members must register to download the database and accept (via click-on agreement) the new disclaimer. Your password is your e-mail address. If you are not in the FISD database, you need to register with FISD before you can gain access. The working database is available to members-only.

FISD is planning on three MDPP products: (1) a free MDPP demo including some pre-formatted reports and exchange fee schedules (2) pre-formatted reports based on key policy questions and combinations of questions (password restricted); and (3) access to the full ACCESS database for ad hoc queries and corporate wide redistribution (FISD redistribution license required). The goal is for the MDPP to be released in beta test by the FISD meeting in December.

The key issue for FISD over the summer has been the strategy for data extraction via the web. The truth is the MDPP is a complex database and current extraction requires a fairly sophisticated understanding of ACCESS. If this database is to be useful to the industry, it must be accessible via a powerful and easy-to-use interface. We have retained an external development team to help us design and built the interface. A demonstration is available via the FISD.net home page.

MDPP and XML Tagging

FISD has been converted to the gospel of XML. The financial information industry is making great strides in this arena and we're convinced that this represents the future for financial market information. We've been trying to keep tabs on XML developments related to our industry.

Being a new convert, we've been attending meetings and making inquiries on whether the MDPP might be an appropriate application for XML tagging. We like what we've learned and are approaching this issue with guarded optimism. Our orientation is on the potential of establishing an XML standard for exchange contracts and policy documentation.

We believe that much of the difficult work in defining the standard has already been accomplished with the development of the MDPP template. The template defines the critical areas of contracts and exchange policies. The two core components of developing an XML standard are to define the critical areas and to create a common tagging nomenclature. And of those, defining the critical areas is the most difficult.

From a broader perspective XML tagging could bring together a number of related contractual initiatives. For example, we've already built an exchange contract guide that defines the critical elements of exchange contracts in general. We're in the midst of building a MDPP database that defines the critical elements of specific exchange contracts. And now we're adding dynamic pricing information to the MDPP database and working to create links to both the ECG and the library of original source documentation. It's possible that XML tags could make that process a whole lot simpler and could help make maintenance a whole lot easier.

FISD is creating a working group to explore the practical side of this question further. Doug Kemp (Bloomberg) has agreed to sponsor the inquiry. Our initial plan is to use the exchange fee schedules as the "proof-of-concept" for this activity.

Billing, Reporting and Permissioning

FISD's business process automation initiative is beginning to come together and we believe that it might be the most important initiative on FISD's administrative agenda. The overall concept is the straight through processing of market data administration. The goal is to eliminate manual processes and reduce costs in the areas of billing, reporting, invoice reconciliation and inventory management. From what we can see, the new mantra must become -- automate, simplify, and standardize.

Business process automation encompasses a significant component of the FISD administrative agenda -- manage market data expenditures, comply with vendor and exchange rules, accurately report market data usage, and ultimately automate what everyone characterizes as the current manual administrative nightmare.

Market Data Entitlement and Distribution

Here's what FISD learned from Janet Santasieri (Merrill) at the WFIC last year in Toronto.

The entire market data process begins with the contract and the rules of compliance. Knowledge of the rules has become increasingly important as firms become vendors and with complex soft-dollar arrangements. Contractual obligations must be tied into inventory because -- if there is one thing we've confirmed -- it's that everyone wants to be in compliance.

We've also learned that these things are complex. Firms have multiple vendors and multiple platforms within their organizations -- all managed by various market data administrators around the world. All this complexity creates confusion and increases the opportunities for inadvertent abuse. The lines of distinction between vendor, broker, investment manager, exchange are so blurred that there are no real lines of distinction. The tools must be in place to manage both internal and external market data dissemination. More and more people are now fully responsible for being in compliance with the rules of the exchanges and other information providers.

Detailed reporting is required and the whole reporting process needs to be automated. And we believe members are talking about both internal reporting for management purposes and external reporting for billing and reconciliation purposes. Standard product names and standard firm identifiers are needed for automated invoice reconciliation. Internal systems need to match external systems -- because there shouldn't be confusion about what people call things. And of course, everyone wants better tools and better system functionality to do optimization modeling, monitor usage, do benchmarking, compare vendor services and do strategic analysis of market data.

Permissioning Systems

Here's what we learned from Colin Wright (IPUG) at the inaugural Eastern European meeting in Warsaw.

