SEC introduces IDEA

Earlier today, Christopher Cox, SEC chairman introduced IDEA - Interactive Data and Electronic Applications, an XBRL framework for surfacing information used by investors. In prepared remarks, Cox said: "It will be faster, cheaper, better [than EDGAR.] Better data analysis will have a positive impact on the market as a whole. It will be global. With data tags, there is no need to do translations into 40 languages. Small businesses will find it less expensive to use interactive data. IDEA will be the platform for 21st century disclosure."

Under the current EDGAR system, users have to do mostly manual extraction in order to get to information that might be useful to investors. With IDEA, users of financial information will be able to quickly gain access to information that can be downloaded to Excel spreadsheets and other software, something that was impossible using EDGAR.

Cox said that once the information is available under IDEA, companies will be able to develop a variety of applications. "Some investment banks have already started to create tools for their own analysis requirements."

During the presentation, Cox drew the analogy between price comparison sites for cars and property noting that investors should be able to make easy investment comparisons in much the same way.

Questions were asked about the cost of implementing the new system and Cox quoted figures of  "The experience among our test filers is in the low tens of thousands of dollars." Most of the cost is incurred in the first year because once tags are established, then they remain in place, subject to changes such as a merger or acquisition.

Cox added that Google and Yahoo! Finance will be able to provide new analysis services: "We'll all get an upgrade. The real power here is that you can do this as easily for 100 companies as it is for two companies."

The big idea is to return power to the individual investor by putting the same information into individual's hands as would usually be collated by analysis service providers. That requires a simplification of the way information is presented to users. How that plays out has yet to be seen although it seems SEC expects a rolling back of the current situation where investment portfolios are handled by intermediaries.

As an aside, the SEC briefly mentioned it is using Twitter as a way of communicating directly with retail investors and said that it is exploring a number of the social networking sites to discover the issues that are important to retail investors.

UPDATE: for those interested in an insider's view on these changes, check out the CoverItLive version of events.