Settlement reached between Dow Jones and Cantor Fitzgerald over broker's data usage

NEW YORK – In mid-March, Dow Jones agreed to settle out of court a lawsuit it had brought against Cantor Fitzgerald over the use of the broker's data by defunct data vendor Telerate.

The origins of the suit date back to 1981, when Cantor and Telerate signed a 25-year agreement under which Telerate became the exclusive supplier of the broker's US Treasury prices. In 1989, Dow Jones bought Telerate, but after nine years it abandoned its play as a market data vendor and sold Telerate to Bridge Information Systems. But as part of the sale, Dow Jones signed a guarantee with Cantor and Market Data Corp, a Cantor spin-off, that it would make payments for the data in the event that Bridge could not. The guarantee was valid until October 2006.

One source says that Cantor suspected Telerate would eventually go bankrupt and cancel the contract, so the broker structured a safeguard from the news provider into its contract, which would survive the sale to Bridge.

Thus, even though Telerate as a subsidiary of Bridge stopped carrying the Cantor content in 1998 – and the data was by then being distributed through other sources – it still had to pay Cantor and MDC under the 1981 contract.

At the start of 2001, the cracks began to show at the ailing Bridge business, and the vendor informed Dow Jones that it would be late in making a $12 million quarterly payment to Cantor and MDC. MDC responded that if the payment was not forthcoming from Bridge, it would seek to recover the money from Dow Jones.

The payments came to $44 million per year, and Dow Jones balked at the amount given that the data was no longer in use and was no longer exclusive. Later that year, in the wake of Bridge's bankruptcy, Dow Jones stopped making payments and began its suit against Cantor and MDC, disputing the remaining payments.

Under the terms of the settlement, which were agreed upon last Monday, March 13, Dow Jones will make a one-off payment of $202 million in total to Cantor and Market Data Corp., instead of continuing installments amounting to a total of $340 million.

Dow Jones will fund the payment with commercial paper or short-term borrowings and will record a post-tax gain of $63 million in its Q1 financials as a result of the early pay-off.