The market data distribution environment has evolved with the movement to digital workstation delivery distributed on an internal platform in the client's domain. The key point is that now the source data provider and the platform vendor have handed responsibility for distribution and management of the data to the user firm. This is a classic good news/bad news scenario. The good news is that the user now has more control and more flexibility at lower cost. The bad news is that the user is responsible for all contractual and compliance requirements. And the market data manager (who is supposed to understand all the complex rules) is not completely in control of all the downstream applications -- particularly in global distribution environments. Based on that environment, Colin identified six broad issue areas for discussion:

1. How well do platform developers understand all the intricacies of global market data rules from multiple source vendors
2. Permissioning systems are understandably not the highest priority of either user firms or platform providers when selecting a distribution platform.
3. Permissioning systems are not always available on all platforms.
4. User firms often have multiple platforms in their organizations and there is a concern about cross-platform support.
5. There are some significant quirks in permissioning systems and their ability to control data across the range of platform sub-components (i.e. terminal cluster servers, ability to prevent multiple logins of the same user ID, application republishing/renaming via alias)
6. Translation of permissioning system functionality to Internet applications lags far behind other distribution environments.

The working conclusion is that (for the most part) permissioning system technology is sound. However, the market data environment is complex and systems can't keep up with the pace of changes in the applications environment. It's too easy for users to breach the compliance requirements. All too often, well-meaning developers -- who are ignorant of the rules -- are writing applications to solve a business problem for an end-user (who is equally ignorant of the rules) in violation of the terms of the contract.

Based on that initial discussion, FISD invited representatives from DACS and BTRS to participate in an open discussion during the Paris meeting. The goal was to make sure the dialogue within FISD on permissioning includes all involved parties -- user, developer, vendor, exchange, platform provider -- and (more importantly) to begin to honestly examine the issues and challenges facing market data providers in today's technology environment. Good communication is vital to resolving these issues. Everyone needs to become fully engaged with the requirements of source data providers and permissioning systems need to become more fully integrated with inventory and reporting applications.

Platform Vendors View

John Perry (Bridge/BTRS) and Mike Dixon (Reuters/DACS) gave outstanding presentations on the capabilities and limitations of permissioning systems -- including how they handle entitlements and feed publishers, and their usage reporting capabilities. Both presentations are posted on FISD.net at http://www.fisd.net/presentations/Btrs900/index.htm and http://www.fisd.net/presentations/Reuters900/index.htm. More important was the discussion about the limitations of permissioning systems -- including how they relate (or not) to inventory management and invoice reconciliation systems and handle cross-vendor services. The result of the discussion was a definition of the key issue areas for ongoing discussion:

1. The critical importance of defining user names/locations and product names in a consistent way across all systems.
2. The importance of and problems associated with managing entitlements over intranets and the Internet.
3. The requirement to integrate permissioning systems with ordering, billing, and invoice reconciliation.
4. The importance of providing open and well documented API's to facilitate working with third parties on middleware solutions to the challenges of market data management.
5. The importance of understanding (and taking into consideration) the capabilities and limitations of permissioning technology by exchanges and other source data providers when developing control and reporting requirements.

Billing and Reporting Standards

All of this discussion ties into the FISD's business process automation initiative. The primary initial objective of this activity is to establish product identification and customer identification standards.

FISD has received four responses to our RFP on product identification. The objective is to develop a uniform billing code to enable users to reconcile global services delivered by multiple vendors. We are now in our third round of discussions. The task for the consultants (and the FISD Working Group) is to build and verify the master list of data originators, obtain and validate a complete list of fee-liable products including an accurate description and a link to the parent company. We've asked the bidders to design and test a web-based registry and interface for both data retrieval and online registration. We've had discussions with the distribution vendors on implementation of the code so that it will appear on the electronic invoices. We've asked for advice from our bidders on selling the concept to both the source vendors and the people receiving the bills and we've asked for recommendations on maintenance (MAC, regional bundles, etc.).

We've also initiated discussions with Tom Butts (TCB Data) on the creation of a common global customer code to uniquely identify firms, locations and subsidiaries. The customer identifier is essential for information providers to reconcile usage reports from multiple vendors. During Tom's presentation, we learned that TCB has already defined a unique customer code for over 2,000 firms. FISD will be talking with TCB over the next few weeks about the potential of making their customer identification code an industry standard.

