NEW YORK -- Many of the largest financial services firms in the U.S. are developing an open standard for the electronic distribution of investment research. It allows users to cut through massive amounts of published material and receive only the information they need, when they want it.
The new specification, known as RIXML (research information exchange markup language), will be based on XML, the emerging standard for data sharing between dissimilar applications. The financial services industry is solidly behind the development of the protocol and has formed a star-studded organization, known as RIXML.org, made up of industry players from both the buy side and the sell side, to make sure it becomes a reality.
Founding members of RIXML.org include: Credit Suisse First Boston Corp.; Deutsche Bank AG; Goldman, Sachs & Co.; J.P. Morgan & Co.; Lehman Brothers Inc.; Merrill Lynch & Co.; Morgan Stanley Dean Witter & Co.; Painewebber Inc.; Salomon Smith Barney Inc.; UBS Warburg LLC; American Century Investments; Fidelity Investments; the Capital Group Cos.; Putnam Investments and T.Rowe Price Associates Inc.
An industry standard based on XML would ensure that all components of a research document are structured and identified consistently across all organizations. That open standard would make it easier to exchange information and customize it to a user's individual requirements. Documents could be converted to formats specified by recipients and delivered seamlessly over a variety of platforms, including the web and wireless devices. The RIXML protocol would allow sell-side firms, which generate research, to target information to specific users, even as users develop customized interfaces to access the information.
The first version of RIXML is expected to be available early in 2001 for equity research. Standards for other asset classes will be considered in the future. Officials involved in developing the protocol said it should be in widespread use by this time next year, dramatically reducing unneeded research while improving the quality and type of research required by portfolio managers, traders and analysts.
"The problem has been that traditionally the sell side has tried to convey an enormous amount of information to the buy side," said Chris Betz, sell-side co-chairman of the RIXML.org standards committee and vice president, institutional equity division, Morgan Stanley Dean Witter, New York. "Also, it may have been in various formats -- text, Microsoft document or PDF - and has been developing in an ad hoc way. The amount of research is staggering today vs. 10 years ago and some firms are starting to add video and powerful graphics. The value is getting the right information to the right people at the right time." RIXML goes a long way toward achieving that objective.
"Our challenge is to determine how best to facilitate consolidation and delivery of the reams of information that asset managers are receiving from their brokers daily," said David Seibert, vice president for investment systems at T. Rowe Price, Baltimore, and co-chairman of the RIXML.org steering committee. "The Internet has provided a great distribution channel for investment research, but it also has created fragmentation, since firms that publish research have developed their own proprietary solutions. An industry-wide standard is required to facilitate the smooth distribution and exchange of information, no matter what distribution channel a client may use."
Too much research
Nowhere is the problem of information overload more pronounced than with investment research. Wall Street brokerage houses and specialized investment research firms churn out millions of documents monthly, both printed and electronic. Investment managers and mutual funds use the research but find it difficult to sort through it all. With the proliferation of Internet use, the volume of investment research has grown more overwhelming.
"If we are to be able to identify information that is useful and relevant to American Century ... we must be able to get to it," said Steve Chandler, buy-side member of the steering committee and director of research at American Century Investments, Kansas City.
RXML will allow research recipients to create personalized reports from multiple information sources and integrate those reports with internal proprietary research.
The RIXML standards will be available for public comment for 30 days to gather further industry input, said Mr. Betz, and version 1 should be available in January.