Data Contracts, etc

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					Data Contracts, etc
FISD Quarterly General Meeting
14 September 2006, London

Richard Kemp
Kemp Little LLP
Solicitors, London EC2
  Just when you thought you had enough to worry about …

  … along come the lawyers with stuff about IP rights and contracts

 IP rights                                       contracts
      Does your organisation view data as             Essentially reflect market practice and
           An asset that gives the business             market forces
              competitive advantage?                   Where in practice all the drivers:
           Stuff that clogs up your servers?               Technology
           The lifeblood of the business?                  Commoditisation
           A service you have to pay for like              Customer fragmentation
              any other?                                    Technology
      Response will determine how your                     MiFID and regulatory
        business feels about IP                       work themselves out
MiFID reprise – (1)

  Pre-trade information disclosure requirements
     Applies to:

        Systematic Internalisers (article 27),

        MTFs (article 29)

        Regulated Markets (article 44) trading listed shares for which there is a liquid market

     Requirements are to:

        publish current bid & offer prices and depth of interest/price per size(s) of class of share

        on a continuous basis during normal trading hours

        on a reasonable commercial basis (non-discriminatory - SIs)

        SIs – in a manner which is easily accessible to market participants

          (either facilities of the regulated market; through the offices of a third party;

          or proprietary arrangements)
MiFID reprise – (2)

    Post-trade information disclosure requirements
   Applies to:

      MTFs (article 30)

      regulated markets (article 45) trading listed shares

      Investment Firms (article 28) trading listed shares outside an MTF or a regulated market

   Requirements are to:

      make public volume of shares, price and time of trade

      as close to real-time as possible

      on a reasonable commercial basis

      IFs – in a manner which is easily accessible to market participants

        (either facilities of the regulated market or MTF; through the offices of a third

        party; or proprietary arrangements)
MiFID reprise – (3)

  Some draft Level 2 advice
   ..normal trading hours..
    need to be predetermined and made transparent to investors close to real time as possible..
    As close to real time as possible given characteristics of trading venue but no >3 mins

   ..easily accessible to the market..
    RMs & MTFs direct through contractual arrangements or indirectly through data vendors
    SI/IFs through RM or MTF, third party arrangements or through proprietary means
        SIs remain responsible for information

   + in each case the publication arrangements must:
    ensure that information published is reliable by monitoring
    is capable of publishing information within required timeframes
    functions during normal trading hours
    be accessible to all interested parties on reasonable commercial basis
    publish the data in a manner that does not impede its consolidation
MiFID reprise – (4)

  MiFID: data and databases

         Systematic Internalisers, MTFs and Regulated Markets all have obligations to publish

          share trade data under MiFID

         Creation of distributed databases

             Ownership of rights „in relation‟ to those trades?

             How will this directive affect current IPR ownership arrangements?
Data – the elusive asset
    Data is funny stuff in legal terms

        But enormously, and increasingly, valuable

    IP rights are like wrappers around the information

    So, the same information may be:

            in the form of a work in which copyrights subsists

            a database in which database right subsists

            subject to confidentiality

            regulated by contract as to what can be done with it
  Market data flow - fees, IP rights & contracts
                               COPYRIGHT?                                                                  DATABASE RIGHT ?,

         what: 1000 Bigco
         how much: x pps
         when:12.30 09.03.06                                                       revendor, third party data feeds
         where: ABC exchange
         seller: MAM
         buyer: Fidelity
         etc, etc                 • combined with details of „n‟ trades           • licensed to revend, combine, etc
                                  • processed on ABC systems                      on terms of ABC licence agmt

                                                                        fees                                        fees
    Trade 1

                      report in protocol
                      prescribed way                         real time datafeed                           real time datafeed


                      agreement                                     licence agmt                                agreement

IP rights
     “what is worth paying for is worth protecting”

        English law pragmatic approach

        Need licence to avoid infringing others‟ rights

     Mix of rights

        Copyright – reproduction of form, not conceptual

        Database right – extracting and reutilising

        Confidence – aggregated, compile data may be protected

     Layering of rights to real time data

        Different sources, different revendors, licensors, etc
            General IPR Issues                   Market Data Issues

 Licence                             Use of standards (esp MiFID)

    Scope & purpose                  Ownership and licensing of data created

    Sub-licensing                    under regulatory requirements

    Reservation of rights            Commingling

 IPR clause                          Derived data

    Keep v broad                     Post termination use

    acknowledgement, etc

    tool for enhancing IPR scope?

    MiFID superimposes regulatory obligations regarding market data

    onto a complex background legal position

       IP and contract rights and obligations

       Influenced by market practice more than anything else

    so players need to pay particular attention

    because data rights are increasingly important

Richard Kemp
    email:
    direct: +44 20 7710 1610
    bio: