Information Industry Assoc. Study Recommends Creating Task Force

A task force should be created to develop standards for streamlining the distribution of market data, according to a study by the Information Industry Association, a Washington D.C.-based trade group.

The report, "The Creation and Distribution of Securities-Related Information in North America," is the result of two years work by the exchange and regulatory committee of the IIA's Financial Information Services Division.

In describing the interdependencies that exist among participants in the financial information industry, the report draws a parallel with the oil business.

"Exchanges and dealers, like oil exploration and drilling companies, produce the crude information that is then refined and piped by vendors, either directly to the user, or wholesaled to other vendors for final distribution," the study says. "Like crude oil, raw information is processed in many ways, with the end product changing form in both appearance and purpose even though the base content is unchanged."

The report notes that conflict is inherent in any interdependent delivery chain, but says that some financial information disputes are caused by misunderstandings about the procedures of various participants.

By defining and explaining common practices, the FISD exchange and regulatory committee wants to help members of the financial information industry "to compete, arguing where appropriate over the real issues, not diverted by phantoms."

The study identifies several major areas of conflict between financial information industry participants, including:

the prices charged by exchanges, original information producers and other upstream producers to users and downstream vendors;

the collection of exchange fees and verification of the number of end users;

ownership and control of the information display format; and

the liabilities placed on downstream vendors for protecting the rights of upstream producers.

The report says that some of these conflicts can be alleviated through bilateral and industry-wide discussions while others, such as the wide diversity in standard contract terms, may be eliminated through "concerted action." However, the study says it is up to competing market forces to determine what is a fair price for financial information.

The Creation and Distribution of Securities Related Information is available from the Information Industry Association for $395, with discounts available for IIA members and for multiple copies. For more information, call 202-639-8262.