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April 30, 2003

Instant Messages Are a Hit

By Peter Chapman

Gated communities are not new. Bloomberg has offered its subscribers text chat for several years now through its dedicated terminals. Along with AOL, Bloomberg ranks as the most widely used IM service in equity trading rooms.

Nipping at Bloomberg's heels are at least two other builders of private communities. Privately-held Communicator expanded from the fixed income world into the equities world last fall with its Hub IM service. Reuters debuted Reuters Messaging at the same time. Thomson Financial is also considered likely to enter the fray.

Vendors on the record-keeping side include IMlogic (which has contracts with Merrill Lynch and Bear Stearns), and FaceTime Communications. The latter's customers include Banc of America Securities and Thomas Weisel.

IMlogic says interest in its product jumped since the e-mail fines were announced in December. "People recognize the SEC, the NASD and the NYSE are waking up to these things," said Jon Sakoda, IMlogic's co-founder and director of products. "Once they recognize IM is in their company they must do something about it."

Sakoda co-founded IMlogic two years ago after noting the explosion of IM use among traders at Goldman Sachs, where he worked in the technology investment group. The firm sells software that allows for the archiving of instant messages and the searching of those archives. In addition, it lets compliance execs "listen in" on a chat as it's happening.

"They can actually go into the message thread themselves and view the conversation," Sakoda said. "All they have to do is type the employee's name into a "search" interface and then they can read all messages up to that point."

The software works across all IM platforms, said Sakoda. But, because Bloomberg provides its own archiving, IMlogic simply integrates Bloomberg's logs into its own repository. The vendor is doing that for one customer, according to Sakoda.

IMlogic also allows compliance departments to flag certain messages. If the software detects a particular keyword, it e-mails the appropriate compliance official who then has the option of viewing the conversation.

IMlogic does not archive e-mails, but has partnered with vendors such as Zantaz and Iron Mountain that do, according to Sakoda.

IMlogic has competition. Other vendors with similar services include FaceTime Communications, Zantaz, Akonix, Ascentive and Omnipod.

Sanford C. Bernstein, an agency broker, uses Omnipod. "We use it to archive messages and to make sure people don't use it in an inappropriate manner," said Matt Andressen, head of global trading at Bernstein. "You don't want your e-mails splashed across the front page of the Wall Street Journal or the New York Times. You need to make sure no one is guaranteeing stock returns or running a Ponzi scheme out of your office."

An Alternative

Andressen says IM is an efficient alternative to the telephone. A busy trader may receive an instant message, let it sit open on his screen for 15 seconds, take care of the task at hand and then answer the message. If the trader at the other end is now also distracted he can do the same. The process is more efficient than a telephone conversation between two distracted traders.