Thursday, May 26, 2005
Corporate Actions data - piece on a City Compass email today by Gary Wright
25/05/2005
A Solution for Cheaper, Cleaner, Market Data is possible!
The cost to the securities industry of gaining accurate and unimpeachable market data for Corporate Events and information that is released by the issuer is huge! Every investor and broker across the industry is paying for this gross market inefficiency and the question needs to be asked, why?
It must be understood first that this industry cost and inefficiency is not the problem of the issuer or PLC! They have no motivation to alter the existing process of issuing market information and will obviously not invest in any technology or service that solves the problem. The position of 99.9% of PLCs will be that they pay their agents significant sums to inform the industry and it is an industry dilemma. This is not an unreasonable position for the PLCs!
The industry as usual group into committees to try and resolve the quandary, but as most of the trade committees are dominated by vendors who clearly have a vested interest, so not much happens in moving the issue to a satisfactory industry conclusion. One only needs to review the memberships of the various Trade Associations to see the proliferation of vendors and consultants. The vendors are now setting the agenda!
The securities firms appear to be happy to plod along in their own direction and increasingly unable or unwilling to enter the debate and implement a solution. Maybe there is a left over of the GSTPA factor here? This was the last time vendors tried to present a market solution. I know this was funded by many market users but all you have to do is to look logically on who would have been the winners financially if it worked and which vendor would have ultimately profited had it succeeded or after it failed? Importantly the Fund Managers were never included in the success equation and no one looked at the question of how to get critical mass from the fund manager without them incurring additional costs or radical changes in practice!
RDUG and ISITC are once again looking at a third party technical solution to standardising market information from the issuer. Not surprisingly the usual vendor suspects on parade with a technical solution that will work, but at a price to them and cost to the industry. This is another version of GSTPA with critical mass once again proving to be the problem. A case of is the cure worse than the illness!
No commercial third party vendor can provide an industry solution! One global vendor is rather astutely trying to use the European consolidation, the many directives and political manoeuvrings to gain industry credibility. However, any successful commercial solution will breed alternatives and competition and leave the securities industry back at square one.
We are all aware that the FSA’s planned schedule for XBRL implementation for regulatory reporting has been held up, but significantly with the European regulators it has not nor has the SEC in neither NY nor most of the other major markets. The importance of XBRL implementation in the UK will return in another guise, probably as part of MiFID or another directive. An interesting aspect of XBRL is the potential for it to be part of a solution for standardising market data?
Should the three major Registrars in the UK decide that they will invest in some cost effective technology they could enter the market data ring? By organising market data from their PLCs into an XBRL type standard they could sell this to the data vendor industry and create a new revenue stream. The data vendors would buy it as a standard and save in-house costs and increase their profit margins. The Registrars could make the data available on their web sites for download under a subscription. The point would be to eliminate the requirement of data cleansing as the information would be clean at the outset.
Internationally the Custodians and similar organisations to Registrars could adopt the same model. Under this solution it is the repositories of the data for their clients that are controlling it and the business will be in safe hands. This would not be the case if a commercial vendor or group tried to achieve the same as the desire for a profitable balance and alternatives replicating will deter market user take up.
By Gary Wright
A Solution for Cheaper, Cleaner, Market Data is possible!
The cost to the securities industry of gaining accurate and unimpeachable market data for Corporate Events and information that is released by the issuer is huge! Every investor and broker across the industry is paying for this gross market inefficiency and the question needs to be asked, why?
It must be understood first that this industry cost and inefficiency is not the problem of the issuer or PLC! They have no motivation to alter the existing process of issuing market information and will obviously not invest in any technology or service that solves the problem. The position of 99.9% of PLCs will be that they pay their agents significant sums to inform the industry and it is an industry dilemma. This is not an unreasonable position for the PLCs!
The industry as usual group into committees to try and resolve the quandary, but as most of the trade committees are dominated by vendors who clearly have a vested interest, so not much happens in moving the issue to a satisfactory industry conclusion. One only needs to review the memberships of the various Trade Associations to see the proliferation of vendors and consultants. The vendors are now setting the agenda!
The securities firms appear to be happy to plod along in their own direction and increasingly unable or unwilling to enter the debate and implement a solution. Maybe there is a left over of the GSTPA factor here? This was the last time vendors tried to present a market solution. I know this was funded by many market users but all you have to do is to look logically on who would have been the winners financially if it worked and which vendor would have ultimately profited had it succeeded or after it failed? Importantly the Fund Managers were never included in the success equation and no one looked at the question of how to get critical mass from the fund manager without them incurring additional costs or radical changes in practice!
RDUG and ISITC are once again looking at a third party technical solution to standardising market information from the issuer. Not surprisingly the usual vendor suspects on parade with a technical solution that will work, but at a price to them and cost to the industry. This is another version of GSTPA with critical mass once again proving to be the problem. A case of is the cure worse than the illness!
No commercial third party vendor can provide an industry solution! One global vendor is rather astutely trying to use the European consolidation, the many directives and political manoeuvrings to gain industry credibility. However, any successful commercial solution will breed alternatives and competition and leave the securities industry back at square one.
We are all aware that the FSA’s planned schedule for XBRL implementation for regulatory reporting has been held up, but significantly with the European regulators it has not nor has the SEC in neither NY nor most of the other major markets. The importance of XBRL implementation in the UK will return in another guise, probably as part of MiFID or another directive. An interesting aspect of XBRL is the potential for it to be part of a solution for standardising market data?
Should the three major Registrars in the UK decide that they will invest in some cost effective technology they could enter the market data ring? By organising market data from their PLCs into an XBRL type standard they could sell this to the data vendor industry and create a new revenue stream. The data vendors would buy it as a standard and save in-house costs and increase their profit margins. The Registrars could make the data available on their web sites for download under a subscription. The point would be to eliminate the requirement of data cleansing as the information would be clean at the outset.
Internationally the Custodians and similar organisations to Registrars could adopt the same model. Under this solution it is the repositories of the data for their clients that are controlling it and the business will be in safe hands. This would not be the case if a commercial vendor or group tried to achieve the same as the desire for a profitable balance and alternatives replicating will deter market user take up.
By Gary Wright
