Mark Hynes - thoughts on corporate disclosure

Opinions on changing rules, changing best practices, and their effect on investor relations officers.

Tuesday, February 15, 2005

The changing role of exchanges in news dissemination


Stock exchanges in Europe are facing a number of challenges, from consolidation to questions regarding their supervisory role.

An unsung area of change has been in the role they play in distributing insider data. Under the Transparency Obligations Directive, it likely that companies will now have a choice as to whether to send the news to their Stock Exchange – or not.

At the moment, stock exchanges across Europe provide news dissemination services for their listed companies. And in some cases, these are mandatory – meaning that companies are obliged to use the service. There are often no overt fees payable for this service, although the costs of running it are often recovered through the listing fees.

Also, there is frequently a process by which the exchange receives a copy of an announcement in advance of general dissemination, so that the exchange can decide whether a suspension of the stock’s trading is appropriate. Under some models, the issuer waits 30 minutes and then sends the announcement; under other models, the issuer waits until the exchange clears the announcement, which can then be distributed widely.

This is all highly likely to change under TOD.

First, as a principle, the issuer will be responsible for the content of the announcement, and the results.
Second, there will be no need to send the announcement to the exchange, either for ‘pre-approval’ or for dissemination. Issuers will be able to choose to send the announcement out themselves to the designated media, and in the way required by the regulators, or to use a service provider.

Costs. What will happen to the costs of this process? Well, several effects.

There will be a fee for the service, where it has previously appeared to be ‘free’. Exchanges will have to decide whether to offer a commercial dissemination service, in competition with traditional news disseminators.

It is likely also to change their income in other ways. Exchanges provide the news (along with pricing data) to financial news services such as Reuters, Bloomberg and others. They often charge a fee for doing so. This is likely to change, because, since they can no longer guarantee to provide 100% of the news, it will be less valuable to the news organisations.

Net net, expect your exchange to contact you with a proposal on dissemination of news. And remember that you will have a choice.

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