Around the world, financial institutions continue to turn to Interactive Data to help them address time-sensitive, mission-critical challenges across their enterprises. As a result, Interactive Data moves forward as a trusted, tier-one industry leader that is well positioned to help its customers respond to key trends influencing both their day-to-day operations and overall long-term success. These trends include heightened scrutiny around the valuation of securities; increased regulation and its cascading impact on risk management and compliance; the proliferation of automated trading made possible by low latency data; and the need by financial institutions to differentiate wealth management platforms in order to attract and retain clients. Even during what may be a protracted period of significant stress across many of the world’s major economies and financial markets, these are trends that we believe our customers cannot afford to ignore.
Volatility in the equity, credit and alternative investment markets during 2008 created significant challenges for financial institutions as they strived to determine the value of their holdings across a broad range of asset classes. During this tumultuous period, Interactive Data’s Pricing and Reference Data business distinguished itself as a trusted, independent source of pricing information and evaluationsfor more than 2.8 million fixed income and equity securities.
As part of our ongoing strategy to address our customers’ evolving needs, we brought new valuation services to the marketplace while continuing to expand the global content that we collect, process, derive and deliver. In August 2008, we broadened the scope of our interest rate swap valuation service — increasing our coverage of this asset class to approximately 95% of the total notional amount of interest rate swaps outstanding. We also added 3:00 pm valuations of this information, complementing our traditional 4:00 pm valuation service. In September 2008, we began working exclusively with Prism Valuation to provide customers with Prism’s valuation services for complex OTC derivatives and structured products. During the year, we also significantly enhanced our innovative Basket Calculation ServiceSM, a web-based offering that calculates intra-day indicative valuations for equity and fixed income exchange traded funds (ETFs), by delivering indicative intra-day valuations for exchange traded notes (ETNs) and values for market indices. As we move forward, we plan to continue expanding our overall securities coverage based on customer demand.
As volatility increased and valuations across certain asset classes fluctuated notably, we continued to respond to the needs of our evaluations customers for greater transparency into how our evaluations are derived. In early 2009, we launched a broad set of information resources to help customers better understand our evaluations, particularly with respect to the potential impact of daily market conditions. We also expanded the information available to help clients prepare for their obligations under Financial Accounting Standards Board’s Statement of Financial Accounting Standards No.157 (“FAS 157”). Going forward, we plan to further expand the scope of our information resources through additional online services that provide greater levels of transparency into our evaluations, including a broader set of content to help customers with their FAS 157 requirements.
Risk Management and Compliance
Reference data — the descriptive information about a security that helps facilitate the timely processing of transactions, support risk management systems and address regulatory and reporting requirements — is taking on an even more strategic role within the workflow of major financial institutions. As new regulatory mandates are implemented and the drive to improve overall efficiency through automation continues, Interactive Data’s reference data content, domain expertise and reliable service delivery are enabling customers to streamline workflows across their enterprises, advance their compliance initiatives, and support their risk management activities.
During 2008, Interactive Data took important steps to broaden its vast reservoir of reference data services. In August, Interactive Data acquired Kler’s Financial Information Service S.r.l., a leading provider of domestic reference data to the Italian financial industry. The content from Kler’s includes corporate actions and taxation information, on Italian and international securities, with coverage spanning equities, listed and unlisted Italian bonds, funds, simple derivatives and warrants. The addition of Italian reference data from Kler’s complements the reference data that we already collect, process and deliver to thousands of financial institutions and redistribution partners around the world. In December, we acquired a majority stake in NTT DATA Financial Corporation, which had served as our redistribution partner in Japan for securities pricing and reference data. Now operating this business as Interactive Data Japan, we plan to market an even broader range of services to our Japanese customers to help them drive efficiencies across their front, middle and back offices while also helping them comply with evolving regulations.
