Tuesday, February 10, 2015

UTP Vendor Alert #2015 - 3
REVISED: UTP Administration Provides FAQs for the UTP Level 1 Non-Display Fees

Markets Impacted:

Products Impacted:

Contact Information:

What you need to know:

  • UTP Administration is providing the following FAQs for the UTP Level 1 Non-Display Fees to clarify and provide guidance regarding the administration of the fee. Please see UTP Vendor Alert 2014-05 for details regarding the new fees effective as of January 1, 2015.

Please provide a definition of and a summary of non-display fees?

For purposes of the proposed fees, Non-Display use refers to accessing, processing or consuming data, whether received via direct and/or redistributor Data Feeds, for a purpose other than solely facilitating the delivery of the data to the Data Feed Recipient’s display or for the purpose of further internally or externally redistributing the data. Further redistribution of the data refers to the transportation or dissemination to another server, location or device. In instances where the Data Feed Recipient is using the data in Non-Display to create derived data and use the derived data for the purposes of solely displaying the derived data, then the Non-Display fee schedule does not apply, but the data may be fee liable under the regular fee schedule.

The following fees apply to the use of data in a manner that does not involve the display of the data.

TIMING
ENTITLEMENT NAME
FEE
Real-Time Non-Display Trading System/Electronic Trading System $3,500 per Trading System per month
Real-Time Non-Display Internal Use (Internal Enterprise License) $3,500 per firm per month
Real-Time Non-Display Use on behalf of Customers (External Enterprise License) $3,500 per firm per month

Does my firm need to submit the Non-Display System Declaration if my firm receives a delayed data feed?

No, the non-display fee only applies to Vendors that receive a real-time data feed.

How can my firm declare Non-Display Use?

Vendors can declare Non-Display use by completing the UTP Non Display Usage System Declaration.

Does my firm need to submit usage report for Non-Display usage?

Vendors will need to report monthly on the Non-Display Trading System usage but only annually for the Internal and External Enterprise Licenses. Vendors must contact the UTP Administration team if there is a change in Non-Display Use.

If my firm only uses a part of the real-time UTP Level 1 Service in Non-Display, are fees due?

Possibly. Any and all data sourced from the UTP Level 1 data feed and used in a Non-Display manner could require payment of a Non-Display fee, with the exception of volume only data. Please see Pricing Notes A1 and D1 in the UTP Data Policies.

Can a list of examples of non-display uses be provided?

Yes. Examples of non-display uses for all three types of Non-Display Use are shown below.

Examples of the Non-Display Trading System Fee include, but are not limited to:

  • any trading in any asset class
  • exchanges
  • alternative trading systems (ATSs)
  • broker crossing networks
  • broker crossing systems not filed as ATSs
  • dark pools
  • multilateral trading facilities
  • systematic internalization systems

Examples of Non-Display Use for Internal Use and External Use include, but are not limited to:

  • automated order or quote generation and/or order pegging
  • price referencing for algorithmic trading
  • price referencing for order routing
  • operations control programs
  • investment analysis
  • order verification
  • surveillance programs
  • risk management
  • compliance
  • portfolio valuation

Could my firm be charged multiple times?

Yes, a Vendor's Non-Display Uses of data may subject the Vendor to a Non-Display Use fee for each of the three categories.

For example, if a broker-dealer operates an ATS, the Non-Display Use fee for electronic trading systems would apply; if it operates a trading desk to trade with its own capital, the non-Display fee for internal use would also apply; and, if it also operates a separate trading desk to trade on behalf of its clients, the non-display fee for use on behalf of customers would also apply. If, in addition to the ATS, the Vendor also operates a broker crossing system not registered as an ATS, then two non-display fees for electronic trading systems would apply.

A Vendor must count each electronic trading system that uses data for payment of the Non-Display fee for electronic trading systems. Vendors that operate Electronic Trading Systems are required to complete an updated Declaration at the time of the change to reflect the change of use.

For the following specific examples of non-display use, how would my firm be charged?

EXAMPLE
FEES CLARIFICATION
If my firm operates a single Trading System, the trade is not matched internally on behalf of customers, and the order is routed outside for another exchange, what fees are due? The firm would be charged $3,500 for the Electronic Trading System fee for the matching of some trades and $3,500 for the External Enterprise License fee for the routing of the fees on behalf of customers.
My firm uses a server based application. The server is aware of our firm’s positions and uses a data feed to subscribe to market data for our holdings. Market Values, Theoretical Values, P&L, Greeks, and implied volatility for derivatives are computed on the server in real time and broadcasted to each user’s client application for viewing. Calculations are made on the server. When the non-display calculations are on a separate server, and even if the data is viewed/utilized by Subscribers that are already paying the display fees, the non-display fees still apply. [Internal or External depending upon the usage]
My firm’s display product allows the customer to access a "send button" which initiates calculations of our system referencing prices in order to route orders (which is in essence order routing). The customer clicks a button that results in an order going to a broker or exchange. The data provider has to reference the price in order to send the order. Is this non-display usage? Yes, price referencing for order routing is fee liable as either the Internal or External Enterprise License, depending on if the data is on behalf of customers or not.

What should I do if I have a question that is not addressed?

For questions not addressed in this Vendor Alert, please send your question to admin@utplan.com for a response.

Where can I find additional information?