S&P to Cut ISIN Fees Post EU Probe, Users Claim More Needs to be Done

Industry participants and European trade associations have welcomed the proposed commitments made by Standard & Poor's (S&P) to the European Commission (EC), which would represent a dramatic reduction in the cost of licensing US International Securities Identification Numbers (ISINs) from its Cusip Service Bureau, but believe more needs to be done to ensure free access and use of security identifiers.

The EC launched formal proceedings against S&P on January 12, 2009, investigating whether the fees being charged by the company for databasing ISINs based on Cusip numbers were in breach of EU competition law, after receiving a complaint from European trade associations The European Fund and Asset Management Association (EFAMA), the Information Provider User Group and the Swiss Information Providers User Group, in 2008.

In an EC notice published yesterday, the EC said that under the proposed new pricing policy, S&P commits to abolish all charges to indirect users for the use of ISINs within the European Economic Area (EEA). "This implies, firstly, that licensing fees paid by all indirect users currently having a licensing agreement with S&P allowing them to use ISINs within the EEA will be discontinued. Secondly, S&P commits not to impose licensing fees on any indirect user not having currently a contract with S&P," said the statement.

S&P has also offered "to distribute US ISINs to information service providers for redistribution in Europe and to financial institutions wishing to source US ISINs directly from S&P for a maximum total price of US$15 000 per year," a significant reduction for most firms.

Frankfurt-based Rudolf Siebel, managing director, head of market and service, at German investment fund and asset management industry group BVI Bundesverband Investment und Asset Management, said: "The glass is already half full. The fact S&P has said any ISIN usage by non-data vendors will be free of charge is a huge step forward in the right direction and was one of our major aims from the start."

"We have to appreciate that the proposed commitments would lead to a complete release in monitoring terms for the usage of ISINs going forward," he added.

However, many user firms believe S&P's proposed commitments do not go far enough, because of the various conditions attached and the fact S&P continues to implicitly assert ownership of intellectual property rights over the ISIN identifiers by imposing conditions over their use.

The EC's notice, in fact, states that indirect users will "have to conclude an agreement with S&P that prohibits the extraction of Cusips (the equivalent of US ISINs for national use) from the ISIN data as well as the redistribution and resale of ISINs to companies other than those belonging to the same group as the user."

Siebel says: "This is a market consultation...we hope that the EU financial services industry shares the point of view of the associations in that we not only need a free of charge but also a free of license and thus free of contract usage of ISIN's."

Meanwhile, a statement released by EFAMA yesterday also highlighted this as one of the outstanding issues yet to be tackled. It claimed "the main stumbling block to a fair settlement is that S&P is not willing to give up on passing on a Cusip usage agreement to ISIN users."

The statement explained that "free usage of US ISINs in all internal and external databases and applications without any contractual commitment to the end user, independent of the dissemination channel of the data and without any reference to the US Cusip identification code," would be one of the necessary requirements for them to look favourably to a settlement between S&P and the European Commission.

"It's not for S&P or for us to decide what terms and conditions it offers to the market, but while the EC takes a final stance, it's our chance to voice our concerns," said Siebel.

According to a statement released by S&P, "the new service will be made available within five months of the completion of the market testing period and a formal decision by the EC."