In the controversies over high frequency trading, made famous by the Michael Lewis book “Flash Boys”, the traders who are doing business sitting behind imposing turrets with rows of buttons that will connect them instantly to counterparties, are often overlooked.
With electronic trading, the role of voice in trading has been reduced, but it hasn’t gone away, said Patrick McCullough, CEO of Speakerbus, a company that makes systems for voice trading.
“Voice is still important but in a different way.”
Electronic trading works well for equities, but for complex products like swaps, voice is still the preferred method. Kevin McPartland, head of research for market structure at Greenwich Associates,, said a survey of 200 institutional investors in Europe, for example, showed that 80 percent preferred to trade over the phone.
McCullough said that “white glove” trades that may involve multiple parties, are apt to get done by voice. But that doesn’t mean the traditional turret vendors — IPC and BT — will be the tools of the future, he added.
“The industry is moving away from having these pieces of hardware on the desk. When IPC says voice is not going away they think the turret market is not going away. That is definitely going away. We saw a 30 percent decrease in the number of turrets for Tier Ones when they go through a technology refresh.”
Speakerbus and Green Key (story to come) have developed software-based voice trading systems built on open standards and using internet communications from firms like Cisco,
"Speakerbus merges the technologies onto a smaller footprint with higher functionality at a lower cost,” said McCullough. “It gives the guys who are paying something that meets their needs, that’s more compact and is as feature rich as all three of those put together.”
The turret can be a traditional big plastic device with loads of buttons and a handset or a bluetooth headset, or it can be virtualized and displayed on a flat screen. The software can be linked to a CRM system like Salesforce or to an in-house application.
Although McCullough keeps looking for the impact of Gen Y on trading technology, he said firms aren’t seeing a lot of millennials coming into trading.
“We are not necessarily dealing with people who click on a screen, but we continue to ask the question. I keep asking my developers when we are going to create an Xbox-style interface to a turret on the screen.”
For Speakerbus, the sweet spot in the market has been hedge funds, Tier Two and Tier Three firms, although McCullough expects more attention from Tier One firms which are under pressure to reduce their costs by six or seven percent a year.
“When you tell them I can save you up to 50 percent and give you the same efficiency and move you to software which is good today and gets better tomorrow, we get a lot of listening ears.”
The role of trading in the big firms is changing and trading floors are getting chopped up or combined, he said.
“Most Tier Ones are going through a tech refresh over the next 12 to 18 months. You will see major floors being combined, perhaps in a new building, and physical consolidation. Everyone we are working with now is reducing their footprint. It’s amazing to watch the number of positions go down as firms in the market look at what really makes money for them — what do they keep, what do they sell off or spin out.”
