Traders are busy people, swamped in market data. So how do they find time to use this data effectively? Try market-data systems that are open, interactive and easily welded to other systems and information sources.
Speed and flexibility are the big kahuna.
In what may be a backlash against proprietary hardware, the market-data industry is undergoing a paradigm shift, moving like the rest of Wall Street from terminals and boxes to systems that are open, fast and more malleable.
Technological change has swept market-data vendors off their feet, forcing them to de-emphasize hardware and to sell systems that utilize information more efficiently.
Perhaps nowhere is this more evident than in the latest avatar of Bridge Information Systems' Bridge WorkStation, which runs on a 32-bit Windows NT platform. Bridge and many of its competitors are now striving towards making their systems more interactive.
That should please Richard Holway, head of trading at Investment Advisors, a $17 billion money manger based in Minneapolis. "I want interactive technology, to allow me to track my portfolio easily," Holway said.
Holway wants an electronic blotter on his computer, where the market-data feed can be programmed to track his investments to the last fraction. "I want to look at my portfolio from every angle," he added.
Like many of his peers on Wall Street, Holway is looking to his system for information he can use. For example, he follows news alerts on the equities he holds in his portfolio, the put-and-call action, price movement, a market-maker activity list, earnings estimates and any useful information that can have an impact on his portfolio.
That's a far cry from the early days of the ticker, when rumors formed the cornerstone of investing and the tape was an unending roll of paper.
Dawn of 20th Century
At the dawn of the 20th century, in his famous and hugely popular book, "Where the Money Grows," journalist and author Garet Garrett noted that there are those on Wall Street who spent hours reading the ticker-tape, finding trading clues as the machine spewed reams of paper.
As this century draws to a close, much of the paperwork has been reduced by technological gizmos, as professional investors and traders, Nasdaq market makers included, sit hunched in front of their computer screens, looking for information as the numbers fly across the cathode-ray tube.
This is the brave new world, where market data flies across fiber-optic cables, faster than the speed of light, helping the money men and women make or lose small fortunes. With more than half-a-dozen options available, it is no surprise that a trader's desktop computer is more cluttered than the New Jersey turnpike at the height of evening rush hour.
Holway says that in the future, the industry will see a merging of trading and quote systems. His own desk uses Reuters Research & Analytics, which is bundled with another Reuters-owned product, Instinet, a system he frequently uses in trading.
The importance of technology is underscored by the increasing amount of money securities firms are spending to upgrade their infrastructure. The financial-services industry has historically been very aggressive about adapting information technology, from the use of electromechanical devices in the 1930s, to Internet technology in the 1990s.
According to the Tower Group, a Boston-based research firm, large securities firms are the most substantial investors in information technology. A recent Tower study notes that large firms are using information technology to find trading opportunities that could not otherwise be found.
The study says that firms that invest heavily in applications technology perceive themselves to have better technology than their competitors. The study adds that firms spend more than 15 percent of their total technology budgets on market-data services and trading technologies.
That is good news, of course, for the more than a dozen market-data vendors, including top dogs like Bloomberg, Dow Jones Markets, Reuters' Quotron, Bridge, S&P Comstock and BMI, duking it out for the more than $5 billion-a-year market.
How do traders choose their market-data providers? And what are the most popular systems?
Tom Norby, head of Nasdaq trading at Portland-based Black & Co., notes that when he is selecting a market-data system, his top priority is the unique information the service provides. That's a view shared by T. Erik Conley, a head equity trader at Chicago-based buy-side firm The Northern Trust Company.
"The ability to get the very latest news, charts and other market data is one of the clinchers," Conley said.
While most pros discount cost, none are willing to compromise accuracy and reliability. In addition, most look for ease of use.
Bridge is the favored vendor on Conley's desk, because, he said, "we need a flexible system accessible from various offices around the country." Bridge has more than 70,000 users worldwide.
Still, Conley has a Bloomberg terminal humming on his desk. Why? "Because Bloomberg never goes down," Conley said. He points out that he decided to use Bloomberg as an option after his Bridge system went down on several occasions.
Conley has company. Most traders tend to use several systems. "I would not feel as comfortable with Bloomberg if it was the only choice," another trader said. Nevertheless, the terminal's ease of use has helped Bloomberg to sell 75,000 of its squat, plain boxes around the world.
A major feature Conley wants is the ability to download data to run spreadsheets. That's available in Bridge, which recently purchased Knight Ridder Financial News (thus adding more muscle to its fledgling service).
Bridge, for example, gives professionals an option to retrieve real-time equity, fixed-income, foreign-exchange and commodity prices on the same workstation screen using multiple windows.
However, if the user just wants the data feed, Bridge has an option to integrate feeds from rivals like Dow Jones and Reuters, via new technology called Data Gateway.
Bridge is taking another step. By using cross-platform Java language, the company wants to open its system further, and integrate it even more tightly with Internet and Intranet technologies.
The appetite for open systems, which use technologies like the Internet and Windows NT platforms, has prompted even the likes of Bloomberg to use open standards.
The company recently introduced The Open Bloomberg, a system which allows customers to access its services through their own PC or workstation by interfacing with Bloomberg hardware and software, using a common keyboard that is color coded for Bloomberg applications.
Bloomberg's aggressive moves to take over the desktop world has forced established players like Dow Jones Telerate, now renamed Dow Jones Markets, to be more defensive. Even Reuters' Quotron real-time financial-information system has started distributing information via the Internet.
Some experts, however, feel that this recent trend towards openness is due to fast-declining prices of financial information. That makes it imperative for market-data vendors to give their customers more functionality and to keep them firmly in their fold.