The following are my responses to a Q&A piece put together by Max Bowie, editor of Inside Market Data regarding innovation in the market data space. It originally appeared as an article in that publication on December 27, 2013.
David Frankel, president of EDGAR Online, explains why he believes analytics─increasingly delivered through apps and mobile devices─will be the source of innovation for the financial technology and data industries next year.
IMD: What factors will drive/hamper innovation in the market data industry in 2014?
David Frankel, president, EDGAR Online: What seems to be hampering innovation in the financial market data/intelligence space is fear of change. The same firms that once pioneered ground-breaking technology and analytics in this space 20 to 25 years ago are still operating largely the same today─they are just bigger. Perhaps the effects of the 2008 market meltdown are still lingering, but to me, it seems as though our industry is stuck in a time warp. It’s not like in the technology sector, where the big players like Google and Apple set the tone and drive innovation. I think that the FinTech industry as a whole needs to realize that the way people are buying and using our products and services is never returning to how it was pre-2008. We need to adapt our business models, value propositions, and what we are defining as “value-added” solutions to the new realities of our marketplace. Continuing to tout development of instant messaging apps just doesn’t seem like ground breaking, value added innovation to me.
The good news is that innovation is happening, though it is on the fringes of our industry, at the investment firms themselves, and from non-traditional places. We work with some small, really cool companies out there every day that are creating the next wave of financial data analytics. Many operate largely under the radar, but are developing truly phenomenal technologies around data visualization and data analytics. Companies like Estimize, Alpha Theory, CB Insights, Narrative Science and Pellucid are examples: these are companies that are willing to take risks in order to help re-imagine how information can be better consumed and analyzed. Look at the businesses Citadel Technology or OTC Markets are building: with the cost of hiring skilled developers continuing to fall, it makes total sense to me that they would be developing interesting analytics themselves. I believe we are going to continue to see this trend from the more forward thinking firms. Ultimately, innovation in the market data industry is going to be driven by those firms that are unafraid to re-think their businesses and take some risks.
IMD: What will be the most exciting new market data-related innovation to be introduced in 2014?
Frankel: I have often stated that I believe the financial market data/intelligence industry tends to be more “evolution” and less “revolution” when it comes to innovation. It took Bloomberg eight years to become an “overnight success” in the early days, and I don’t think change is generally embraced in our industry at pace much faster than that today. But, like many people, I continue to be intrigued by mobile: I think that there is a collective underestimating about how much of a material impact advances in mobile and cloud technology are truly going transform the investor’s workflow, particularly as our client base adds more Millennials. I was recently informed of this interesting statistic from Gartner: by 2015, mobile application development projects targeting smartphones and tablets will outnumber native PC projects by a ratio of 4:1.
Similarly, according to a report by Vision Mobile Research, by 2016 there will be over 5 million global mobile developers, with the overall mobile app market growing to around $143 billion. The barriers to entry are lower than ever before, so you no longer have to be working at an industry leading firm to have a legitimate, alpha-generating financial data analytics solution that will be appealing to investors. And with people becoming more increasingly comfortable with the “app-ification” of their solutions, it’s not hard to envision a day where an investment analyst is operating solely on a tablet, with internally and externally developed, best-of-breed data analytics apps sharing information and data. That future is what excites me.
IMD: How will EDGAR Online contribute to innovation in 2014?
Frankel: 2014 is already shaping up to be an exciting year for EDGAR Online. As we look at the strengths of our data and analytics business, we recognize that we truly care about how to make financial disclosures useful and actionable more than any other firm out there. That has always been a primary focus for Edgar Online, and people have been entrusting us to do this for almost 20 years.
So it is to that end that we are striving to help bring innovation back to the FinTech space by using APIs to essentially transform the financial disclosure into a platform for developers. We believe EDGAR Online’s reputation for efficiently producing high-quality financial data from disclosures, combined with improvements we have made to our API infrastructure and our new relationship with Mashery─an innovator in API management technology and services─will put us in a great position to help foster the next waves of innovation in our space in the years to come.
In 2014, we expect to: (1) make the rich financial data and information that can be found in SEC filings more easily accessible to anyone developing financial analytics applications via the EDGAR Online API; (2) dramatically change the business model around financial data distribution so we can partner with emerging companies and help bring innovative financial analytics back to the forefront; and (3) team with Mashery to go directly to the broad developer community at venues like South By Southwest Interactive (SXSWi) in March and sponsored hackathons in the latter part of 2014 so that we can provide our expertise in the area of financial disclosures to those working on the latest ground breaking innovations in financial data analytics and visualizations. I really think it’s going to be a great year for us.