Index License Agreement

Indexed products are a pillar of the structured products market, and issuers regularly negotiate and enter into licensing agreements with index promoters in relation to these products. Given the recent regulatory focus on indices and the increasing use of proprietary indices, we address the following important considerations when preparing or negotiating index licensing agreements. Index licensing agreements are often structured as a series of separate contracts. The structure varies by provider, but the central element is a license to receive the data itself (for example. B, real-time or end-of-day index values or constituent files). This is often supplemented by additional documentation that includes rights such as the right to create derivative data, the right to issue funds or products that reproduce an index, the right not to display the data (e.B. for algorithmic trading or for use in risk modeling) and the rights to publish or disseminate the data. Finally, this is often complemented by non-contractual “living documents” such as usage guidelines, index rules, or method documents (which often describe key principles on topics such as error handling, recalculation, and representation). Index licensees should also take into account the index provider`s ongoing assurances regarding the publication of an updated methodology in the event of a change in the calculation of the index and disclose the requirements relating to such changes or updates to the methodology or to disruptions or corrections to previously published levels. Licensee`s Compensation. The index provider is responsible for the ownership of the intellectual property it licenses under the Agreement.

Accordingly, a licensee should negotiate compensation for third-party claims relating to the use of the Index or related trademarks. It is not uncommon for index providers to require a prior review of offer documents. However, licensees should consider whether this is feasible within the expected time frame of issuance. The language of the form approved before the first issue (or included in the license agreement) is often an acceptable alternative to pre-screening offer documents, although some index providers may require that they also receive the relevant offer documents for subsequent review to ensure compliance with the agreed language. (c) Licensor and Licensee each agree that, to the extent licensee uses Licensor`s Marks in connection with Licensee`s own trademarks (e.B. with respect to the fund name), neither party owns, registers, licenses or discontinues such resulting “Composite Mark” and each party retains exclusive ownership and ownership rights in its respective marks. The parties will consult and cooperate with each other to take steps reasonably necessary to maintain the validity and enforceability of this composite mark and to protect such marks from unauthorized use during the Term. Such a compound sign shall be identified in Appendix B as pre-approved designations. It is common for index license agreements to include audit rights in favor of the vendor to verify compliance with the contract and fees. Frequent or in-depth audits can be disruptive and costly, so care must be taken to define the parameters of the audit to ensure that disruptions are minimized (for example. B specifying that sufficient notifications must be made and audits must be carried out at reasonable times) and that confidentiality is maintained.

And, of course, no discussion of licensing agreements would be complete without a discussion of intellectual property issues. Plural publishers must maintain an easily accessible “library” of their index license agreements as well as a list of their inventory and all relevant expiration dates. Calendar reminders can also be implemented at any deadline. When these mechanisms are in place, it often becomes easier to launch new offerings because the status of all required licenses and the language of the required license agreement are easier to obtain. (g) Upon expiration or termination of this Agreement for any reason: (i) all applicable licenses granted herein shall terminate immediately; and (ii) Licensee shall immediately cease all use of the Index, Index Confidential Data, Index Data, Licensor`s Marks and all other Intellectual Property Rights of Licensor; and (iii) Section 2, Section 4 (so far all applicable License Fees will be paid), Section 5(h), Sections 8, 9, 10, 11 and 12 will survive the expiration or termination of this Agreement. Index licensing agreements typically include a requirement to include certain disclaimers and assignments when referenced to the index in documentation or output reports, and may also require that such documentation be approved by the vendor prior to distribution. It is understandable that the supplier wants to control how its products are presented (both from the point of view of reputation and the management of liability to third parties), and it is in the interest of both parties to ensure that the characteristics of the index are correctly stated. On the other hand, lengthy reviews and discussions can be an administrative burden and reduce time-to-market.

Index provider exemption. The index provider is generally compensated for all lawsuits brought by investors in the respective indexed products. However, claims where the investor`s loss is related to index data or calculation errors or corrections may be excluded from general compensation. The acquisition of an exclusive right to use an index for a particular type of structured product may confer a competitive advantage on the licensee. On the other hand, the licensor is likely to charge increased royalties for that privilege. A licensee seeking an exclusive license may also want the option to convert the license to a non-exclusive license at a lower cost. Indices play a crucial role in asset management, more clearly in passive investments, but also in measuring the performance of active funds and investment strategy. The contraction of indices has received relatively little attention, but there are specific market standards for this type of contract (which may seem unusual at first glance for those who are more accustomed to other types of trading contracts), and there are a number of issues for the asset manager that deserve careful consideration. This article discusses some of the key issues to consider when negotiating an index license agreement, as well as some practical steps for managing index licenses1. As we have already mentioned in the introduction, more attention has been paid to benchmarks through regulation. The EU`s benchmark regulation is now in force, and while the US has not introduced similar comprehensive rules, there have been calls for additional SEC regulations (discussed in more detail here).

Therefore, the new licensing agreements will include clauses related to maintaining the regulatory status of the index. These clauses include, depending on the circumstances, provisions relating to the index provider`s compliance with applicable regulatory requirements and the limitation of licensee`s use to activities that do not result in the index being subject to additional regulatory requirements or oversight. These provisions complement the standard presentations in order to maintain the independence of the index by maintaining appropriate procedures for governance, monitoring and auditing of the index and by using third-party price information. b) The USCF is a sponsor and operator of the Fund. Licensee may sublicense its rights under this Agreement to: (i) the Fund; (ii) the Delaware Statutory Trust sponsored by the USCF, of which the Fund is a number; (iii) other subsidiaries of the USCF in each of the preceding sections (i), (ii) and (iii) to the extent necessary solely to facilitate the operation and promotion of the Fund (including the marketing and distribution of units of the Fund in accordance with this Agreement); and (iv) the Third Party Provider of the Website that provides services to the Licensee and the Fund (the “Website Provider”), to the extent necessary for the Website Provider to fulfil its obligations related to the development, operation and maintenance of the Website for the Fund on behalf of and for the benefit of the Licensee. Licensee shall ensure that all sublicensees described in subsections (i) to (iv) comply with all applicable terms of this Agreement, and Licensee shall remain liable for any act or omission of such sublicensees. Except as expressly provided in this Section 1(b) above, the licenses granted herein are not sublicensable. This amendment is intended to modify and be implemented in connection with the Agreement and, together, this Amendment and the Agreement constitute the complete and exclusive representation of the Agreement between the parties and fully supersede all prior oral or written proposals and agreements with respect to the subject matter of this Agreement. In the event of any conflict or inconsistency between this amendment and the Agreement (or any other amendment to the Agreement), such change shall prevail. . .