A Chairman's-Eye View Of The Market Data Marketplace; MTR Interviews Knight-Ridder's Tom Jordan

Knight-Ridder Newspapers, Inc. has been pressing intently into various segments of the market data business. A long-time presence in the futures arena with Commodity News Services, Inc., the firm got a piece of the technical analysis market last year by acquiring Tradecenter, Inc., and then launched the ambitious Moneycenter service to establish a foothold in the money markets. Worldwide, its Unicom division markets all three of these.

Supervising the market data services, plus Commodity Research Bureau, Commodity Perspective, and Knight-Ridder Financial News, is Tom Jordan, chairman of Knight-Ridder Financial Information Group. Jordan joined KRFIG last October after three years as chairman of Monchik-Weber Corp. and 16 years at IBM Corp. We spent a few minutes one morning discussing the state of the quote business:

Jordan: In terms of delivering information to the financial marketplace, we cover all sectors of the marketplace with the exception of municipal bonds and corporate bonds. So my job is to consolidate the organizations together as best we can to deliver the information in a cost-effective fashion. We have a lot of information, but the charter -- the challenge -- is to get that information down to the client, so they can pick and choose what they need of that information, and then have some analytic tools to look at it. So that people will be able to combine the news information with the price information with some analytic information and of course get that on one sort of service or one sort of terminal. So actually my job is to be the architect -- the manager -- to insure that we can bring all of this together, and to deliver it to the client, so that we're going to be one of the major players within this marketplace in the next three or four years. MTR: What role do you see technology playing as far as accomplishing this, and are there particular technologies that you think have high leverage capability in this area?

Jordan: The key of course is a combination of having the right information and then getting that information to the client in a proper area, and you can't be successful without having them both. I mean, you could have the technology, but you've either got to create the information yourself or get it from someone and and vice versa. I mean, you could be just in the information business and use someone else for the technology. We're actually in both businesses, and in terms of your direct question on the technology, we just see it as being a very key factor in it, because a lot of the information that we're talking about is going to be available from multiple sources in different formats. So if you can use the most efficient technology -- a la the fastest, cheapest -- to get it out there, you're going to have the competitive advantage over the competitor.

Now, in terms of some of the technology stuff, we are a leader in some of that already. We certainly use Equatorial Communications to deliver a large part of our information. We were the first firm to use Equatorial Communications at commercial sites. We're the largest user of Equatorial Communications. So we use that when it makes sense. We use FM sideband when it makes sense because at some of our services the FM sideband just works fine. You know, it's the cheapest, most efficient way to deliver it, and in other cases of course we'll just use phone lines. We use both broadcast and we use interactive, and we believe you need both. The more information you can send down to broadcast, the better off you are, of course, because the cheaper you're going to be able to get it down there, but you have to allow the people to have opportunities from time to time to come back and get some additional information. So we'll do both, but our focus has really been on the broadcast information.

Jordan: You really have to have it on a microcomputer. As I'm standing here in my office here right now, I have three of my products on the table in front of me, and they all happen to be on microcomputers. I have on my left-hand side, I have the CNS service -- the CNS Analyst -- which is on an IBM Personal Computer, and then I have the Moneycenter product, which is on the AT&T 6300, and then I have the Tradecenter product, which is on an IBM Personal Computer XT. You really have to deliver it on some sort of microcomputer, and you also have to have the capability, of course, to allow the client to put it on his own microcomputer, because a lot of people just happen to have their own microcomputers out there on their desks and just aren't terribly enamored with adding another one onto the desk. So you have to have that kind of capability. And it's really neat if in additional to delivering it on microcomputer, you allow people to do some additional work besides just delivering what you're going to deliver on it, and that's part of the philosophy also -- is to leave them some capability there, so that they can take some of our information and then go off and do some things using some of that information.

Jordan: I think you can take a look at what the large financial institutions have and envision that a lot of the information is just going to move down to the next level. And those people at the large institutions will have more things going on. So the people that are the major banks, the major securities firms today, and the kind of information and analytic tools they have, will move down to the next level, and then it'll move down to the next level. So what I'm talking about is that the kind of stuff that the major institutions may have, you'll see moving out to the regional banks, to the small securities firms, to the pension managers, to the treasurers of the corporations, to the investment managers. And we're already starting to see that, and we're positioning ourselves to take advantage of it out there in this much larger marketplace than just the major institutions.