Centralized Reporting Mechanism

Clearly, product and customer identification standards are the initial objectives. Once accomplished, the discussion will need to convert to the issues of practical implementation. The product codes and customer identification codes need to be mapped and included on electronic invoices and reports. We see two options. One -- get the vendors and exchanges to convert their billing systems to the standard codes. Or two -- to use some form of centralized reporting mechanism to cross-reference and reconcile the various codes already in place (in essence and industry standard cross-reference table). There has not been any formal discussion within FISD about the creation of a centralized reporting mechanism or any of the obstacles to its implementation -- but we suggest that now is the right time to think about these practical implementation issues.

ISIN and STP

FISD has been in active discussions with The Association of National Numbering Agencies (ANNA) on a host of issues related to ISIN and other primary identification numbers. The goal is to fix some of the important data access and maintenance issues associated with security identification as the industry moves forward toward T+1 and STP -- and to work with ANNA and the proposed new ANNA Service Bureau on the commercial and distribution side of security identification.

Background

As we all know, the global financial industry is rapidly moving toward T+1 settlement to reduce risk exposure, deal with growing cross-border trading volumes, lower costs, and enhance the post-trade processing and settlement process. These changing market conditions now require a fast, efficient and automated way to process transactions. As such, the ability to precisely identify global securities in automated environments has become essential.

FISD members have demonstrated that incompatible database and the lack of data standards are a primary cause of high error rates, product valuation errors, manual and exception-based processing, trades of the wrong security and the high rate of expensive trade failures. T+1 and straight through processing no longer allow data managers the luxury of spending time on quality assurance and database reconciliation. In short, numbering systems have become the common link for automated trading/execution systems.

In order to meet the escalating requirements of automation, primary identifiers must be available prior to the date of security issuance; contain all relevant information essential to properly identify the security throughout its entire life span; and be functionally available to all aspects of the financial industry on fair, reasonable and equitable terms and conditions.

For these reasons, FISD members (along with others in the financial industry), have begun a focused campaign to work with the Association of National Numbering Agencies (ANNA) to address issues related to the unique and complete identification of financial instruments as well as those related to timely access and electronic dissemination of numbering information. FISD members support the steps taken by ANNA to ensure the proper allocation of ISIN and CFI data in accordance with the ISO 6166 standard. FISD members also support the creation of the ANNA Service Bureau as an efficient operational utility to meet the increasing requirements associated with ISIN assignment, maintenance and consolidated dissemination. The end result should be the successful creation of the informational infrastructure required for straight through processing.

FISD Concerns

FISD members have expressed concerns about the competitive and potential conflict of interest issues associated with the creation of an industry utility (the ANNA Service Bureau) licensed to commercial organizations (Telekurs Financial and Standard & Poor's). These issues alone have generated more than their share of internal debate. That debate has been fueled by both the involvement of SWIFT and by the fact that FISD members do not know any of the proposed policies, procedures and details associated with the Service Bureau.

Based on that uncertainty, FISD members have asked us to document the concerns as a specification document and to highlight issues that might be included in a service level agreement between the Service Bureau and its customers. The draft specifications document represents the work of FISD members on a whole host of issues related to security identification numbers and is intended to initiate a dialogue on the open issues associated with the level of service and the operational practices that can be expected from the Service Bureau.

FISD has suggested that a meeting between FISD members, Telekurs and Standard & Poor's would go a long way toward alleviating these concerns and could get everyone aligned on the outstanding work that ANNA has done in creating the information infrastructure required for T+1.

FISD Specifications

The FISD specifications document is organized around four core issue areas -- assignment/maintenance, access/dissemination, commercial terms and conditions, and operations of the Service Bureau. A copy of the full document is available from Michael Atkin. Here is a summary of the key points:

1. Assignment and Maintenance

New Issues -- ISIN data is needed prior to issuance of the financial offering and no later than the date of initial trading. On bulk assignment of ISIN, communication must occur at the earliest possible date. At the very least, all new ISIN data needs to be made available to the industry within the same timeframe as available to the NNA itself for preparation of any security identification or corporate action products.

