The London Stock Exchange (LSE) lies at the heart of the world’s financial capital. But perhaps few realise that the technology delivering its information-hungry business has been a key factor in its success over recent years. Europe’s biggest stock exchange stated, in its most recent financial results, that its stellar growth would continue to be boosted by more foreign companies listing, as well as a significant rise in electronic trading.
With the increase of web-based electronic communications transforming the fortunes of financial trading and regulatory institutions – it is the diversification of services the LSE offers its listed company customers that has enabled such successful growth.
These additional LSE services include a portfolio of Investor Relation (IR) products including a Reference Data Service and Reference News Service (RNS) to help listed companies fulfil domestic and international regulatory obligations, communicate with shareholders and explain company news to the markets.
Simon Wilkinson is the head of RNS for the LSE and spoke exclusively to CIO UK about its technology investment and the strategy supporting this portfolio of lucrative new services as well as the most recent development of corporate social responsibility (CSR) modules.
The Corporate Responsibility Exchange was created to provide structured end user and client CSR reporting facilities. To enable the service the LSE first had to construct a platform, data structure and web interface to manage the input to and hosting of customers’ investor relations websites. The growing importance of the corporate social responsibility requirements that come from doing business internationally are immense, says Wilkinson.
This is increasingly a focus in today’s environmental and economic climate, where the impact of operating a business is controlled by a growing number of international, national or regional regulations.
It is a requirement for all companies listed to have an investor relations website. Both electronic reporting of financial results and additional regulatory requirements, like CSR filings, are encouraged, if not mandated, by most financial regulators. But for small companies, it can be difficult to maintain a team of fund managers on hand just to gather data and information for CSR and investor relations reports.
Wilkinson says: “Every kind of business sector will have different priorities and how it interacts with factors that affect its business. For example, the impact on the environment of sourcing its raw materials and how to do that ethically. Every company has a different range of considerations. At the same time they must struggle with the issue of standardisation and dealing with different regulatory requirements.”
"It’s not necessarily the data, but how you structure it that becomes important"
Simon Wilkinson, head of RNS, London Stock Exchange
The Corporate Responsibility Exchange was designed for companies with small teams in human resources, investor relations or specialist CSR departments, depending on the size of the company, to gather the data for very often, bilateral and multiple information requirements.
The problem arose from answering questions about business processes and strategy in a different way, as opposed to the cold figures-based analysis, often characterised by traditional financial reporting.
Questions to determine risk, compliance and ethical criteria will be, in essence, drawing on the same information but in diverse ways.
Two simple examples are ascertaining how many board members are male or female; over 50 or under 40 years of age.
It is first necessary to distinguish the systems that hold this information and then marry the right data with the right profile in a way that also distinguishes a non-executive board member from an executive one.
“Each one of our customers that is listed on the Exchange has to make submissions to many bodies according to the different criteria of each, to fulfil CSR requirements,” says Wilkinson.
“From my perspective, we could see there was a problem for companies who had to capture and assimilate all this data. It’s not necessarily the data, but how you structure it that becomes important. Traditional financial software just doesn’t go far enough. Some of the data that needs to be captured is published in real time, so we realised we would need to have a data architecture that was flexible, but in a structured way.” Web development agency Priocept was responsible for building the web modules to deliver the IR services portfolio. It has been working with the LSE on the modernisation of its legacy Unix infrastructure for nearly four years.
This led to the Exchange relaunching its entire IT platform on Microsoft .NET, using Microsoft Content and Commerce Servers and personalisation engine. The entire IT infrastructure is being based on Microsoft desktop and server products.
The LSE commitment to Microsoft is a highly strategic one that saw it act as an early adopter of Windows Server 2003.
David Lester, the LSE’s CIO says: “In the financial world, stock market professionals rely on data to transact business worth billions of dollars every day. Using Visual Studio .NET, the .NET Framework and Windows Server, we implemented a system that will enable us to add to the range of financial market data products and services we can deliver to customers and increase our revenue opportunities.”
It was this work with Microsoft and Accenture – to build a system using Microsoft’s application platform and provide stock traders with sub-second delivery of market information – that Wilkinson also references within his responsibility. “What was interesting for the LSE was that CSR information isn’t necessarily easy to maintain in the way the questionnaire owners – ethical, health and safety, discriminatory research agencies – would like.
There was no logical standard as there is with the Exchange itself, and unlike the news service we provide, there was a need for structured information delivery,” says Wilkinson. “We saw an opportunity in simply providing the data structure and not setting any standards given our position of neutrality, and so we set out to try and facilitate this process.”
"Every company has a different range of considerations. At the same time, they must struggle with the issue of standardisation and dealing with different regulatory requirements"
Simon Wilkinson, head of RNS, London Stock Exchange
Launched in 2004, the introduction of the CRE was a relatively discrete one. “We soft-launched on July 1 and the first customers were formally using the system by October,” says Wilkinson. “We always knew there was going to be another phase of work to tweak and redevelop it, like making changes to the interface or functionality for it to run more smoothly. The way our clients interacted with it changed over time. We then needed to change it with a second development process that was started early in 2006.”
LSE’s leading position
The McKinsey Report, commissioned last year by the Mayor of New York, recognised London is ahead of New York as the world’s number one financial centre. Last year, the London Stock Exchange had 419 international companies listed on it, compared to 174 for the New York Stock Exchange.
The Mayor of London, Ken Livingstone, highlighted this fact in comments made in response to the report’s publication early in 2007. “London must resolutely continue down the path of embracing globalisation in its regulatory, economic, social and cultural policies to maintain this position as a world leader,” he said.
Livingstone has also been a staunch defender of the LSE’s independence, whose success has been recently underlined by an aggressive takeover bid from its £2.7 billion US rival Nasdaq. Both the Mayor and LSE executive urged shareholders to reject its ever-increasing offers.
Georg Braun used to work for the LSE and was one of the key members of the Corporate Responsibility Exchange development team, but is now responsible for application development projects within Priocept.
“The data itself was becoming quite commoditised,” says Braun. “But the hardest thing was to maintain a clean database with quality data. Then at the client end, it was necessary to enable meaningful, ever-more complex scenarios from that data pool. So companies were spending increasing amounts of money on analytical systems, when they couldn’t really afford to spend money on IT operations, something that should actually be coming down in cost.”
Braun says the thinking behind the Corporate Responsibility Exchange system was to organise the data so it could be searched in multiple, different ways. He says: “We thought we could sort this information in a more efficient way for clients but only if it was possible to tag data with a contextual tag – it’s not about data, but the architecture. Building that is a lot more difficult than you’d think.” The Exchange’s new .NET infrastructure allows information about a board member’s age, sex or business interests to carry multiple tags, mapping cross-referenced CSR searches from the questionnaires.
“Once we were able to prove the structure worked, we were able to use the position of middleman the Exchange offers to get all the relevant stakeholders involved and signed up to a clear set of principles,” says Wilkinson.
“The technology investment was a significant factor in winning over our clients to the service,” he adds. The Corporate Responsibility Exchange grew beyond the realms of its core business and was sold in December 2006 to ICSA Software, an arm of the Institute of Chartered Secretaries and Administrators. ICSA Software intends to incorporate the powerful tool into its corporate governance workflow systems and take on and develop its existing 170-strong FTSE 100 client base still further.