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July 31, 2000

Chat Channels Vs. Squawk Boxes - Filtering Out the Hot Air for Traders

By Peter Chapman

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  • Chat Channels Vs. Squawk Boxes - Filtering Out the Hot Air for Traders

Traders will be able to swap their squawk boxes for chat rooms if technology from a Chicago start-up catches on.

Parlano, a division of the venture capital firm Divine InterVentures, began operations three months ago to market MindAlign, a text chat application developed by UBS Warburg in 1996.

Warburg's parent, UBS AG, responding to demand, sold the technology to Divine InterVentures in May. The bank did not want to engage in software marketing, nor did potential customers who were competitors, want to purchase their software from the bank. UBS AG also took a stake in Parlano.

MindAlign, called 'InterChange' at Warburg, lets groups of people conduct ongoing text-based conversations about subjects of mutual interest. Dedicated chat rooms or 'channels,' as Parlano calls them, can be created to facilitate discussions of almost anything including individual stocks, market sectors or customers. Traders who once got analyst upgrades or downgrades over the Warburg hoot 'n' holler now subscribe to dedicated MindAlign channels.

"This is a real-time, never-stop, 24 by 7 open forum," said David Schonberg, Parlano's vice president for R&D and the former executive director of information technology at Warburg. "You'll see 600 traders and salespeople on a given channel at Warburg."

Over 11,000 of Warburg's 15,000 employees subscribe to one or more of 3,000 chat channels. The goal is to spread the technology throughout the entire UBS organization, according to Andy Konchan, chat project leader for UBS AG. The Chicago native and co-midwife of InterChange was transplanted to London this year to oversee the spread of InterChange to UBS Asset Management and its retail banking affiliate UBS Switzerland.

MindAlign's key selling points are threefold: real-time dialogue, archiving and filtration. Since Warburg's traders replaced their hoot 'n' holler, the information still flows in real-time, but can now be archived. The trader never misses a message. If the trader leaves the desk or is on the phone the announcement will still be there. "With a squawk box you really had to be listening to what the person said," Schonberg explained. "If you were on the phone at the same time, it was difficult."

The ability to filter out unnecessary information is also a plus. A trader can therefore subscribe to the channels he needs. A trader responsible for Internet infrastructure stocks, for example, would only subscribe to the channel covering Internet infrastructure stocks. He doesn't have to listen to announcements on bank stocks, telecommunications and other areas.

Warburg's most successful channel is its 800-subscriber European equities channel, reflecting the bank's trading strengths in Europe. Dialogue centers on where stocks will open; the effect of news; and intraday analysis. Reports and statements from analysts and economists are also featured.

"We put on anything that happens in the equities market in Europe," Konchan said. "It's our central nervous system."

Back in Chicago, Warburg's proprietary desk also found a use for the technology. The group used to hold a daily morning meeting to talk strategy and swap trade ideas, rumors and broker comments. Schonberg's team built a lightweight knowledge management system, a sort-of information aggregator, and combined it with the