We also took steps to provide our institutional customers with a greater range of delivery options for our reference data. In addition to offering intra-day services, we accelerated delivery of our start-of-day reference data service for North American equities by seven hours to 1:00 am ET, which is prior to the start of trading in Europe. As a result of providing our reference data earlier in the day, our customers have additional time to build and maintain more precise security master files while facilitating the flow of data through the back, middle and front offices. As we move forward, we see further opportunities to harmonize reference data content used across our organization, such as corporate actions, which will enable us to accelerate service delivery. We also plan to continue efforts to bring new services to market, including our new Business Entity Service that allows customers to support their risk management objectives by analyzing their global exposure to various entities, industries and regions.
As risk management becomes an ever more critical function within major banks, brokerages, pension funds, and insurance companies, Interactive Data’s BondEdge® represents a powerful front-office tool to manage risks and measure the performance of their diversified portfolios. During the year, we made significant progress advancing our next-generation version of BondEdge. In addition to improved functionality and a more intuitive user interface, Interactive Data is adding a broader range of deployment options, including the introduction of new tools designed to make it easier for a broader range of users to benefit from its robust capabilities, and facilitate tighter integration with complementary asset-liability and risk management solutions.
In trading rooms around the world, there is a proliferation of sophisticated automated trading systems that rely on complex algorithms to execute the purchase and sale of securities. These algorithmic engines require exceptionally fast delivery of information, typically measured in milliseconds or even less than one millisecond. Interactive Data has established itself as a leading provider of low latency data services that are used by a broad range of financial institutions, trading platforms and financial web portals.
Speed, resiliency and reliable service delivery are fundamental to helping the world’s largest and most innovative institutions with their real-time market data requirements. However, meeting these requirements is further compounded by surging market data volumes resulting from the adoption of algorithmic trading applications, auto-quoting by remote market makers, and the growing appeal of electronic exchanges and other opaque trading venues that anonymously connect buyers and sellers. During 2008, the Company continued its global efforts to reduce the time it takes to collate real-time data from over 450 exchanges and other sources and deliver it to customers.
For major institutions with global trading strategies or smaller regional firms focused on their local marketplaces, it is critical that we continually enhance the breadth and depth of our real-time market coverage. During the past year, we took steps to significantly strengthen our real-time market coverage. In 2008, we added a number of exchanges in the Middle East and Africa, as well as emerging exchanges and trading platforms such as BATS Trading, the operator of the third-largest U.S. equity market, and the Turquoise multilateral trading facility, which provides electronic execution services to buyers and sellers of pan-European equities. Going forward, we plan to continue adding exchanges and other sources with an emphasis on those in Asia as well as the Middle East.
We also continued to broaden our real-time services in 2008. In August, we introduced PlusFeed SelectSM, a cost-effective, hosted “watch list”-based real-time datafeed service. PlusFeed Select is targeted at a variety of institutions including hedge funds, order management systems, portfolio managers, third party application providers, web sites, and firms that have investment strategies that require access to a modest subset of real-time information across a variety of market sources and asset classes. PlusFeed Select is an extension of PlusFeedSM, Interactive Data’s consolidated high-quality, low latency digital datafeed that powers algorithmic and electronic trading applications. The PlusFeed suite of low latency data services, along with DirectPlusSM, an ultra low latency service that provides access to sub-one millisecond data directly from a major exchange, provides customers with a wide range of real-time services to address their latency sensitive trading needs.
Going forward, we plan to add new capabilities that are designed to make our real-time offerings even more bandwidth efficient and even easier to integrate into trading room operations as our customers look to migrate from their incumbent providers.
Around the world, wealth management is taking on a new level of importance due to the sharp downturn in many major global economies and financial markets, as well as trends around pension privatization and an aging baby boomer population that is living longer and edging nearer to retirement. As a result, the competition among leading banks, asset managers and brokerages to attract and retain clients has intensified. As profit margins are squeezed, institutions are reexamining the tools they provide to their advisors, brokers and relationship managers as well as the ones they extend to their end customers. Interactive Data’s range of innovative, cost-effective web-based solutions and workstations can empower institutions to differentiate their offerings, more efficiently support their clients and ultimately increase productivity and profitability.
