Internet-based networking technology is heading toward the trading floor, promising traders faster and easier access to a wide array of market data and analytics.
The technology has spawned Intranets, linking traders to each other and to information resources both inside and outside their firms.
Intranets are a type of private network using Internet technology to allow electronic communications among users. A company e-mail system is a good example.
As Intranets begin arriving on trading floors over the next few years, desktops will undergo radical transformations.
Standalone computer workstations and terminals will be replaced by "thin clients" – stripped-down PCs costing as little as $500 – that are designed specifically for Intranet use.
Intranet technology's impact on traders will be immense, said Lawrence Tabb, group director of The Tower Group, a Newton, Mass.-based firm that analyzes technology trends in the banking and securities industries. "Intranets will give traders a degree of data flexibility and integration they can now only dream about."
According to Tabb, the era of separate terminals handling individual proprietary data feeds will pass into history.
"Traders will be able to receive information provided by a wide variety of suppliers, fed directly to their workstation via an Intranet," he said. "Their biggest problem will be finding the best sources in a sea of information."
Cheaper Information
Much to the consternation of proprietary financial-content providers, a great deal of the information Intranets can pull in from the Internet is comparatively inexpensive, or even free.
While not a substitute for the proprietary news streams, the materials traders can have delivered to their desktop from the Internet provide an additional level of information and analytic support.
TheStreet.com (www.thestreet.com) attracts subscribers with yearly fees of less than $9 per desktop, depending on the Intranet's size.
The information on the web site isn't as deep as the content carried by the proprietary providers, but is still quite extensive, and includes company news, opinion columns, delayed and historical quotes, Securities and Exchange Commission documents and intraday and historical charts for more than 24,000 stocks, funds and indices.
Alan Maguire, strategic sales manager for TheStreet.com, says the upstart service fills a previously empty niche.
"Prior to the arrival of companies like ours, information was primarily the domain of established vendors, like Reuters or Bloomberg, who covered the markets with plain facts, or research houses," he said.
"They have often an axe to grind regarding the markets and companies they comment on," Maguire added. "We bring a fresh, original approach to financial news by delivering an unbiased, insider's view of the industry."
Free Source
A free, Internet-based information source traders can turn to is BusinessVue 2.0 (www.businessvue.com), a program that pulls together information from multiple sites and sends it to traders through their Intranet-connected desktop.
In its final test stages at press time, the software allows traders to obtain corporate profiles, current and archived news stories, analyst recommendations, SEC filings and delayed and historical stock quotes. The product can also export data to a variety of standard business programs, including Microsoft Word and Microsoft Excel.
"We're ancillary to the Bloomberg machine and other products traders are using. We provide another data stream they can use to make informed decisions," said Denny Michael, vice president of marketing for Alpha Microsystems, the Santa Ana, Calif.-based company that publishes BusinessVue 2.0.
Although the advertiser-supported software and content is available at no cost, Alpha also markets an advertising-free version (with customized data feeds) that more closely resembles the service offered by proprietary-content providers.
Costs start at $10,000 per site, plus monthly and per-user fees that vary according to the size and scope of the Intranet. Michael believes that all financial information will eventually be delivered to traders via the Internet and Intranets.
"You're already seeing the proprietary providers moving in that direction," he said. "The stranglehold these companies once had is being eliminated by the Internet."
Information Overload
While Internet and Intranet-supplied data streams offer traders an almost unlimited array of information sources, the sheer volume of incoming material can pose a problem similar to that of visiting an all-you-can-eat buffet – serious indigestion. Combine Internet and Intranet-supplied data with proprietary feeds, and the situation can be overwhelming.
"Simultaneous access to data from multiple real-time and historic sources is a critical problem confronting the trading floor in virtually every firm today," Tabb said. "The ability to access multiple data sources from an integrated graphical interface meets a critical need."
To answer the problem of information overload, Leading Market Technologies (www.lmt-expo.com), a Cambridge, Mass. software developer, has created MarketBrowser.
The Intranet-based charting and graphing solution aims to help traders view and analyze market data from multiple sources simultaneously. The product integrates Reuters, Open Bloomberg, FAME, LIM and other major sources of real-time and historical financial-market data, as well as a wide selection of Internet and Intranet-delivered information.
