Flat Fee Plan For LME Ticker Brings Vendors Together Against Reuters

Several London-based vendors of commodities prices have banded together to make sure they're not pushed around by the big kid on the block -- Reuters Ltd.

The group recently sent a letter to the London Metal Exchange protesting against the price structure for its new ticker because it favors Reuters over smaller vendors.

Bridge Information Systems, ICV Information Systems Ltd., Knight- Ridder/Unicom, Pont Data, Quotron Systems Inc. and Telerate Inc. are said to have signed the letter.

The LME recently hired Reuters to design and operate its first real-time pricing service, which was developed to comply with Britain's new Financial Services Act. Before the ticker was introduced, Reuters and Knight-Ridder/Unicom collected LME prices by placing reporters on the trading floor.

Sources say the LME wants to charge vendors an annual rate of 50,000 pounds sterling to receive the real-time pricing service and that half this fee would be paid to Reuters.

The letter sent to the LME says charging a flat fee for the ticker will discriminate against vendors with only a few subscribers receiving the LME price feed. The vendors have proposed a price structure based on the number of terminals that receive the ticker instead of charging a flat rate.

"The LME would make a lot more money if it charged some sort of end-user fee instead of charging a flat fee because that would encourage every vendor to take the feed and make it available to clients worldwide," says David Taylor, managing director of ICV Information Systems.

In addition to price structure, the vendors are concerned that Reuters will have better quality data since it is operating the price ticker.

The vendors have agreed not to publicly disclose the contents of the letter, says Taylor, because we "want the LME to have the opportunity to consider what we're proposing without the pressure of publicity."

However, Taylor says the LME has "responded favorably" to the suggestions made by the vendors and that he expects the issue to be resolved shortly. David King, director of finance for the LME, could not be reached for comment.

The revolt in London may be an isolated incident, but it serves as a warning for the Chicago Mercantile Exchange, which will offer its Globex electronic trading system on the Reuter Dealing 2000 system. Exchanges that depend on Reuters to supply infrastructure must take care not to offend other vendors.