During the past year, we continued to advance our family of managed solutions offerings that are used to create customized, web-based financial information terminals, portals and applications. For example, in early 2009, we added new features to the Portfolio module used in our PrimePortal offering for creating customized online financial applications. With a host of new Portfolio capabilities, investment advisors, online brokers and financial portals can better develop and monitor investment portfolios, and increase efficiency and quality in key advisory processes. The combination of our customizable PrimeTerminal and eSignal® offerings are enabling us to address a broader range of opportunities in the wealth management sector — including helping regional brokerage firms in the U.S. and private banks across Europe who may be struggling with the rising costs associated with migrating to higher-priced solutions from their incumbent suppliers. As we move forward, we will continue to advance our suite of web-based solutions with new features and capabilities, including new tools designed to enable our customers to advance their in-house development initiatives.
With nearly 55,000 direct subscription terminals around the world, our award-winning eSignal offerings set the standard for active traders, individual investors and investment community professionals seeking high-quality market data platforms with access to a range of powerful decision-support tools. Over the past year, we have added an array of new features to the eSignal suite of offerings. In addition, we introduced eSignal OnDemand specifically for end-of-day traders, as well as new products aimed at helping futures traders identify trading opportunities in the agriculture market. A pioneer in delivering financial information to mobile investors, eSignal also strengthened its QuoTrek® service for Blackberry and other java-enabled mobile devices with new features and 2.5 times more capacity in terms of the number of symbols that can be viewed.
Trusted Around the World
By incorporating feedback from our customers to guide and refine key development programs, our value proposition continues to resonate with its customers around the world. As we move forward, we are aligning key functional areas across our Company in order to foster innovation, accelerate time to market, elevate quality to new levels and promote highly responsive support. We also continue to extend our reach globally through an ongoing commitment to build our presence in key local markets through our ongoing sales, development and support initiatives as well as by advancing strategic acquisitions and other key relationships.
Regardless of the economic climate, Interactive Data has always prided itself on working closely with its institutional customers to better understand their needs, and then investing in the resources required to efficiently and effectively address them. With a vast range of market data services, analytics and related solutions, and proven expertise in understanding the operational workflows of our customers, we are helping our customers worldwide adapt to powerful trends that are impacting their businesses. As a result, we continue to validate the implicit trust that our customers worldwide have placed in our organization.
2008 was a year of significant global expansion for Interactive Data. The Company generated strong organic revenue growth globally amid robust demand for its independent fixed income evaluations, comprehensive reference data services, low latency datafeed services and managed solutions. In addition to this success, Interactive Data also completed two strategic acquisitions that provide the Company with a more substantial direct presence in two important regional markets: Italy and Japan.
In August 2008, Interactive Data acquired Kler’s Financial Information Service S.r.l., a leading provider of reference data on Italian securities to the Italian financial community. The reference data content from Kler’s on Italian equities, listed and unlisted Italian bonds, funds, simple derivatives and warrants complements the reference data content that Interactive Data already collects, processes and delivers to thousands of financial institutions and redistribution partners around the world. For customers in Italy, the addition of Interactive Data’s rich global content will further strengthen Kler’s existing offerings, and create opportunities for Interactive Data to develop evaluated pricing for Italian unlisted bonds.
In December 2008, Interactive Data acquired a majority interest in its Japanese redistribution partner, Tokyo-based NTT DATA Financial Corporation (NDF). NDF’s services are widely used in Japan by banks, asset and funds management companies, insurance companies, custody banks, trust banks and securities firms. Renamed as Interactive Data Japan, the combination of NDF’s knowledge of the Japanese market and Interactive Data’s experience in delivering information for millions of global securities every day and robust technology infrastructure creates an opportunity for Interactive Data to directly provide financial institutions in Japan with an even broader range of financial data and services.
Going forward, Interactive Data plans to continue growing its business globally across continental Europe, the Middle East and Asia Pacific by pursuing strategic acquisitions and realigning existing resources with agility and decisiveness to further scale its presence in markets with high-growth potential.