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March 1, 2001

Trading Turrets Enter Internet Age: Can Digital Sound Subdue Analog Signals?

By Peter Chapman

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  • Trading Turrets Enter Internet Age: Can Digital Sound Subdue Analog Signals?

The world's largest turret vendor has embarked on a controversial plan to transmit traders' voices as so-called data packets' instead of traditional analog signals.

Global Crossing Financial Markets is shipping a new generation of turrets that digitize voice signals for transmission over data networks using the Internet Protocol.

It is a bold departure from the traditional method of sending voice in analog format over dedicated circuits provided by telephone companies. The key benefit is cost savings for customers, analysts say. That's because the plan requires only one network for handling both voice and data transmission

Global Crossing Financial Markets was formed last year when its parent, Global Crossing, the big Bermuda-based network provider, bought turret manufacturer IPC Information Systems and its network-supplying subsidiary IXnet.

Trading Room

Both Global Crossing, which dominates the North American turret market with a 70 percent share, and its closest rival, Syntegra (the systems integration business of BT, or British Telecom), have a stake in the new technology. But only Global Crossing has declared Internet Protocol ready for the trading room.

The turret, a sophisticated telephone system used by traders to field multiple calls, is a critical piece of trading room technology. Most calls mean money.

Internet Protocol, or IP, is the method by which data is sent from one computer to another on the Internet. When it is used to facilitate voice traffic the process is known as Voice over Internet Protocol (VoIP), or IP Telephony. Telephoning over the Internet costs less than conventional means, but often results in scratchy, broken-up conversations.

Global Crossing maintains that traders' conversations will not be impaired if moved from dedicated circuits to the controlled environment of a private data network. Private networks are inherently more reliable than the public Internet. In fact, Global Crossing officials says, customers will enjoy both cost savings and operational efficiencies by switching over to their new IQMX turret.

"The whole point of moving a product to IP is to create a common language for all devices to communicate," said Gregg Kenepp, senior vice president for product development at Global Crossing. "The telephony devices on the trading floor are the last pieces of technology that have yet to be integrated into the rest of the trading environment."

The turrets will be able to communicate both with traders' software applications as well as others' IP-enabled telephony devices. By IP-enabling their telecommunications, firms will also be able to leverage the advanced data technologies of Cisco, Nortel and others to develop their voice infrastructure, Kenepp added.

Bandwidth Concerns

The Global Crossing strategy has skeptics and many critics. "You need to be extremely cautious about migrating data and voice onto one network," said Bob Magee, director of technology core services at Jefferies. "There are financial benefits, but if you can't manage consistent bandwidth for your voice requirement you could be in trouble."

Magee notes that data networks slow down at times due to unexpected peaks in bandwidth utilization. The same condition on a voice network would not be tolerable especially by a trader taking an order from a client.