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European Firms Receive RIC Questionnaire from the EC

LONDON—The European Commission (EC) has sent out a questionnaire focused on terms of use relating to Reuters Instrument Codes (RIC), the instrument identifier used by Thomson Reuters, Inside Reference Data has learned.

Officials at banks in Continental Europe say they received the questionnaire in September, and had two weeks to return it to the Commission.

Thomson Reuters has not been approached by the EC regarding its licensing of RICs, but “in the event of any such investigation, Thomson Reuters would be happy to assist the EC in dispelling any concerns it may have regarding Thomson Reuters RIC licensing policies,” according to a spokesperson at Thomson Reuters. The EC declined to comment when contacted by Inside Reference Data.

Sources say the “detailed and precise” questions, issued by the competition division at the EC, relate to limitations in the way the code can be used and intellectual property rights. The RIC code, like some other proprietary codes, can currently not be used for accessing data from other providers based on the standard licensing practises, and, according to officials receiving the questionnaire, the questionnaire aims to establish if this hinders clients in moving from one provider to another.

John Best, director and senior consultant at London-based Kendale Systems and Services, says it is a major concern for firms, and it is difficult to change to a new data provider. For exchange-traded products it is possible to change, and firms can normally use a conversion product, but this is not the case for OTC products, says Best: “It is even difficult to switch between [Thomson] Reuters and Bloomberg.”

The ticker-like RIC code is only used to identify financial instruments and indexes in the Thomson Reuters products, and customers do not pay separately for the identifier. When taking a feed, the identifier becomes embedded in the clients’ infrastructure, and this is why consumers say it is difficult to switch to a new provider. Thomson Reuters enforces its intellectual property rights for RICs, explains Best.

For identification codes that are not publicly recognized standards, third-party market data vendors are typically not allowed to disseminate them due to intellectual property rights. If proprietary standards were to become open, other companies would be able to cross-reference them against ISO standards, such as ISIN codes, and, according to market participants, this could potentially go a long way toward solving security-level symbology issues, ease data integration and lower the total cost of data ownership.

Princeton-based Ed Ventura, president, Ventura Management Associates, says the terms of use of identifiers have been a longstanding issue that cause hundreds of days of work within just about every company in the business. “I agree that it [the terms of use] makes it more difficult to change vendors, but only if the company single sources, which is rare, and doesn’t have its own security identifiers.”

The concept of making it easier for consumers to switch between providers has previously been enforced in the mobile phone industry, where it is now possible for EU consumers to change mobile phone operators while keeping old phone numbers.

Ventura says it is not surprising the EC is looking into identifiers considering the transparency issues being focused on by all financial services regulators. “From their view, they must be asking how one can expect transparency in the market when something as basic as a key identifier cannot be stored within the custodial system,” he says, talking about identification issues in general.

The EC launched formal proceedings against Standard & Poor’s (S&P) on January 12, investigating if the fees being charged by S&P for databasing International Security Identification Numbers based on Cusip numbers are in breach of EU competition law. Market participants say it makes sense the EC investigates market practises relating to different securities identifiers due to the ongoing case against S&P.

London-based Dan Kuhnel, chairman of the Association of National Numbering Agencies (Anna), who is not familiar with the latest questionnaire, suggests it could be that they are looking at what other identifiers are in existence, and what usage conditions apply to them to make sure there are harmonized practises.