Would you pay 1,000,000,000 USD for public information?
The IBOR fallback has been a hot topic over the last years. Will it soon also be an expensive topic? Don't worry, dear Reader, I do not plan to charge for my blogs (multi-curve and muRisQ). You will continue to get the most accurate and independent information available at the best price possible (0 USD). You may even find from time to time some open source code.
No, my question is related to the adjusted RFRs and adjustment spreads. According to a recently published Bloomberg FAQ, "Yes, a license will be required from Bloomberg for usage of the ISDA fallback rates." Those rates are based on publicly available information. In USD, this is based on SOFR, available on the Federal Bank of New York website and some past LIBOR rates. From those public rate, a public formula of interest rate composition, which has been public for more than 500 years (see for example Pratica della mercatura published around 1340), is used. I have myself published more recently (only 18 months ago) some open source code that does the computation (see Has value transfer in LIBOR fallback started?).
What is Bloomberg selling with its "license for usage of the ISDA fallback rates"? The data is public, the formula is public, the implementation complexity is a couple of hours for a bank quant and has probably be done many years ago in all decent financial institutions. Moreover Bloomberg computations would come too late for risk management and trading purposes, so financial institution need to develop those things in-house anyway.
According to the document, "Government Agency" have to pay an annual license fee of 100,000 USD. Does it mean that the Federal Bank of New York will have to pay 100,000 USD for the privilege to receive its own data slightly transformed?
Where is this license coming from? Will the soon to be published ISDA fallback language include a legal license trap forcing users to take the Bloomberg license?
If we take 50,000 financial institution in the world and they need a "firm-wide usage license" at 20,000 USD, we get to 1,000,000,000 USD (one billion U.S. dollars). Not bad for selling public data freely available!
No, my question is related to the adjusted RFRs and adjustment spreads. According to a recently published Bloomberg FAQ, "Yes, a license will be required from Bloomberg for usage of the ISDA fallback rates." Those rates are based on publicly available information. In USD, this is based on SOFR, available on the Federal Bank of New York website and some past LIBOR rates. From those public rate, a public formula of interest rate composition, which has been public for more than 500 years (see for example Pratica della mercatura published around 1340), is used. I have myself published more recently (only 18 months ago) some open source code that does the computation (see Has value transfer in LIBOR fallback started?).
What is Bloomberg selling with its "license for usage of the ISDA fallback rates"? The data is public, the formula is public, the implementation complexity is a couple of hours for a bank quant and has probably be done many years ago in all decent financial institutions. Moreover Bloomberg computations would come too late for risk management and trading purposes, so financial institution need to develop those things in-house anyway.
According to the document, "Government Agency" have to pay an annual license fee of 100,000 USD. Does it mean that the Federal Bank of New York will have to pay 100,000 USD for the privilege to receive its own data slightly transformed?
Where is this license coming from? Will the soon to be published ISDA fallback language include a legal license trap forcing users to take the Bloomberg license?
If we take 50,000 financial institution in the world and they need a "firm-wide usage license" at 20,000 USD, we get to 1,000,000,000 USD (one billion U.S. dollars). Not bad for selling public data freely available!
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