Better, Faster Information for Investors

By Gerald Trites, FCA

Investors depend on information that is fast and reliable. Most of the information they use in making their decisions originates with the company in which they are investing in the form of annual and quarterly reports, news releases and the like. Then it goes through various financial intermediaries, analysts, the press and newsletters to the investing public.

Along the way, there are delays in the information because of the need to re-input the information. Also, the information often gets changed by the intermediaries for various reasons of their own, like space and formatting constraints, or simply misperceptions of the importance of particular items of information.

XBRL (eXtensible Business Reporting Language) is a way of smoothing the way for information in its path to investors. XBRL is a method of “tagging” information with additional data that defines and describes the information in such a way that it can be read by other computers, without the need for human intervention. With XBRL, the need to re-input the information disappears.

At present, filing of information in XBRL format is required by the SEC in the US, Companies House and the HMRC in Britain, and most exchanges in the EU, Japan, China and South Korea. In short, most of the world’s market cap is represented by companies that must file in XBRL. A notable exception is Canada, where the regulators have yet to step up to the plate.

The implications of XBRL for investors are huge. Regulatory data can be processed more quickly, improving on the effectiveness of regulation in protecting investors. Analysts can gain quicker access to data and can simply import it into their analysis tools, making their job quicker. As a result, analysts can extend their coverage to more companies. Overall, information can be moved more quickly, making it available to investors on a more timely basis.

As one example, many investments decisions are made based on earnings and news releases. However, those releases usually need to be re-input before they can be provided to the broad investing public by the intermediaries. This takes time, often several hours or even into the next day. These delays can have a negative impact on investment opportunities. If those releases were presented in XBRL, the information could be made available instantaneously.

The absence of XBRL requirements in Canada leaves investors holding the short end of the stick.