From Fire Hose to Garden Hose


New York–Research distribution is one of many ways the research marketplace is changing.  On one side, the buy side wants research which is more tailored to its investment approach and interests.  The sell-side meanwhile is seeking to tier the research service levels it provides.  In April, Candice Browning, Merrill’s director of research, sent an open letter to clients explaining Merrill’s entitlement policies intended to prevent the “napsterization” of Merrill’s research IP.

Meanwhile, behind the scenes, work has been progressing to come up with standards for the distribution of research.  We are pleased to have guest author, Michael Skutinsky, Executive Director of, update us on the Research Entitlements Consortium, a group of seventeen investment banks and vendors which are working to develop a standardized framework for research distribution.

The Research Entitlements Consortium (REC)

An Overview

If you have been in the Research business for some time, the topic of “entitlements” might not have even been on your radar screen a few years ago… times have changed my friends!!

A few short years ago Research distribution was conducted on the “give them everything, if we get one trade out of the account it’s worth it” model.  Sell-side distribution models were archaic at best.  Often aligned to systems that were designed for proxy mailings, they were not adequate enough to handle the pinpoint delivery of a Research product.    The paper product made it from point A to point B without the help of an integrated CRM databases so we had an “all or nothing” distribution system.   Accordingly, if you were on the Buy-side, you got everything or nothing at all for the most part.  Your mailbox was filled with Economic reports, Earnings Updates, Strategy pieces, Company reports, and everything else the Sell-side produced.  It was an “on or off’ world of distribution.   Vendor and internal distribution systems were built to accommodate this “on/off” world and thus the fire hose model evolved.

Fast forward to about 2006 and we see that the Research distribution world has dramatically changed, along with the need for more granular and detailed distribution methods and information.  Driven in part by the Global Research Analyst Settlement, huge technological advances, the emergence of a “just get me what I need when I need it” culture, and extreme downward pressure on Research budgets… the distribution world changed!!

A Sell-side driven effort to better “tag” the Entitlements portion of Research distribution was created the Research Entitlements Consortium was born.  Here is the URL for the web site:

The premise is simple: once we track who is entitled to receive the product, what is the most primary identification record for the individual, where they are located, and then we can begin to build a database of “tiered entitlements.”  …Our fire hose is now required to become a garden hose!!   As you can see from the standard posted on the above mentioned Web site, much of the technical heavy lifting work has been done; the focus is now the “business relationships” between the Sell-side and Buy-side professionals. 

I anticipate that there will be much discussion revolving around the readership reports— how people use them, and what impact they will have on future payment agreements between both parties.  Personally, I feel that with the growing number of CCA’s and CSA’s evolving, this information will just become another data point in the sea of information we all try to use as a metric for “Research Effectiveness.”   As we see the need for more effective tagging and categorization of the Research product, XML technologies such as RIXML (Research Information eXchange Markup Language), and, XBRL (eXtensible Business Reporting Language) will be adopted as the tools-of-choice.  XML lends itself very well to granular tagging and this is the way the Research environment is moving.      

We are seeing a combined effort from all parties involved with Research distribution in making this happen.  As is often the case, the lead is being taken by a few of the major players on all three fronts but the resultant product will benefit all firms regardless of size or capabilities.

Michael Skutinsky Jr.

Executive Director   



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