FEDERATION OF EURO-ASIAN STOCK EXCHANGES > YEARBOOK 2002/2003 > PAGE 13
WORLD FEDERATION OF EXCHANGES
INTRODUCTION
Information, an essential commodity for financial
markets, has a very elusive nature. It has many
of the characteristics of public goods, as
consumption by some does not usually prevent
consumption by others. Yet many forms of
information are also traded in specialized markets
in ways comparable to private goods.
Unexpectedly, we may turn to light for a better
understanding of the properties of information
and the challenges they present for exchanges.
During the pioneer times of scientific exploration,
a virulent debate emerged on the nature of light.
Some claimed light was an immaterial wave that
could travel through empty space and matter
alike and remain radiate. Others considered that
light could be broken down into physically
defined and countable units called photons. In
fact, modern physics considers that both sides
were right and holds that light can equally be
considered as a particle or as a wave. Defining
it as one or the other only depends on when and
how you need to use its properties.
Information has a duality which is quite similar
to that of light: it can travel and disseminate
freely like a wave through all sorts of media, or
it can be made proprietary, bundled and
commercialized in a defined legal or contractual
framework, just like photon obeying the laws of
physics. This dual vision was clearly perceptible
in insights shared with Prométhée by several
exchange executives, as for instance at the Stock
Exchange of Thailand (SET). In their words, for
exchanges like SET, “in the short run, the most
important thing is to increase our investor base
by disseminating both trading and listed
company information on a mostly free and real-
time basis, instead of generating maximum
revenue out of it”. Yet in the long run and once
it has reached a size it considers as critical, SET
may uphold the view that it has a right to “sell
part or all of the information” that it gave for free
earlier in its growth process.
As this and other exchanges’ experiences
suggest, market data and market-related
information can be apprehended both as a free
public good and as a proprietary and tradable
good. It all depends on when and how one needs
to consider each aspect. During some stages of
commercial development, an exchange is most
likely to consider free dissemination of data as
crucial to attracting investors and liquidity.
Exchanges in more mature markets might find it
more interesting to dispense only core and
mandatory data for free while commercializing
real-time and additional data through vendors.
In either case, working within their regulatory
framework, exchanges decide on the fate of the
information they generate: will it be given for
free or will it be sold? They have to integrate
intellectual property management choices into
their overall strategy for growth.
Although there are some differences in approach
depending on the countries, intellectual property
can roughly be divided into five main areas: (1)
patent, which is designed to protect inventions;
(2) copyright, which protects original author’s
works – including literature, sound recordings,
films, broadcast and cable programs,
typographical arrangements or published
editions; (3) industrial design rights, which
protects the original design of industrial
processing devices; (4) registered trade marks,
protecting “any sign capable of being
represented graphically and capable of
distinguishing the goods and services of one
undertaking from those of others” 1 , and (5)
confidential information rights, which protect
commercial or trade secrets. Each area has
corresponding territorially-based legal regimes.
But what about information such as market data?
Does this specific material fit into any or many
of the five categories of protection? Can
exchanges really understand their information
dissemination business in the light of the present
IP regimes? As we have seen in the analogy with
light, there is clearly an ambiguous status for this
kind of information. This paper tackles this
ambiguity by sketching the main tendencies and
issues which are springing up from particular
cases in this and other industries around the
world. Exchanges will benefit from keeping track
of these issues linked to information either
because they can impact their business directly
(e.g. in the field of market data) or because they
set a framework that they must take into account
in thinking about their strategic positioning.
Information property rights is a subject which
can thus be addressed in a three-fold movement.
First, information must be positioned as a critical
issue for exchanges: even if it can appear to be
a free resource – exchanges themselves often
knowingly give it away for free in their own
interest in the realization that there is true value–
the downfall of the early Internet libertarian
frenzy proves that in reality information is a highly
valuable and appropriable commodity. Hence
in part 1, we will explore this interplay between
free-for-all “information commons” and the
“innovation commons” from which technology
is gradually leading information goods to
enclosures.
Secondly, this new reality is not yet fully
acknowledged in the present national and
international IP regimes, and exchanges have
adapted through the usage of ad hoc, pragmatic
solutions. Part 2 will therefore explore both the
existing IP regimes and the pragmatic solutions
exchanges have brought to address the absence
of clear and harmonized regulation in the specific
field of market data.
Together, these three aspects of information –
and notably this tension between “information
commons” and “innovation commons” – can
provide the necessary background analysis for
exchanges to use to their best advantage the
dual properties of information, a light in the
market that both radiates as a wave and can be
enclosed and traded as a valuable commodity.
CONCLUSION
The three-fold analysis put forward in this paper
highlights the importance of transformation in
IP regimes for informational goods.
The role of information as an economic object
continues to change rapidly, as we saw in
part 1, with the impact of technological advances
in the fields of communications and networks.
As a consequence, as we showed in part 2, IP
regimes can appear to be out of tune with the
way information is actually being used, and
notably by exchanges. Lex informatica – a
pragmatic, software-based set of decentralized
solutions – tends to fill the vacuum. The
exchange community has reacted quickly, and
many exchanges can be seen indeed as
mastering an almost Darwinian art of adaptation.
Meanwhile, however, as shown in part 3, other
key actors are taking initiatives, either alone –
like Schwab – or in concert – like the FISD– to
trigger lawmakers into providing a fully fledged
answer to fundamental issues regarding
information management, that may well disrupt
the pragmatic balances currently struck by
exchanges.
Exchanges will be increasingly confronted with
the dialectics of information commons, in which
visibility and liquidity can be established, and
innovation commons, from which the tools of
enclosure can be built. The latter is probably the
strategic arena in which they must increasingly
excel individually, once they achieve a
preeminent position that allows them to turn
some types of market data into valuable products.
Yet, collectively exchanges must also make sure
the force of “information as a commons” remains
on their side.
Defining this combination of a collective effort
to preserve open information commons and of
individual efforts to enclose new or specially
valuable information assets is among the
fundamental challenges of the early 21 st century
for the world of exchanges.
To read a complete copy of the text of this study
please go to:
http://www.world-exchanges.org.
Lastly, there is a response to these recent trends
in the field of information property from courts
and regulators. These responses – captured in
part 3 – are the building blocks for future IP
regimes, which the exchange community must
be aware of.
1
Intellectual Property Law, Jennifer Davis, Butterworths, 2001
Contact Information
Mr. Thomas Krantz
Secretary General
[email protected]
www.world-exchanges.org