Non-Assignment -- All securities that are issued and tradable should have an ISIN. The minimal requirement is for disclosure and publication of all local NNA rules of assignment and reconciliation of those rules to the ISO standard. The ANNA Service Bureau should develop a clear, standard definition of the minimum amount of information that need to be provided in order to get a number assigned. Communication between the issuer and the NNA on the request for ISIN needs to be clarified and enhanced. Dummy numbers should not be created and processed as an ISIN. FISD members are also interested in working with the ANNA Service Bureau to review and back-fill all existing valid securities without an ISIN for subsequent assignment.

Multiple Assignment of ISIN -- The minimal requirement is for ANNA to designate the official NNA in each country, and if more than one, to designate for which class of securities each NNA is authorized to assign. In addition, the ANNA Service Bureau should ensure prompt (one day or less) resolution of disputes where multiple ISINs have been allocated.

Substitute Numbers -- Clarification is required about the rules governing the assignment of substitute ISIN numbers. A clear escalation policy for when to use a substitute numbering agency must be defined. All substitute NNA's must make substitute numbering data available to vendors/users upon issuance and on reasonable terms and conditions.

Market Identification -- The purpose of the standard should be unique identification of all tradable instruments. The industry needs to be able to support multiple prices for a single ISIN and internal systems need to be able to handle the method of communication. In addition to the ISIN, the minimal requirement is for ANNA to adopt and support a uniform exchange code and register level identifier.

Corporate Actions -- NNA's should adopt local rules and standards that minimize the requirements for the issuance of new security identification numbers and ISINs, unless absolutely necessary based on legal changes in the security or instrument (as opposed to simple changes in descriptive information). The minimal requirement is that ANNA will support a uniform rule for when a security identification number will change and that the goal of such rule shall be to minimize the number of changes to the identification number itself. Communication between the NNA, paying agent and clearing agency about corporate action linkages needs to be enhanced.

2. Access and Dissemination

Core Data Element Definition -- Core/basic security identification information -- meaning all data elements required to uniquely setup a master security file -- should be accessible to all levels of the marketplace on fair and reasonable commercial terms. There must be an absolute level playing field between core ISIN data and any other value-added proprietary products in terms of timeliness, content and dissemination priority. The core product must include enough information to explicitly identify the security. See FISD Specifications for list of core data elements.

Timeliness and Usability -- NNA's should make basic security identification data (including substitute data) available in a daily electronic batch format. If the NNA provides intra-day services, such services should be available to vendors/users. Daily or intra-day electronic batch files must be easy to use (i.e. no encryption) and provide the ability to determine additions and changes to the information. Access to all existing historical data should also be made available.

3. Commercial Issues

Centralized Administration -- Centralized administration for all NNA contracts -- regardless of their individual terms and conditions -- would go a long way toward helping the industry avoid complex or non-available bilateral agreements.

Licensing and Redistribution -- There should be one uniform license to obtain, use and redistribute ISIN information. Every NNA that contributes information should agree to the uniform license. The license should permit downstream redistribution without the imposition of re-licensing provisions on end-user customers (unless they are also in the redistribution business). The Service Bureau product should be priced to take into account all the bilateral needs of the NNA's who are contributing to the consolidated feed. The ideal product should be modular, allowing vendors/users the ability to select product segments as appropriate. Vendors should receive credit against such cost if they maintain other direct services with any of the NNA's.

Customer Support -- Centralized, 24x7 support for data accuracy, timeliness, coverage, technical and contractual issues. The ANNA Service Bureau should act as the contact point for resolving multiple ISIN issues and any other data related questions.

4. Operational Issues

ANNA Member Regulation -- ANNA needs to assure its members are connected via a common distribution platform, contribute ISIN data on a regular basis and allow for redistribution of ISIN data to vendors and end-users. Adherence to the ISO standards and ANNA Guidelines is mandatory (i.e. no workarounds to handle their internal system issues unless ISO 6166 is modified to specifically define how internal values are defined). NNA's (or substitute agency) should be able to codify all financial instruments. If unable to assign a number, the industry should be notified at the earliest possible time.