Jordan: A combination of both. I think that you've got to give some of the folks out there some of the information, but if you can get the software down there for them to manipulate it, then they are more likely to deal with you. See, the major institutions can participate in that by allowing the smaller institutions to also access some of their information. Overall intent of course being to cause those institutions to deal with them. But the delivery of the information, of the software, and the way of getting it down to them is a ever-increasing important element in that whole sales process.

Jordan: We have, as you probably know, a significant presence on the continent, in London, and also in the Far East, and we're moving some of our focus in the Far East to Tokyo from other places within the Far East, and Tokyo is becoming the third financial capital, if you will, of the world. You're not going to be successful in this business without being able to distribute information overseas, to be able to capture some of the information overseas and bring it back here to the states, if you're not really looking at it as a global marketplace. We have a global news organization now. I will come in here on a Saturday or early in the morning, and we have a news desk around the world, and we just keep moving it around, you know, based on the clock, covering all the events that are going on. And that's what's really happening, and you're really, not going to be too successful unless you can provide the international side of the business, and because of what we've done overseas, with Unicom, we have a little bit of a head start in doing some of those things.

Jordan: I think the challenge the securities and futures exchanges have is not a technology issue. It's really finding the product that's going to cause people to want to trade in that instrument. The New York Stock Exchange just came out with a new index having to do with betas to try and get interest on some options on some highly volatile stocks, and for as many of these products as come out -- you know -- I don't know what the percentage is, but it's a low percentage that's successful, so I really think that's where their focus is going be -- to try to find the products that people really want want to deal with. I really don't see how they can play much the technology game. I think the time has passed where they can be the vast distributor of information. I think what they have to do is get their information to people like ourselves, and people like Quotron, people like Telerate, and whoever else is going to get it, and allow them to distribute it, because they're just not going to be able to go direct to the large bulk of the clients. The clients are looking for someone to consolidate that information. They're not going to take information from 20 or 25 or 30 exchanges. So I think their focus is going to have to be more on the marketing and the sales side, rather than on the technology side.

Jordan: I think it is possible, because what you have to do is come up with the most efficient distribution media you can, which is really broadcasting of the information. And a capability to get back to your databases for historical information or for real sophisticated analytics. The broadcast capability -- we have that kind of service on Moneycenter and CNS. The interactive capability we have on Tradecenter. Tradecenter has a focus on the equity side of the marketplace and the futures, and Moneycenter has it on the non-exchange-oriented areas. So we wind up covering the marketplace with the exception of munis and corporates, pretty well with the combination of the products, and we wind up combining the technologies pretty well with the combination of the products. So you wind up just having the challenge of putting them together. We see a way of doing that, and we're already moving in that direction. The organizations are working a lot closer together. You know we have a chief technology officer, Paul Tucker, who has the responsibility of pulling that together. And he's been working on that pretty hard over the last six or nine months.

Jordan: What's really happened there is that the futures market itself has done fine, because the financial futures has increased in volume to pick up where the agricultural futures has fallen off, and I think that's what you're talking about in terms of the traditional being the agriculture business. The agriculture business has fallen off, and it's not clear to me when that business is going to turn around. There are some people who say the bottom has been reached in the market, and there are others that say it hasn't. I suspect it hasn't, but it'll probably reach it, hopefully within the next year or so. The good news on that is that our competitors have had a tough time in that marketplace, and since we're the predominant player in the whole thing, we've been able to handle it better than anyone else has. So the bad news is the agriculture market isn't growing. The good news is that we continue to increase our market share in that marketplace. And that's a real significant market to us, and we intend to keep our presence in it. The agriculture business is going to come back. I mean, it's something that people in this country depend on, and it just so happens that some of the stuff just got overgrown. But the market will -- that will be corrected. That will be corrected over time. And when it is we'll be stronger than ever in that marketplace.