Financial institutions and technology suppliers are working on a
way to streamline the huge quantities of research reports hitting
City desks each week. XML could have the answers
Investment managers want facts not documents. This simple statement
cuts to the heart of the problems surrounding the generation and
distribution of research analysis.
Easy access to data and clear recommendations is paramount, yet
even with advances in electronic formats and the Web all that has
changed so far is the partial replacement of paper with PDF (a file
format that can be viewed on multiple platforms). Nothing
fundamental has improved. Consumers of research have been deluged
with ever larger volumes of raw output. True, print costs for
research houses have been brought under control but this is still
the same business process at work. Highly paid and respected
analysts produce worthy but difficult to consume tomes for their
desired audience who wish instead to easily find, compare and
contrast the central analysis, forecasts and trading ideas.
All this will change with the advent of research
componentisation.
Analysts can continue to author content in traditional ways
assisted by a range of information provision tools, but the result
will no longer be a simple document. Instead, componentisation
tools disassemble the constituent consensus data, forecasts and
ratings together with the commentary, charts and other content.
Thereafter, these component items can be separately revised and
manipulated, and seamlessly re-assembled.
The most suitable target formats for particular distribution
channels, clients and regulatory environments can all be automated.
Hence clients wanting a short format automatic email or those who
wish to search and extract specific items from an online research
aggregator will all be serviced from a single point of entry under
common compliance controls.
To bring about this change and generate real value requires that
industry, process and technology forces all converge.
From the investment management industry perspective, especially
given the doldrums in the equity markets, buy side decision makers
are demanding clear and independent analysis. In the UK this is
further reinforced by the Myner's Report proposals, requiring fund
managers to provide well-documented evidence for their investment
choices.
For the sell side suffering a dearth of attractive new share issues
to leverage business, their selection as brokerage will
increasingly rely on the strength of their research and
relationship offerings. To justify the considerable cost of
maintaining highly rated analysts their output must be seen to win
the hearts and minds of clients and their resulting trades.
Analysts' reports must be delivered in the most effective and
appealing manner for their brokerage's brand to surface in the sea
of content available through Web-based portals and distribution
services.
The major players in all stages of the research lifecycle have been
active in acknowledging the need for change, and collaborating to
improve their mutual processes. Consortia of buy and sell-side
institutions, together with information providers and tools
vendors, have launched two significant initiatives in this area.
Research Information Exchange Markup Language (RIXML) was formed as
an open standard for investment and financial research. It is a
unified system which aims to makes it easier to categorise,
aggregate, compare, sort and distribute research.
Investment Research Markup Language, (IRML) launched by research
portal Multex, has a similar mission statement for an
'open-architecture standard which would benefit all facets of
financial information technology', and has attracted many industry
supporters.
Unsurprisingly both standards have XML as the underlying format to
take full advantage of the universal adoption of tools to support
this technology. Despite this common underpinning, and the
substantial collaboration between the two initiatives, they do
differ fundamentally in their approach.
RIXML aims to highlight key items from the document, without
replicating all the original content of the typical publication -
with IRML taking the contrasting, comprehensive approach to holding
all items in XML.
RIXML is also initially focused on equities, whereas IRML will
address fixed income, commodities, foreign exchange and
derivatives.
Each authoring operation will evolve internal XML-based formats to
best reflect its unique working practices and product coverage.
This will be a superset of the information required by either
industry standard, to be transformed as and when needed into the
chosen target for delivery to a portal or end-client.
The componentisation process does not stop at the sell side.
Investment managers also have to collate and publish reports,
strategies and decision documentation, which in turn are partially
sourced from brokerage research. Having the technology in-house to
receive and manipulate material in component form will have a huge
impact on the quality and cost of this work.
In future, it is likely that the entire research process will be
integrated with coverage systems, client relationship management
and self-service portals. For the first time, analysts, sales
forces and management will have clear and timely feedback on their
collective impact on clients and orders.
www.evolution.net
Richard Hall is chief technology strategist of financial industry
consultancy, Evolution
Research the XML way
The quality of research has always
been a key differentiator for investment banks and a primary tool
for winning clients. A new approach to authoring called 'research
componentisation' offers a breakthrough in the online presentation
and distribution of research. Research componentisation uses XML
(eXtensible Markup Language) to build tailored reports from
research elements, but without the need to force rigid formulae and
irritating templates onto analysts.