When technology and technology stocks were booming, the Nasdaq Stock Market loved to flaunt its own high-tech proficiencies.
By Jeffrey Kutler
November 2002
Institutional Investor Magazine
Not only were the era’s highfliers, like Cisco Systems and Microsoft Corp., listed on the market -- and spotlighted in its television commercials -- but the exchange burnished its all-electronic image with a flurry of major back-office projects. These culminated this year in a quotation-system upgrade and the October launch of the highly touted SuperMontage trading system.
For its next act, in keeping with the air of austerity on Wall Street, Nasdaq is championing a promising technology that it doesn’t even own -- an online data standard that the exchange, regulators and the accounting profession say will revolutionize the way corporations and investors publish, transmit, share and analyze financial reports.
The technology is XBRL (extensible business reporting language), a variant of the increasingly widespread Internet programming standard XML (extensible markup language). The major accounting firms initiated the effort in 1999; among its benefits is that it relieves analysts of the need to manually transfer figures from a quarterly earnings report onto a spreadsheet. Instead, the data can be downloaded, charted and compared with any number of other statistics, using simple clicks and commands, regardless of computing platform or database system.
The revolution has stalled. Now that the boom is history, with the Nasdaq index 75 percent below its March 2000 peak of 5,132.52, technologists are finding it a lot harder to muster the old enthusiasm -- even for an innovation that’s ideally suited to meet burgeoning demands for timeliness, transparency and accountability in corporate disclosure.
There has been no groundswell of support from corporations, and critics complain that financial industry XML proponents have gotten so bogged down in technicalities that they have lost sight of business needs.
“XML is only a means to an end,” says George Kledaras, founder and chairman of New Yorkbased transaction systems supplier Javelin Technologies. Kledaras believes the financial industry should first focus on developing a new generation of Web services before deciding on the appropriate tools.
Nasdaq, however, has adopted the XBRL cause as its own. It has a link on its home page to an online demonstration that it launched in August with help from Microsoft and PricewaterhouseCoopers. The demo consists of 10-K and 10-Q documents from Microsoft and 20 other high-tech Nasdaq stocks. It’s but an inkling of how “corporations and investors alike will reap the benefits of a simpler process for issuing financial reports and making investment decisions,” declares Nasdaq vice chairman Alfred Berkeley.
Nasdaq is not alone in supporting XBRL. Some 150 companies belong to its global governing body, XBRL International, though few have campaigned as openly as Nasdaq. A related panel working on a securities research standard, RIXML (research information exchange markup language), has more than 20 members, including top investment banks and buy-side firms.
Morgan Stanley research group executive director Mark Schnitzer acknowledges that the pace of such cooperative efforts is slow, and the evident lack of progress is difficult to refute because few institutions have revealed their implementation plans.
Schnitzer is doing his part: Morgan Stanley and Microsoft in October became the first companies to file XBRL-encoded 8-K forms on the Securities and Exchange Commission’s Edgar online repository, predicts Schnitzer, “XBRL adoption will be accelerating in coming quarters.
