NYSE taps FISD to gather industry insight into VRXML, an initiative aimed at streamlining market-data-vendor reporting requirements.
VRXML aims to streamline and improve the accuracy of reporting for exchanges, vendors and financial-services firms. In an effort to streamline its vendor-reporting requirements, the New York Stock Exchange has announced its Vendor-Reporting-eXtensible-Markup-Language initiative to standardize market-data-usage reporting. While the NYSE is the first exchange to set forth an XML-based standard for reporting, the exchange envisions VRXML extending into other areas as well.
Under the current Vendor Automated Reporting System, market-data vendors send data files of their reporting requirements to TCB Data Systems, an NYSE spin off which processes and extracts the data, then passes the files along to the NYSE.
In general, vendor-reporting requirements include information such as customer information/location, start date, quantity, product identification and zip codes for state-tax calculations.
As a direct-bill exchange, the NYSE also invoices the customer using the data provided by the vendor. As the number of vendors has multiplied significantly over the years, and the information business has exploded, the process of reporting has become more complex. In turn, the biggest problem customers now face is vendor and exchange invoices that do not match up. Customers have also been finding that invoices are not received in a timely manner and the process is inefficient, says Ron Jordan, vice president of market data at the NYSE.
Streamlining the Process
"So we decided to try and improve the vendor-reporting system," explains Jordan. "And we went to customers and asked them what they would like to see and what their issues were." For the feedback process, the NYSE teamed up with the Financial Information Services Division of the Software Information Industry Association to reach out to financial-services firms. "We came up with a list of things the users wanted to see to make it more efficient and, based upon that, we've put forward VRXML," he adds.
To accomplish this, the VRXML initiative looks to streamline the vendor-reporting process by allowing direct reporting to the exchange by vendors, as well as the transformation of existing VARS files into VRXML through TCB Data Systems. The idea would then be for vendors to use the format to either report directly to the exchange, if they can convert to the XML standard, or to continue to report through the VARS system, which would convert the files into the standard format and then pass them along.
"The NYSE is saying you need to report to us in our format and our format is VRXML," says Mike Atkin, vice president of the FISD. "The exchange doesn't really care how they do that, but that will be the obligation." He adds, though, that the NYSE is being very flexible in the transition to the VRXML format. "Everybody wants to get accuracy and make it easy to meet the obligations, so the NYSE is working with the industry to make sure they can adopt it and what the transition might be," says Atkin.
Jordan also emphasizes that timely, accurate reporting is the main focus of the NYSE and that the exchange is neutral, in terms of how and from where the information gets to it, as long as it is in VRXML format. "When a vendor provides services for the customer and the customer gets a bill from the vendor and then a bill from the exchange, those bills should match," he says. "One shouldn't say the customer has 10 devices while the other says they have 15 because of some reporting anomaly."
Jordan says that the exchange now has the interfaces in place to receive the VRXML reports and is beginning to beta test with several firms. "We're not going to make anything mandatory, at least not in the foreseeable future," he says. "We'll still accept VARS input, but if firms and users believe that XML and total inventory is better, then we believe they would switch to that. And we do believe they'll think it's better because they've asked us to do this."
Inventory-based reporting is also something new that the NYSE is moving to as a way to streamline the process. Under the new plan, the NYSE will receive the entire inventory from vendors each month rather than the current reports, which only include additions and changes with end users or changes in services. "Going to total inventory will greatly reduce errors," says Jordan.
Atkin agrees that total-inventory reporting is a more consistent approach. "Now end users report a number (by saying) they have 50 terminals this month and 47 terminals the next month, as opposed to reporting every single transaction."
In turning to an industry standard, Atkin says that end-user firms will also be able to minimize internal administrative tasks associated with the data. "People spend a lot of time and money reconciling their inventory - Did we order this? Do we owe this money?" says Atkins. "And if the bill doesn't match what your inventory is internally, they have to find where the problems are and that's all a manual process with back billing and credits and adjustments and timing-cycle lags that cause the problems."
Beyond the NYSE
The VRXML initiative looks to extend beyond the NYSE as a tool for market-data-vendor reporting. "We're working with the FISD to standardize things like billing cycles, units of count, pro-rating of devices and I think we've answered a lot of the questions and sort of set industry standards for them," says Jordan. "And hopefully if it's something the industry wants, we'll offer it up as a standard."
"This is good for the industry as a whole because XML technologies are extensible and can be used as the foundation to standardize the meanings of administrative-data elements," adds Atkin. "If the specification works, we could use it for reporting all around and that's good news." He adds that by standardizing the specific data elements for vendor-reporting requirements, XML would be able to convey more meaning to the process and make it more efficient for the industry.
The FISD has gone out to the industry for feedback to make sure the draft version of the VRXML format meets end-user requirements, whether it can be extended for internal inventory management, what kind of conversion-process problems are possible and what areas might need some work. "We have our finders on a lot of the people who do reporting from all sides - the users, vendors and exchanges," says Atkin.
He adds that most exchanges around the world all want the same result - an accurate report and payment for data. "Anything that makes it easier, all the exchanges would be interested in so we're coordinating with all the exchanges and having them look at the specification to make sure we can understand any issues they might have with it," says Atkin.
He adds that this sort of industry-accepted standard would be a win-win for everyone involved. "If you're an information owner, you want to make sure you get paid for your data and if you're an information consumer you want to make sure you only pay for what you use," says Atkin. "This is one good step along the road of making this process as automated and efficient as possible."
Some vendors have already started working on their own XML-based formats for reporting to the exchanges. Reuters, in particular, has already developed its own XML-based reporting output for the NYSE that covers its e-commerce-related businesses. "In our current drive to deliver great services across out entire organization, we recognize the benefits that XML brings, not only to client delivery, but also to our back-office-service operations in our role as a vendor of exchange data," says Aiden Murphy, head of global reporting and audit in the content acquisition and rights management group at Reuters. Murphy adds that Reuters has been in further discussions with the NYSE on the VRXML initiative and is interested in partnering with the exchange to drive new standards for the industry.