Service Bureau Governance -- A governance structure with measurable and enforceable oversight terms under which the Service Bureau operates needs to be implemented. The initial resolution of a dispute should be at the ANNA Board level. Any member of the ANNA Board who also represents one of the Service Bureau partners must be substituted in the dispute process. Vendors/Users must have the right to go to outside arbitration for final resolution. The industry has expressed numerous competitive concerns about the prudence and desirability of establishing an industry utility licensed to a commercial organization. The objective of the governance structure should be to ensure accountability to the industry the utility is intended to serve. FISD members strongly urge the ANNA Board to include members of the industry in the governance of the ANNA Service Bureau.

ANNA User Group -- The ANNA User Group should include representatives from all segments of the industry involved with security identification. Its purpose will be to address the details associated with data quality, ISIN maintenance and licensing issues.

Based on initial conversations, we expect to confirm a meeting between Standard & Poor's/Telekurs Financial and the vendors/custodians/users shortly. The objective of that meeting is to determine (to the degree possible) what the creation of the ANNA Service Bureau will really mean to the industry. How will it operate? What are the product components? What level of commitment can the industry expect from Telekurs and Standard & Poor's on the open issues? How will the Service Bureau be accountable to the industry it's intended to service. We will keep members apprised of developments as they occur.

Exchange Contract Guide

FISD's Contractual Review Committee (formed at the May meeting in Warsaw under the direction of Claire Pons of Primark/Thomson) met during the September meeting to evaluate progress being made on the ECG and prioritize issues associated with Phase Two.

For members unfamiliar with this activity, the Exchange Contract Guide (ECG) is a reference database of exchange contract provisions with business commentary and sample text. Its fundamental purpose is to offer guidance on the development of effective contracts. Phase one has been completed and is posted on FISD.net.

The ECG has been well received by the membership and has been used as the basis of many of the new exchange contracts. (BTW -- Our web tracking service reports that the ECG has logged over 500 visitor sessions and has been downloaded over 100 times over the course of the summer.) During the working meeting, the CRC agreed to the following:

• Ongoing maintenance of the existing ECG is the most critical requirement. FISD is in the process of validating all sources currently cited in the ECG and will update them accordingly.
  
  
• The CRC will use the FISD Bulletin Board as the vehicle for ongoing communication about changes, new contract references and new issues to be added to the ECG.
  
  
• The CRC is working on the creation of an online library of original source material as a companion to the ECG. The contract library will also be linked to the MDPP. FISD is also contemplating tagging the ECG in XML and providing a cross-link to the MDPP. The result should be to allow members to access references from all exchange contracts, not just the samples currently posted on the web.
  
  
• The CRC has decided not to pursue phase two of the project (originally structured to include exchange fee structures, units of count, billing and payment and reporting requirements). Rather they decided to add these issues on an ongoing basis as determined by the CRC (the list of possible new areas for the ECG are included in the August report of the CRC.
  
  
  • First tier additions to the ECG include issues related to rights to create indices, web-hosting arrangements, and market data distribution scenarios (i.e. wallboards, remote access devices, contended access, free trials, etc.).
    
    
  • Second tier additions include issues related to units of count and reporting requirements. The CRC is approaching the second tier issues with caution -- and notes that they are difficult to manage in a neutral manner. Their approach is likely to focus on the business principles related to efficiency, administration and implementation and to ensure that the right links are created to the MDPP.

Closing Price Project

Transparency and Consistency of Display

The principal issue behind FISD's closing price project is one of definition, transparency and consistency of display. The conclusion from our working group activities is that there is a problem in terms of how closing prices are processed, labeled and displayed by vendors which in turn creates problems with the accuracy and consistency of data and leads to uncertainties and inconsistent valuation results among the investment industry.

Over the past year, FISD has been engaged in a research initiative designed to clarify the definition of closing price and define the range of prices disseminated by exchanges. Our research (now over 100 marketplaces) focuses on the full range of issues related to how closing prices are calculated, which additional prices are included, the conditions that cause modification, IPO pricing rules and pricing conventions when there is no trading activity. The objective of the research (in addition to transparency) was to enable vendors to use the data as a foundation with which to audit their exchange feed specifications.

We are now at a key juncture. FISD has assembled a significant amount of anecdotal evidence about the nature of the transparency and consistency of display problem. And we have support among the vendor community on the motivation and rationale behind this issue. However, the steps being advocated by the user community require broad buy-in within the vendor organization. The resources required to audit a vendor's exchange feed specifications (accuracy of interpretation) and their valuation products (appropriate labeling and consistency of display) are somewhat significant. The bottom line is that a strong customer message is required to win the internal competition for resources.

