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14 Facts About Markets in 2019

Nicolas Colas, co-founder of DataTrek, shares hiss examination of the 14 facts prevalent to him in this year's financial markets.

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July 31, 1998

Is More Technology Good?

By Russ Lewis

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  • Is More Technology Good?
  • Page 2

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.