"Different data formats and communications protocols across multiple market-data sources has often meant that traders, for example, either can't get the data they need, or require multiple terminals to display it," said Jay Smith, chairman of Leading Market Technologies. "Even then, they can't combine data into the same application. MarketBrowser solves these problems."
In addition to its information-sorting capabilities, MarketBrowser provides an on -screen button bar to allow quick changing of the symbol or periodiciy of any chart. The software also includes facilities for drawing trend lines, annotating charts and printing. Users can cut and paste MarketBrowser charts and graphs to Microsoft Office and other PC applications for use in client reports and other documents.
Knight Securities, a Jersey City-based Nasdaq wholesaler, is a MarketBrowser user. "We bought MarketBrowser because we didn't want to depend on a data vendor for our charting and analytics," said Kenneth Pasternak, Knight's president and chief executive. "With MarketBrowser, we get an outstanding graphical display of market data and the ability to choose whatever data sources we want."
Intelligent Agents
Intranet-linked workstations can also take advantage of powerful software search tools, known as intelligent agents. Intelligent agents are self-contained programs that can be tailored by users seeking specific types of information.
Data Grabber, an intelligent-agent program from Cyber Vista (www.cybervista.com), allows traders to automatically harvest data from an array of online sources, including information services and web sites.
A trader could, for example, instruct Data Grabber to capture stock-quote information at designated times, and have the data automatically placed into a spreadsheet for analysis. The software can also be used to monitor web sites for product announcements, financial statements and other types of breaking information.
Nicholas Roche, vice president of sales and marketing for San Mateo, Calif.-based CyberVista, said Data Grabber can help traders quickly zero-in on key information. "Data Grabber acts like a silent assistant, collecting information and allowing traders to follow all markets 24 hours a day," he said.
Roche noted that the software can even alert a trader to breaking information while away from the desktop. "Data Grabber can be linked to a user's e-mail, alphanumeric pager and fax machine to deliver information anytime, anywhere," he said.
Streaming Media
Another powerful Internet and Intranet-oriented technology that will likely impact traders in the years ahead is streaming-media technology, which delivers live or pre-recorded video and audio programming directly to the desktop. Streaming media is already available to firms with networked trading floors.
Mountain View, Calif.-based Starlight Networks, for example, offers StarCast, a streaming-media product that provides live and on-demand video and slide presentations within a standard web browser.
James Long, Starlight's chairman and co-founder, said potential StarCast applications include company announcements, corporate presentations and training seminars. "It really opens the world to traders," Long said.
"A trader can get video in a window on his desktop. He can correlate the information he's getting from the video feed to market information he's looking at concurrently," he added.
According to Long, brokerage giant Salomon Smith Barney was the first major financial-services company to embrace StarCast. The company deployed the technology on its 11,000-user corporate network last fall.
"Smith Barney uses the technology to broadcast live analyst briefings to desktops at its New York headquarters and in 470 branches nationwide," he explained.
Small Firms Lead
A few major firms, such as Salomon Smith Barney and Merrill Lynch & Co., have already begun installing Intranets, primarily as a low-cost way of linking together globally-dispersed employees.
But smaller firms will likely lead the industry's move toward Intranets. "Small companies can move faster because they don't have as many desktops to convert," said Rob Enderle, a senior analyst at Giga Information Group, a technology research firm based in Santa Clara, Calif. "Also, small companies don't have the financial investment in big, iron desktops like the major firms, so it's easier for them to make the decision to move to the new technology."
While Intranet technology has been available for several years, system security worries have slowed the technology's arrival on the trading floor.
"People have the feeling that anything that connects into any part of the Internet is a security risk," Tabb said. But firewalls, hardware and software combinations that prevent unauthorized data streams from entering an Intranet have become sophisticated enough to thwart the skills of even the most skilled hackers, he noted. "Intranets are really quite safe," Tabb added.
But it will still be a few years before the industry begins to widely embrace Intranets. Most firms are taking a wait-and-see approach, Tabb said. "Intranet distribution is still quite new, and most trading-floor managers are waiting to see how the technology evolves," he added. "No one wants to be among the first on the bandwagon."
