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.
"I can't throw the firm's voice and data over one network until I'm sure I can manage it effectively and consistently," he added. "VoIP is a relatively new technology and will experience growing pains. That's reason enough for me not to put all my eggs in one basket." Jefferies is in the process of replacing its V-Band turrets with IPC's current-generation Alliance MX turrets. It is evaluating VoIP in non-business critical areas.
Syntegra also contends Global Crossing is too far ahead of the curve. "The time is not right," said Judith Dixon, a London-based executive with Syntegra. "The technology is not robust enough. There is still a 100-microsecond delay audible to traders. There is no way they will want to voice trade over VoIP. It's simply not acceptable."
Development Kinks
Syntegra is pushing VoIP, but for less time-critical communications. It has joined with British start-up Purple Voice to implement an IP Telephony solution for brokerages that have satellite sales offices. That means branch offices will be able to save money on their morning intercom calls, the company says.
Kenepp at Global Crossing vigorously denies his service is prone to development kinks. He claims poor quality calls are a problem of the public Internet but not controlled private networks.
"The delay depends on the amount of compression you use," he explained. "The more you compress, or the less bandwidth you take to communicate the voice, the more delay you introduce."
The Internet does not guarantee bandwidth. Therefore, users must compress voice signals in order to transmit as much information as possible, according to Kenepp. "Our implementation does not compress," he said.
Even so, convincing traders and their technologists of the viability of VoIP is crucial. Global Crossing has a grand plan, seeing itself become the Ma Bell of Wall Street, linking traders' turrets worldwide into a single IP-based virtual private network (VPN).
Its Global Financial Extranet (previously IXnet) is a network that connects the voice, trading and information devices of reportedly 600 financial institutions and data vendors. It is the foundation of the planned VPN.
The plan is to convert the turret into one more node on the network. Critics like Dixon say subordinating the turret to the network is wrongheaded. "You will be just a turret hanging off a network," she said. "One size fits all. Is that what customers want or what Global Crossing wants?"
Global Crossing is phasing in the new technology in stages over the next year. That means traders won't be talking to traders in a pure VoIP environment for a while. Until the fourth quarter of this year the IP Telephony will extend only as far as Global Crossing's "backroom," its Alliance MX switch. Once a call reaches the switch it will go out over existing private lines to the trading counterparty. Later this year, the company plans to roll out its VoIP VPN technology.
The company believes a gradual changeover will be more palatable to its customers than one big round of changes. It will allow trading technologists to integrate their turrets into their data infrastructure first. In that way customers will also discover benefits other than conversation, Kenepp believes. "It's not just about taking voice and moving it into the data domain," he said.
CTI Science
Computer-Telephony Integration, or CTI, is the science of making telephony devices communicate with computers. It has been around for at least 10 years and has had the most success in call centers, which are distant cousins to the trading room.
CTI benefits sales or customer service representatives by making customer relationship management applications workable. CRM software updates screens with customer information when the phone rings. On Wall Street, it is promoted to sales traders and research salespeople as a tool providing instant snapshots of clients' securities holdings.
More Uses
Kenepp suggests more uses. A sales trader taking an order from a client over his turret pushes a button on his computer to access a deal ticket. The client's telephone number provides a common link between the turret and the computer. When the deal ticket pops up it already contains much of the required information about the trading counterparty.
Also, the audio recording of the transaction can be embedded into the deal ticket. Typically, recordings are archived on a separate system and can take time to locate when settling a trade dispute. With CTI/CRM, the trader clicks an icon on the deal ticket and calls up the recording.
As with VoIP, trading technologists aren't fully sold on CRM. "I don't think the CRM solutions are all that helpful at the moment," said Kristin Fendelander, a senior business analyst in the equity capital markets division of US Bancorp Piper Jaffray. "They won't be very handy for this industry until they're a little more advanced." Fendelander notes that most telephone calls come through a general switch that identifies the company, but not the individual.
Both Global Crossing and Syntegra have offered CTI for about five years. Syntegra is pushing hardest in this direction and introduced a CRM application last year called ITSMyriad. That software interacts with communications that come in over the turret, the Web and remote devices to provide caller data.
VoIP is not necessary for CTI, but it makes it easier to work, according to Kenepp. "[That is the case] anytime you can get devices all using IP to communicate," he said. Some tech execs aren't so sure.
Magee of Jefferies is excited by the promise of VoIP, but offers a note of caution. "They've advertised a pretty aggressive vision for the whole Global Crossing strategy," he said.
"All of their ideas sound good but I'll reserve judgement until I see them," he said.
