Commentary

Tim Quast
Traders Magazine Online News

We're All HFTs Now

In this guest commentary, author Tim Quast looks back at the history of HFT and how the market has evolved to where many firms now fit the definition of high-frequency trader.

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September 30, 2003

The Video Village

By Gerald J. Burnett

It is amazing how many trades still take place in an environment where pros are practically blindfolded. Yet, according to research, half of our brain function is devoted to vision. So it is no surprise that video technology is filling a need in the rapid-fire, complex and interpersonal world of trading. Video is becoming an alternative to turrets, instant messaging and the once-reliable method of standing up and shouting.

Some 1,500 traders in the U.S. and worldwide are already video-connected for fast, effective communication. Firms like UBS and J.P. Morgan use video to quickly deliver and receive a more complete picture, without the risk of misunderstanding. They use this technology in making major decisions on block trades. They also use it to assess risk. They use it to keep costs low and relationships on a good note in trade settlement.

The most profitable strategies work in an environment in which traders are a click away from face-to-face discussions with analysts, other traders or risk pros. Here's how the technology works: With video calls, a trader typically accesses his buddy list' - a familiar tool in instant messaging - to check whether his colleague or counterparty is logged in. The trader then clicks to connect onto video with the other party. The video call receiver will first see the caller ID. He can choose to accept or refuse the call.

Finally, if the call is accepted, the colleague instantly appears in a video window on the workstation. He's right next to the prices, positions and models in discussion. It's that simple. The image is crisp and clear. There are no annoying freeze frames and no perceptible time lag between voice and video.

But few pros limit themselves to simple interactive calling. With a couple of more clicks, they can pull two more people into the call, all arranged in a quad around the screen, in the same style as some news channels they follow. In fact, they often pull in live TV feeds so they can watch events unfold with an analyst online, simultaneously calling a client live or recording his commentary. That helps them to secure the right outcome in a timely manner.

What's more, many morning meetings can take place, at the same time broadcast internally or externally, with password access and the ability to retrieve them later in the day or the week.

The latest technology can accommodate users who want to share a view of a document or a market data screen. The cost of ownership is typically around a couple of hundred dollars per user per month. This includes communications costs and the internal corporate overhead charges for managing and supporting the communication networks.

The latest combination of video and telephone turrets, as an integrated multimedia platform, is encouraging firms to consider video as an important tool. These video turrets merge voice, video and data. This allows speed and accuracy to come together like never before, using a familiar interface. Traders do not have to switch handsets or headsets for voice and video calls. They can easily add the colleague on his cell phone as he runs through the airport.

As for lingering economic and security concerns, firms are paying more attention to tools that help them manage the realities of the current climate. That's without sacrificing internal communication, risk exposure, productivity or service. Indeed, video is the natural response to geographically dispersed teams and travel cutbacks.

To illustrate my point, consider the first global video community connecting the buyside and sellside. It was initiated by one of the world's top two global equities firms. I believe this new community will enable traders to expand their counterparty network. It will enable them to reach the people who matter - with the information that matters - when engaging in complex transactions.

So what is the ultimate vision? It is to connect all of Wall Street, London, Frankfurt and money centers worldwide into this global video community.

Gerald Burnett is chairman and CEO of Avistar Communications in Redwood Shores, CA. The company provides business video technology.