The truth is that we have a dichotomy. On the one hand, the investment advisors, portfolio managers, index providers, technical analysts, custodians and pricing specialists indicate that inconsistency is a serious problem. On the other, the vendors are saying that there is not a significant enough demand by their customers (business justification) to focus resources on addressing this problem. This dichotomy has led to inaction. Bill Conti (Merrill Lynch) has accepted the position as the new member sponsor of this activity. We've discussed this issue and are making the following recommendation:

1. FISD has identified a representative list of organizations that are most interested in this issue. That list includes -- BONY, Capital Group, CSFB, Deutsche Bank, Dow Jones, Fidelity, FTSE, Goldman Sachs, Lipper, Merrill, Morgan Stanley, Morningstar, MSCI, S&P, State Street Bank and UBS. Please note that any FISD member interested in this issue is welcome to participate.
    
2. FISD will contact these organizations to identify the right people (at the right level) affected by this problem. We will explain our project and objectives in an effort to either get organizational buy-in to the importance of the problem or remove it from the agenda.
    
3. If we get enough support (i.e., firms willing to endorse the activity) we will craft an informal process to get the users together with the vendors to outline an approach for defining and implementing a solution.
    
4. Please contact Michael Atkin or Bill Conti with your thoughts and insights.

Extended Trading Hours

The Securities and Exchange Commission (SEC) announced on October 6 that both CTA and Nasdaq have agreed to implement a "T" modifier to distinguish after-hours and regular session trades. This new modifier is designed to deal with complaints about confusing end-of-day security prices. The confusion has arisen from inconsistencies among market data vendors and media concerning when they take their end-of-day snap shots of stock prices. The lack of consistency is particularly a problem if small volume after-hours trades result in a sharp price change from a stock's regular session closing price.

The Investment Company Institute (representing the US mutual fund industry) and market data vendors have both expressed significant interest in having international exchanges adopt a similar modifier. FISD is looking to explore the issue further. Our goal (for the moment) is information gathering. When are trading corrections finalized and posted as official? Are condition codes being implemented appropriately? Are exchanges planning on flagging extended sessions in their feeds? If so, how will they be implemented?

FISD Operational Issues

1) FISD Meeting in Chicago Canceled

Members have overwhelmingly suggested postponement of the planned November 8-9 FISD meeting in Chicago (during the Futures Industry Association's Exposition). The indication is that it is too close to both the just completed meeting in Paris and the NYC meeting in December.

2) WFIC Planning Committee being Formed

Planning is getting underway for the 2001 World Financial Information Conference in London. The meeting is being planned for the first week in October. Jenni Neumann (Bridge) has agreed to be the Conference chair. Members interested in participating on the planning committee should contact Michael Atkin or Jenni Neumann.

3) Asian Trade Mission

FISD members have expressed significant interest in the concept of an Asian trade mission. The primary purpose is to ensure that the Asian marketplaces and other financial information participants are offered the opportunity to become more fully integrated into the activities of FISD. We are exploring possible dates and will propose an itinerary shortly. The Singapore, Hong Kong and Taiwan exchanges have already expressed interest. For more information -- and to express interest -- please contact Michael Atkin.

4) European FISD Coordinator

FISD members in Europe have had in-depth discussions with the candidates to become the FISD European Coordinator. The primary functions will be project management and coalition development. The position has been funded by SIIA. We expect to make a decision shortly.

5) FISD.net

FISD.net (our market data portal) was launched in April 2000 and has been extremely well received by the membership and the industry at large. Since its launch, we have logged over 5,000 unique visitors and some 20,000-visitor sessions. Over the course of the summer, the daily financial industry news scan has been the most requested page. The contracts database is the number one application. The DFQ and ECG are the most downloaded files and the MDPP is the most accessed issue area. We have made a number of improvements to the site and are looking to implement the MDPP database this December. Please direct rants and raves to our web content manager Zeba Khan.

6) FISD Elections

Twelve positions on the FISD Executive Committee -- as well as the Chair and Vice-Chair positions -- are set to expire in December 2000. The existing Executive Committee elects the Chair and Vice-Chair. Executive Committee positions are elected by each constituency group and are open to any interested FISD member.