By Tristan Dehaan, Market Data Vendor Manager
Following a robust market data discussion on RegTechFS, we asked Tristan, a Market Data Vendor Manager at a European Asset Manager, to tell us about his efforts to help the industry get to more client-friendly market data contracts.
At the end of 2012, speaking as a well-placed member of the market data community, my peers from buy- and sell-side firms discussed what issues are high priority for us to tackle, especially if we focus on long term matters that just don’t seem to be improving. At first, the thought of audits, and the irritation of extra licensing, sprung to mind. But examining deeper the root cause of this led back to the contract itself.
We all work with a vast amount of suppliers in common, and multiples of individual licensed products from each. That results in hundreds of individual market data contracts we all handle. But why is it that, even when we all work in the same industry, the contract terms and conditions contain terminology, definitions, and language that can be so different and unclear in its meaning? Or worse, similar terminology between different vendors can have different interpretations, even when the products are the same. Confused? Welcome to the daily lives of market data people who handle contracts for the consumer side, constantly scratching their heads and pulling their hair out!
These discussions amongst the market data community led to the birth of Project CRISP: ‘Contracts that should be Readable, Intuitive, Standardised and Precise’.
Just to set the record straight, CRISP is not about taking over the world of market data contracts and becoming the ‘de facto’ standard (that would be asking too much). In an ideal world we would love everybody to use the same standard contract, no more than 3 pages (do you really need 30-50 pages to explain terms and conditions) in plain simple English so that anybody looking at the contract will always understand it in the same manner as the next person, no confusion, no debate, WYSIWYG. But in the real world this is not possible, so CRISP has been designed to be an additional tool to compliment the complex world of contracts.
CRISP has is a one page template that summarises the compliance side of the contract terms and conditions. It states what an end user needs to know so that he does not act in any way that is not permitted under the license. We all want compliance, but the user also wants to know it quickly and clearly. When this is known up front, we can easily assess that the license is fit for purpose or even if additional license(s) are required. Furthermore, as processes and business needs mature then the golden rules stated in CRISP will be a close ally to ensure any changes stay in parallel to the requirements.
Today it is too common that project people, IT and data architects are unaware of the do’s and don’ts of a contract, so the risk of non-compliance is high. CRISP is here to be the best friend of compliance, market data people and IPR (Intellectual Property Rights), the latter of which vendors and exchanges strongly defend to protect their business assets. So by now you must be reading this and thinking CRISP would be greeted with open arms by all; if only life were that simple.
Sadly, CRISP has not been universally praised, and even some consumer firms have expressed doubt. Firstly this is new, and new is different, meaning many people see fear rather than opportunity. Consumers are unaware how this will mature and if the vendors and exchanges will co-operate because this project will only work when all sides participate. However, satisfyingly, the principle behind this initiative has received many positive reviews and as such a number of consumer firms are ready to partake. Even better, some firms from the vendor and exchange community have agreed to beta test the program by taking their standard contracts and translating into a CRISP sheet to be reviewed and then distributed amongst the consumer community.
Of course, only time will tell whether CRISP will become an industry standard. With continued hard efforts, regular communication of progress and constructive co-operation from all, this initiative could develop to be the ‘norm’ and avoid the intervention of regulators by proving we are capable of solving problems for ourselves; after-all, we are not children in a playground, are we?
Final thought of the day is what will tip the balance? We are already a good year on from the start and we have some beta testers, but we are far from being an industry standard. It’s my opinion that as we deliver the beta results, and praise the pioneers, consumers will demand service delivery matching that of the CRISP pioneers and that more will follow. After all, as they say, Rome was not built in a day. And in the near future, we hope to have a city of our own: one of transparent and simple contracts.