Market Data Contract Awareness: A Quick Checklist


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The differences in market data contracts globally can be both substantial and subtle. The impact on policies and licences may not always be immediately clear.

The creators of contracts tend to work within the framework of their domestic market and legal system, which means different things can be open to interpretation.

It is no accident that many contracts are subject to the laws of Eng

land and Wales as the closest thing to a global standard, or the related laws of New York. However that leaves a lot of agreements outside this framework.


This bullet point presentation aims to provide a quick checklist of the important items to look out for when reviewing a market data contract.

1.0 Contracts and Common Issues

  • What are the immediate issues to be aware of?
  • As we have stated, contracts will vary from jurisdiction to jurisdiction with potentially different meanings, interpretations, terms and interpretations.
  • Contracts with vendors tend to be similar in outline, but the devil is in the detail.
  • There are multiple data policies and usage rights. Even agreements with a single exchange can vary in content and application depending on what is being offered.
  • Legacy and out of date contracts rarely manage to reflect the real world application of market data usage.
  • Even new contracts struggle to reflect real world usage. They are a snapshot in time.
  • Why? Users and re-distributors can and do find ways to use data in ways contracts did not envisage.
  • Different exchanges require different monitoring and reporting standards and requirements.
  • There are varying unit of count standards, especially regarding the principle of ‘netting’.
  • The lack of common standards by the data sources and exchanges in terms of policies and usage rights make the contract environment more complex to manage.
  • There are contractual conflicts of interest, data source contracts Terms & Conditions can and do conflict with vendor and re-distributors contracts.
  • This has not proven too much of an issue in the past but as the spider’s web of IPRs expands the more the potential for a conflict to develop.

2.0 Common Principles

  • Looking for contract transparency.
  • Ownership rights must be established and the business relationship between supplier and the client defined.
  • The supplier must have the right to offer the market data to the client.
  • All usage rights and policies should be clearly stated and understandable by all parties.
  • Derived data usage rights must be clearly stated and the term ‘derived data’ defined for the purposes of the agreement.
  • Distribution rights should be outlined and described.
  • Database maintenance, especially after termination of agreement, must be included in the agreement.
  • End Users may have to maintain data for regulatory reasons.
  • Creation of value added, for profit, products such as Indices usually require separate contracts, but some may not, i.e. Spreadbetting, or creation of structured products.
  • Requirements for the control, monitoring and usage of market data must be comprehensive.

3.0 Know Your Supplier

  • Often users do not know the ultimate source of the market data they use.
  • Know Your Supplier has yet to become standard policy within many financial institutions.
  • In contrast knowing where your price comes from is becoming ever more important.
  • Even in the world of MiFID2, IOSCO Principles, FRTB, and even just for understanding who spends what on who, this is not a topic at the top of users’ priorities as they consume market data.
  • When a user looks at a Bloomberg terminal it is a common assumption that all that data is Bloomberg’s, and the same for other vendors.
  • Also Banks and vendors do not create a relationship matrix of their suppliers, for instance although Vestek, WM & Company are both part of the Thomson Reuters group they are treated as separate suppliers.
  • The result is that a complete view of exposure to suppliers is unknown in terms of services and dollars spent.
  • This is because a supplier hierarchical relationship has not been established linking the ultimate suppliers holding company with its subsidiaries.
  • Also internally different business units may have individual relationships and contracts with the same suppliers.
  • This reduces the ability to negotiate better rates for services.
  • It also reduces the ability to conduct a comparative analysis of services to identify the best services to meet business requirements.

4.0 Important Contract Considerations

  • There are 4 obvious , yet key considerations which have an effect on the contract and the relationship between the supplier and the client. These include:
  • 4.1 Licences V. Sales.
  • Many clients, and particularly end users do not understand the difference or the principle.
  • Data Sales are a misnomer. The purchase that occurs is of a licence to use the market data, and then for a specific period, not to buy data for use on a perpetual basis.
  • IPRs remain with the licence seller and there is no transfer of ownership.
  • There should be stipulated clauses regarding permitted usage, including purging of databases after contract termination.
  • 4.2 Contract Enforcement.
  • There is usually an audit provision allowing the data source to inspect onsite records and usage.
  • Out of contract usage results in required back payments for any such usage.
  • Clients are normally required to report on either a monthly, or quarterly, basis, usage and changes to usage.
  • The data sources insist on having effective entitlements/permissioning systems in place to (1) control access to, (2) monitor usage of, and (3) report usage of their data.
  • Without such systems the contracts usually enforce uncontrolled access rights with the client having to pay for all potential usage. Note, this is different to all actual usage.
  • 4.3 Contract Changes.
  • Legacy contracts often do not reflect changes in data usage since signing. This is common with smaller vendors, data sources, and exchanges.
  • Many vendors do not communicate changes in contracts and policies directly to clients, unless the exchanges and data sources specifically demand this.
  • Such changes are usually reported via dedicated sections on the data sources websites, or via their vendors, e.g. The TR ‘Customer Zone’.
  • This reactive communication policy places the onus on the licensee to monitor these sites.
  • 4.4 Contract Terms.
  • Contract terms do vary and range from 12 months to 36 months, however 24 Months tends to be the norm.
  • Notice periods can range from 3 months to 12 months.
  • Few data sources or vendors allow a break out of the term period.
  • Automatic Rollovers. The data licence buyers are responsible for monitoring rollovers and placing any cancellations as required by the business.
  • Data Sources and vendors rarely inform clients of impending rollovers.
  • Clients should continually monitor the terms and conditions of their contracts.