6 Dec 2002: RIXML Adoption by Major Vendors Boosts Case for Research Standard

The prospects for RIXML have received a boost by the adoption of the research standard by two major vendors in the distribution of sell-side research. Both Thomson Financial and Multex are working on initiatives that embrace the standard, which has been pioneered by the rival Researchsummary.com enterprise.

RIXML now appears set to become the standard for XML-based integration and manipulation of research services. Analysts believe that the adoption of the standard by the major vendors removes a major hurdle in broad industry acceptance of the standard.

Multex is currently working with a number of financial institutions in the hopes of convincing them to incorporate RIXML tagging into their research endeavors. The company already supports version 1.0 of the RIXML standard and is now incorporating support for the higher-level version 2.0 into its research distribution platforms.

The functionality of these Multex services for buy-side clients will improve considerably if the sell-side contributors can be persuaded to incorporate RIXML classifications into their research. Multex has long recognized the value of adding XML-based meta data to its services. It was the promulgator of the now-defunct IRML standard for research services, which makes its adoption of RIXML all the more significant.

Equally important is the adoption of RIXML by Thomson, whose First Call and I/BE/S product lines for research are now being upgraded for support of the standard. Thomson Connect, a fully RIXML-compliant buy-to-sell-side network connectivity system, is due for release before the end of the year. It has been based on the Worldstreet platform acquired by Thomson. Thomson Connect will be incorporated into First Call’s research platforms, which currently service more than buy-side 70,000 users.

Additionally, Thomson is working with Evolution, another provider of research distribution technology, to develop the so-called Research Workflow Solution. The service will allow users to create modular research services using Microsoft Word and Evolution’s Clarity Composer, which itself supports a variety of formats, including RIXML 1.0 and 2.0.

The RIXML working group and Researchsummary have long maintained that success of the standard will depend on its adoption by the sell-side community. The additional support for the benefits of RIXML by such major vendors as Thomson and Multex gives the sell side substantial incentive to adopt the standard in a bid for higher service levels to their buy-side clients.

Certainly, the sell-side producers of research services are under substantial pressure from regulators to clean up their act after allegations of conflict of interest with other operations within their firms. Specifically, big firms like Merrill Lynch and Citigroup, among others, have been accused of inadequate separations between their research and investment banking departments. This lack of controls has led to suggestions that research, an expense to the firms, has been modified in order to support the revenue-generating operations of the investment banking departments.

The adoption of RIXML per se isn’t expected to get the firms out of their current predicament with the regulators. But if real improvements to services can be made through the standard, the case for continued research creation by the sell-side firms may be strengthened. In some quarters there have been calls for the complete separation of research from the other activities of the firms.

Indeed, Reuters is currently toying with the idea of setting up an independent equity research operation that would offer competing research services. It is, thus far, unclear whether Reuters would implement RIXML in its services, but the more functionality the existing providers can offer to the research producers, the greater the likelihood that they can compete with any new independent provider.