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Should the Registrars Become a Data Vendor? By Gary Wright MSI, CityCompass Research

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The problem with data in the securities industry today is there is too much of it coming from too many different sources and in too many different forms. The cost therefore of gaining the data you want and need, has never been greater and this is in the 21st Century with the world of the web with open access and virtually free information. One problem area is reporting of company financial data in a standard format. How is this data mess and associated cost possible today and what could be a solution to provide assured information at the right price, at the time the industry needs it?

The first point to make when looking for the answer is that no third party supplier or group of suppliers will hold the solution the industry needs. This is akin to GSTPA mentality and we all know how much that cost the industry before it was binned. Beware therefore any solution proposed by consultants, software vendors or groups of business users with a vested interest! A viable industry solution will not be forthcoming if it can be replicated by competing suppliers that will quickly spring forward with multiple alternative models. This will put the industry on an expensive merry-go-round and we’ll end up back where we all started.

The second point to make is that any solution that involves the investment of public limited companies (issuers) or investors will also be doomed to failure. PLCs do not see this as their business, and just like GSTPA, investors will expect to continue their business without change or cost. That leaves the market to determine its own solution. Given its role as a Primary Information Provider (PIP) collecting reported company information through its Regulatory News Service (RNS), the London Stock Exchange (LSE) could be in a good position to help. At a CityCompass conference in February, however, they said the could not enforce clients to report in a particular way unless there was true demand and a business case for it.

The third point is the use of domestic or more topically European directives or regulations to enforce industry change. However, this is unlikely to achieve the desired result because it is long winded and very much the slow lane solution.

The real solution to the problem may well lie within the existing market structure for issuing data. Here, the registrars are in a premier position to control the battle. The question is, do they know it? The PLCs contract to the registrars for the depository of their market information, which needs to be communicated to their investors and the market at large. The registrars have huge databases and the ability to work within a legal and secure environment. Registrars have also created a highly technical environment and can reconcile and control a massive amount of information and data transmission.

Capita IRG, Computershare and Lloyds TSB Registrars control over 90 percent of the UK securities market. If they all decided on a standard electronic reporting language, many of the data problems could be resolved very quickly and at low cost.

Who better then to bring into the data standards solution?

Registrars could create a new revenue stream without a huge investment in technology that could electronically convert market data into both machine-readable XML format for the publication of say the Chairman’s statement, but also extract and populate market data for ISO15022. This is very simple middleware solution that could use for arguments sake, XBRL.

XBRL has of course gained some notoriety as the FSA – SEC – and European-preferred reporting language. Although the FSA has not managed to convince the market to invest in the technology required by regulated firms to fulfil their electronic reporting requirements. Could XBRL therefore, have a more appealing and attractive role in the data standards space, and for the registrars in particular?

The registrars could make their ISO15022 details available as a download from their website that would enable a very low cost investment by the small fund managers to gain electronically the data they currently spend small fortunes on.

Would this compete with the existing data vendors? The answer is both yes and no. The data vendors with high volume businesses are less likely to be affected by registrar competition and there is the strong likelihood of their ability under this idea to reduce their own in-house costs for improved profit margins. There would be greater competition between data vendors for high volume business which would probably lead to a price war. Is this a bad thing for the market user? I think not.

Internationally the same type of solution would work with custodians and other agents replacing the role of the registrars take in the UK. If this type of solution is adopted it looks a far more likely resolution for both UK domestic and international markets and finally provide the answers the industry desperately needs.
It certainly keeps the GSTPA types out of the way and puts the answer in the safe hands of the Registrar. Obvious really.

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