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Standards for Securities and ResearchStandards for Securities and Research“RIXML – Research Information eXchange Markup “RIXML – Research Information eXchange Markup
Language – Present, Past, Future”Language – Present, Past, Future” Session 3.1.2 Session 3.1.2
Michael Skutinsky, Jr.Executive Director
RIXML.orgwww.RIXML.org
May 3, 2006
What is RIXML?What is RIXML?
An open industry standard that provides for extensive metadata tagging to any piece of investment research, in any form or media, with significant detail for end users to quickly search, sort and filter aggregated research
The indexing that describes the content and context of the document, not the document itself
A standardization of terms and rules that enables clear description of investment research data
What RIXML is notWhat RIXML is not
RIXML is not: a search engine a data repository a front end application a definition of format or content of documents a resource format or document type a data transmission definition
What is RIXML.org?What is RIXML.org?
The organization
RIXML.org is a consortium of research producers, research consumers, research vendors, and technology companies
investment managers
brokerage firms
independent research providers
aggregation and distribution vendors
software and market data firms
RIXML Membership OverviewRIXML Membership Overview
The ProblemThe Problem
Information overload
Over 2.5 million documents published by sell-side members of RIXML
Buy-side e-mail inboxes and faxes strain under the weight of content being sent from analysts, salespeople, auto alerts, etc
Voicemail boxes saturated in the early morning
No standardization across the industry
Lack of a common metadata format among publishers
Aggregators each have their own metadata “standard”, and it is usually less rich than those of the individual publishers
Net result is poor search criteria, leading to lowered expectations, and reliance on rudimentary symbol and author searches
How It WorksHow It Works
Product
defined as any research publication, e.g.: morning meeting comment, industry report, conference invitation, company model
Packages
Sourcedefines who
published and authored the
product
Contentcontains the title of the content, an
abstract and synopsis, and its
location and status
Contextcontains metadata
categorizing the content
Legalcontains copyrights,
disclosures and disclaimers
How Did We Get Here?How Did We Get Here?
Let’s turn the clock back 21 years . . . to 1985!In 1985:
Ronald Reagan was President
Soviet leader Chernenko dies and is replaced by Mikhail Gorbachev
Unemployment was at 7.2%
Amadeus won the Oscar for “Best Picture”
San Francisco 49er’s win the Super Bowl against the Miami Dolphins
1985 must have been a great year. Highlighted by both “Bowling for Soup” and “SR-71”:
“Bruce Springsteen, Madonna, way before Nirvana, there was U2 and Blondie and music still on MTV.”
Financial Services HistoryFinancial Services History
Financial Industry Benchmarks - 1985
The DJIA at year end was around 2000 (after surging from the 800s in the early 1980s)
A “heavy” trading day on the NYSE was around 39,000,000 shares.
The IBM PC was about 3 years old, and a 10MB hard drive cost around $6,500.
The “technology” vendors in the Research departments were DEC, Data General and Wang.
HTML, XML, PDF, and, the Internet were not yet born (as we now know them)
AND, two guys named Jeff Parker and Bruce Fador were going around Wall Street pitching an idea about sending “Morning Call Notes” via a system called “FIRST CALL.”
Financial Services History (cont’d)Financial Services History (cont’d)
First Call, in 1985, provided the first “coding” schema for Research “Morning Call Notes”
4 Tags: Broker Name, Analyst Name, Ticker, Date
These “tags” became the distribution skeleton that the Industry built on over the next 20+ years.
We took that skeleton and bolted on new Industry types (Educational Services), we cut and diced new Sub-Industries (Internet, B2B, B2C), and we discarded whole Sectors/Industries (Coal, Data Processing, Auto Parts)
BUT THE DISTRIBUTION SKELETON STILL SURVIVED, much too rigid to change very fast with the times.
Research Issues in 2006Research Issues in 2006
Michael Ross, VP – Tabb Group
Equity Research model is “dead.” In the past 10 years, investors have migrated towards passive investment strategies, lower transaction costs, and self-directed electronic trading.
Fidelity’s 2005 agreement with Lehman Brothers and Deutsche Bank to unbundle research payments (and more to come…).
Alpha – Portion of investor’s return attributed solely to the skills of the manager.
Beta – Returns of the overall market cornerstone of passive investment
Research Issues in 2006 (Cont’d)Research Issues in 2006 (Cont’d)
Over supply of large cap research
Compressed commissions due to electronic trading
Downturn in broker revenue
Shares traded = research revenue Large float stocks are more appropriate for low cost channels, further
decreasing the commission pool for research.
ATTITUDES:
By focusing on commissions, you miss the more difficult costs – market impact and opportunity costs.
Active managers will pay for “alpha research”
Passive managers won’t be saddled with expensive research that does not add value.
Research Holy GrailResearch Holy Grail
“Value added, timely research that is thematic in nature and not maintenance oriented.”
Just In Time (JIT) Research
Send out 50 titles, get interest feedback, write reports.
FutureFuture
RIXML gives us a chance to redefine that “distribution skeleton,” in total, for the first time in over 20 years.
RIXML has over 660 enumerated values in the latest schema design version 2.2.
RIXML has addressed over 7 asset classes and will “drill down” through them in 2006.
RIXML is focused on the Research product and stays true to its original intent by not going beyond what it was formed to address.
In conclusionIn conclusion
RIXML is a unique opportunity for the industry to improve research classification, tagging, and distribution.
It provides benefits to the buy-side, the sell-side, and third-party vendors.
The organization is now focused on promoting adoption of the standard. A “RIXML Level One” product will be announced in the very near future.
Visit UsVisit Us
www.rixml.org
The RIXML.org Web site is the primary communications forum
Discussion groups for general and specific topics
Notification of updates to the specification, upcoming events, membership info, etc.
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