Greatly improving a process often makes technology more attractive. The best solutions are usually simple and flexible. But sometimes, the solutions aren't so simple, making technology needlessly complicated for users.
The problem is the way technology is applied. Many times we load our systems with unnecessary bells and whistles. The users get confused and the bells and whistles go unused. Demonstrating their prowess, the technologists provide traders with applications that do more than is necessary.
Technologists are missing the point. Technology is merely one tool used by trading desks. Technology is not a silver bullet.
Often we automatically assume that the only solution in this age of information overload is technology. The technologists' response to trading-desk problems comes with multiple monitors, layerings of windows and many double-clicks and keystrokes, sometimes losing sight of the traders' work environment and objectives.
Technologists attempt to impress traders with jazzy solutions, rather than elegant ones. I believe elegance means simplicity, and meets the users' needs.
There is a point of diminishing returns on all technology investments. Sometimes, a vast majority of the costs of applications are spent on features that may go unused. Therefore, the question technologists should ask themselves is, "Should we do this?" and not, "Can we do this?"
Technology's Place
Computers should be used to filter, collate and sort massive amounts of information to help traders perform more and better trades. Computers are not good decision-makers. Artificial intelligence and expert systems are examples of failed, improperly-applied technologies.
In some areas of our business, these types of technology have been very effectively applied. For example, Los Angeles-based Jefferies & Co.'s AE Workstation has simplified the crossing process and automated the clerical aspects of sales trading. Another simple solution was installing EASE, a product made by a New York vendor which allows simultaneous entry of indications and trades into Boston's Thomson Financial Service's AutEx and New York-based Bridge Information Systems.
Mapping the right-sized technology to the problem is as important as the solution itself. Because of the high rate of turnover in technology, it is more important than ever that we make technology investments with an eye to the future. We may decide not to purchase an upgrade, like Windows 98, because of the costs or the impacts to scheduled work.
Even though it may be "new and improved," it may not offer any useful functionality. Technologists and not the vendors should manage upgrades at reasonable paces.
Who's Driving?
In many cases, technological change is driven by forces outside of the firm's control, particularly industry-wide projects. Examples include the Year-2000 computer bug; the National Association of Securities Dealers' Order Audit Trail System, or OATS; settling trades one day after execution, or on T+1; the New York Stock Exchange's goal to have its computers handle four billion shares daily; the European Monetary Union; and decimalization. Not one of these expensive initiatives adds one dollar to a firm's bottom line.
Jefferies' clients are demanding direct access to products and services. The firm is working closely with clients to deliver electronic connectivity like direct access to markets, electronic communications with traders and seamless integration with internal systems.
Some traders may resist these initiatives, viewing them as threats to their relationships. This dichotomy produces a dynamic tension for management trying to prioritize technology projects that meet the customer's and salesperson's needs. Prioritizing and resolving problems adds yet other dimensions of immediacy to the process.
Another issue is how the buyside is requesting connectivity. Sell-side firms must use one of five "standard" Financial Information Exchange, or FIX, formats to communicate. The problem is the standard that resides in a specific firm and not among other buy-side firms. No one vendor or organization owns the FIX protocol.
Technology Philosophy
Jefferies' goal is to provide its traders with the right level of technology. We try to achieve this by becoming true partners with our business units. We aim to act first as advisors, then as technologists.
Due to client and regulatory demands, technology is a large part of the expense structure. Business-unit managers must view technology as a strategic investment instead of a backoffice expense. Efficiency should not be the primary driver.
To be worthy of consideration, business managers must discard the mindset that technology must result in dollars saved through improved efficiencies. A technology investment should focus on more strategic goals, such as providing a competitive edge, meeting customer needs and increasing market share.
Why would a trader feel a new technology solution was a failure while a programmer may feel it was an unqualified success? Why such divergent views?
Traders who are good at building relationships and are fully accountable to their clients frequently work under time pressure. By the same token, technologists view their craft as an art form and focus more on product issues than people issues. Technologists tend to take a product view instead of a solution view of the deliverable. In other words, the product worked fine but the network caused the problem. The user only knows that the technology doesn't work.
Technologists don't expect their products to be 100 percent perfect once out of the box. They expect, and consider it common knowledge, that a burn-in period is needed for each new application. Depending on the complexity, this period can last months. Time is a relative thing. Technologists measure time with a calendar. Traders measure it with a stopwatch.
Need to Change
What's the big deal about technology? Why do we now need to change the way we work together? For one thing, competition and the markets are driving the change. Technology is an important tool to help facilitate the evolution of our industry. In the future, firms that make the smartest use of their technology investments will be more responsive to their clients and adapt better to changing market conditions.
To this end, technologists at Jefferies first seek to understand the problem, knowing that a solution may not involve technology. Then a very focused approach to investment is made to insure that technology dollars are being spent on strategic initiatives. Too many times, technology dollars are wasted. Time, effort and resources are spent on what can be done rather than on what should be done.
