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Elaine Wah

Modern Markets, Modern Metrics - A Blog By IEX

In this blog by IEX's Elaine Wah, the newest public exchange looks to refute public claims that the metrics it uses are designed to inflate its own volume numbers and mislead people.

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April 1, 2000

Hoot n' Hollerin' Replaced by Net Blasts Are Thing of the Past

By Peter Chapman

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  • Hoot n' Hollerin' Replaced by Net Blasts Are Thing of the Past

Communications software that changes the way the Street updates its traders and their applications has been introduced by several Silicon Valley companies.

The products make conventional updating mediums, such as hoot n' hooler systems or diskettes unnecessary. Instead, an intranet or extranet is used to channel the latest market intelligence to a trader. His trading applications can be automatically updated whenever new versions are published.

The major vendors include BackWeb Technologies of San Jose; Marimba of Mountain View; and Talarian of Los Altos.

Jefferies & Co., Goldman Sachs, Morgan Stanley Dean Witter, CS First Boston, Salomon Smith Barney, Warburg Dillon Read, Robertston Stephens, and even Nasdaq, have all found a use for the technology.

Jefferies uses BackWeb to broadcast earnings updates and news flashes. "The whole point of using BackWeb is to keep the noise off the speaker systems so we can use it for trading," said Mike Alex, Jefferies senior vice president for trading technology. "We're constantly putting our merchandise over the hoot n' holler so we need to keep it clear."

No More Earfuls

Instead of an earful of noise, a trader using BackWeb will get a pop-up box marked urgent' on his screen. A typical message is an updated earnings forecast from the research department. Right after an announcement is sent to Bloomberg and First Call/Thomson Financial, it is routed via Backweb to the trading room.

Other pop-ups may announce the detection of a program trade in the market. Jefferies' program desk uses software that examines such indicators as the number of ticks up or down, spikes in volume, and the spreads between certain cash and futures prices to sniff out programs. If it finds one, a BackWeb notice is sent to traders.

Jefferies can also use BackWeb to route floor looks to its traders from W&D, its wholly-owned floor brokerage at the New York Stock Exchange. Floor looks are hastily scribbled notes written by floor brokers denoting who is in the market and at what size.

The technology is, in essence, a sophisticated e-mail system. "E-mail is good for peer-to-peer communications of small messages. BackWeb allows you to send messages to large audiences through very unique targeting mechanisms-by topic, job title, geography or whatever," explained Todd Johnson, BackWeb's vice president of marketing. E-mail, Johnson noted, is generally acknowledged as not the best way to send urgent information.

Traders at Roberston Stephens used to get their updates via e-mail and voice-mail. "BackWeb pops right up on the screen so you see the information right away," said Fred Hughes, a Nasdaq position trader at the firm.

"With e-mail you have to go into it. But you're not as likely to do that right away sometimes," he said.

The bank has deployed the software on all its trading and sales desks. "It allows you to disseminate information to an entire trading floor in a real-time fashion," Hughes added. "It helps speed up the the flow of information."