Index License Agreement

When a license is granted for the first time, a transmitter may have a specific product in mind, for example. B an ETN. However, if the product is successful, the taker can use the index for other products, for example. B for other types of structured bonds, CDs, structured warrants or over-the-counter derivatives. The scope of the licence agreement should be taken into account in the context of the licensee`s future issuance plans. Compensation from the index provider. The index provider is generally compensated for all actions taken by investors in the corresponding indexed products. However, actions in which the investor`s damages are related to index data, miscalculations or corrections may be excluded from general compensation. Licensees can negotiate contractual terms to ensure that the index remains an appropriate benchmark over time and in a wide range of regulatory environments.

As a result, the taker may invite the index provider to do so: as stated in the introduction, regulatory attention to benchmarks has been strengthened. The European Regulation on Benchmarks is now effective and, although the United States has not implemented similar detailed rules, additional SEC claims have been made (under discussion). As a result, new licensing agreements will include clauses relating to the maintenance of the index`s regulatory status. These clauses include, depending on the circumstances, provisions relating to compliance with regulatory requirements applicable by index providers and the limitation of the use by licensees to activities that do not result in the application of additional regulatory requirements or index monitoring. These provisions complement the standard representations for maintaining the independence of the index by maintaining appropriate procedures for the governance, monitoring and auditing of the index and by using information on third-party prices. If a fund or product is linked to an index, the termination obligation must be carefully considered. For example.B. the end of an index license while the current contracts are index-related, this may prevent the issuer from accessing the data necessary to conclude these contracts. Similarly, it will take some time before a fund is tied to an index or measures the performance of an index, and commits (in the case of an indexed fund) to make the trades necessary to change the benchmark values after the end. In addition to normal situations to be taken into account with respect to liability provisions in a commercial contract (for example.

B quantity of caps and scopes of exclusions), it is necessary to take into account specific losses that could result from a default or an error on the part of the supplier. Is there, for example, room for manoeuvre in an indexed fund to recover the costs of trades that need to be realized because an index has been corrected to correct an error? Indexing licensing agreements are often structured into a number of separate contracts. The structure varies by provider, but the central element is a license to receive the data itself (for example. B index values on a real-time basis or at the end of the day or constitutive files). This is often supplemented by additional documents that confer rights such as the right to produce derivative data, the right to issue funds or products that follow an index, non-display rights of data (for example. B for algorithmic trade or use in risk modeling) and the right to publish or disseminate data.