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Hedge Funds and Phone Systems

Thursday, 23. June 2011 11:17

Computer-driven trading  has done little to diminish the importance of telecommunications in conducting business at hedge funds. While IM has replaced or augmented voice in the early stage of the trading process it is still good to talk and hedge fund traders have been weaned on trading turrets and digital trunking that are the apogee of reliability, quality and ease of use.

The difference is that bulge bracket firms from whence these traders came, have the scale, staff and budgets to manage complex telecommunications infrastructure while starting small and running lean is de rigeur at most hedge funds.

Often this means a choice between allocating a disproportionate share of resources to replicating the systems they used at large firms or making compromises that may:

  • impede trader productivity
  • lower system quality
  • decrease flexibility as the firm grows
  • increase overall life-cycle costs

Might there be a “third way” in essence having your cake and eating it too? Let’s look at a few aspects of the telecomms conundrum.

Day One and the Future

A mistake we see almost every week is customers being shortsighted in the procurement process. The sheer strain of getting a new venture  up and running is enormous and a lot of decisions must be made quickly and with very little sense of how things are going to play out.

Basics include asking potential providers to answer these questions :

  • Does your firm deal with trading firms regularly?
  • How does your system handle DR?
  • How much does it cost to add users?
  • How do you add remote users or branch offices?
  • Does your system offer trading turret integration (PBX)?
  • Can your system handle ringdown circuits or audio feeds or hoots?
  • Can multiple users jump-in on a line?
  • How many phones can a given line appear on?
  • Can your system be hosted in a remote data center?
  • Can your system support voice recording?

Trunking

T1 PRI and Ringdowns still rule the day in trader voice. What these connections lack in flexibility and resilience they make up for in assuring quality and consistency.They fall within acceptable price-for-performance ratios and most carriers offer various business continuity solutions that will reroute calls in situations when there is an outage. SIP Trunking can be substituted (or deployed in addition to) for T1 PRI. SIP offers many advantages including:

  • can be purchased in individual trunk increments (instead of blocks of 24 like a PRI)
  • enable dynamic rerouting in case of a carrier outage or cable cut
  • allow remote workers to work off of the same phone system and have local phone numbers

Hosted vs. Premise-Based

Tempting as it may be to go with a hosted VoIP telephone system there are certain circumstances under which you should resist; while these services offer convenience and flexibility they are not designed for the typical workflow of financial trading enterprises. For example they:

  • usually do not support ringdown connections
  • do not offer trading turret or hoot n holler devices
  • cannot support multiple people barging-in on lines
  • cannot support multiple appearances of lines
  • offer tedious, menu-driven phones with few buttons
  • can have inconsistent call quality

The good news about most premise-based VoIP systems is that they can be hosted in a remote data center and offer mobility applications. This reduces the likelihood that a building issue will affect your phone system and enables you to support remote users in branches or at home on the same system.

To Turret or Not to Turret

Buy-side trading floor denizens can be a different animal from their sell-side counterparts. To begin with their work is is often managing a portfolio or research-oriented which may not be nearly as phone-intensive as say that of an interdealer broker.

That said, trading floor staff at a hedge fund frequently make use of common trading turret features such as ringdowns,  multi-party ad hoc conferencing and multiple pages of direct  speed dial buttons. These capabilities are not readily imitated by a hosted VoIP or PBX-type telephone system and it can cost extraordinary sums to purchase a traditional turret system, especially for a handful of users.

WCS incorporates the entire spectrum of telecommunications for a trading firm into a single, scalable platform. Turrets can be deployed on “Day One” or added later if needed. We also offer a variety of IP trading desktops that suit different types of users at different price points and they all contain the core capabilities of a trading turret as well those of a regular phone.

Its Not Just the Phones

Financial trading is ferociously competitive and so problems with IT systems require immediate support. Ensure that the companies that supply you with phones (and other IT systems) deal with your type of business regularly, are able to respond quickly and are staffed with people who are familiar with the trading environment.

Your IT Partner

Voice solutions are not usually the bread and butter for most hedge fund solution providers. The tendency, especially if they are a cloud-based business model, is to partner with a hosted VoIP provider. This can seem like the best way to go but remember that hosted VoIP providers do not cater to financial trading and often lack the features you may require. Several are aligned with a particular PBX manufacturer (Avaya and Cisco come to mind), and rightly, have invested in building skill sets and service capabilities around these platforms. In any case, these providers can have either a bias or an agenda so it pays to do your own homework if the phone system is a key component of your business.

In Summary

A lot of the decision on the most suitable phone solution depends on the various activities your firm will be involved in. The flexibility and resilience available with IP technologies can  mitigate operational risk and make your staff more productive. But all of the technology in the world will not make up for the purchase of a system not designed for a trading environment.


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Shopping for IT Like You Are Big & Tall

Tuesday, 19. April 2011 14:34

Some stories just stay with you over the years. Like the one when my brother, who is somewhere between 6’3″ and 6’4″, told me he went to buy a suit in a Big & Tall store and they told him he wasn’t “big & tall” enough.

I have been thinking about this as it relates to our customers. Many are really small-medium size businesses (SMB = 10-500 employees) who traffic in very high dollar volumes and sophisticated securities instruments either as an broker-dealer or investment manager.

It is true that they often compete with the big boys and many of their employees have worked at bulge bracket firms but in reality they are truly SMB.

There is nothing wrong, per se, with thinking like a big guy, but if you aren’t one and you decide to shop at the Big & Tall shop you may not be getting the best fit.

What are the implications for firms like these across the continuum of evaluating, sourcing, deploying and supporting hardware, software and applications  that are critical to the mission of their business?

SMB lack the depth and breadth of resources that larger firms possess. This can affect their ability to stay abreast of the latest innovations and trends in the vendor ecosystem and can lead to knee-jerk, least path of resistance buying decisions. This might mean they:

  • Make the “going with what I know choice” by going with the next generation solution from their current vendor
  • Make the “default choice” by opting to go with what the big guys use
  • Make the “safe choice” by going with the current market leader

In the case of communications systems, this can mean living with the solution, service provider and cost structure for a decade or longer. Going with what the big guys use seems like it makes sense. After all, one might argue that he is piggy backing on the due diligence process of a large firm. The unfortunate thing is that SMB buying criteria should differ markedly from bulge bracket buying criteria.

What may compound this error is that when bulge bracket firms buy from industry behemoths they often do so because the market leader’s product (and support orientation) is optimized for their very largest customers. So you might be buying something meant for a different size customer and you may end up at the back of the line when it comes to that vendor’s priorities for providing service.

SMB, especially multi-location firms, need to be mindful of how they can efficiently roll out and support staff in branch locations and offer high availability, resilient systems for all users at reasonable costs. If a system is designed to be supported by highly trained, local IT staff you may have a lot of headaches dealing with the six person office in another city where the receptionist doubles at the IT resource.

At WCS, our products and service orientation are optimized for multi-site SMB financial trading enterprises who require high-performance, high-availability voice trading communications solutions that are scalable, flexible and manageable.

 

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WCS Adds Blog

Tuesday, 11. January 2011 17:15

In addition to the readily apparent self-interest associated with publishing a blog we at Wesley Clover Solutions hope to provide context, color and from time to time, useful information and perspective for readers.

We think that we are in a unique position to offer valuable insight for readers by combining our collective experience and role as an emerging player in the voice trading industry.

We hope, after reading, you think so too.

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