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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.


Category:Buying A New System, Uncategorized | Comments Off on Hedge Funds and Phone Systems | Autor:

Saying Goodbye to $10K Per Position

Friday, 29. April 2011 15:58

Certain measurements in life take root and become a reference point. For example, 12 inches equals one foot or four quarts equal a gallon.

In trader voice,  for as long as I have been doing it, the baseline metric for price-per-position (total purchase price/number of end users) has been $10,000 per position. Of course, this can change based on factors such as system size, configuration and negotiated discount, but, as a rule of thumb, this is as good as any. Note that with traditional turret suppliers this is an “after discount” figure as list prices can be as much as double, especially for small numbers of users.

Since WCS’s founding, one of our fundamental goals has been to put paid to that measurement through innovation. It started with the recognition that the vast majority of traders use a fraction of the capacity of their turret (the average sell-side turret user has 4-5 unique ring down circuits, a small handful of DID, some speed dials and another handful of lines that they may cover for other traders in their group; adding up to a need of somewhere between 20-100 virtual button appearances; the typical buy-side trader needs even fewer).

We also new from experience that a related bugbear for financial trading firms has always been that traditional turrets could not share line appearances with regular PBX phones. This necessitates the investment in a $10,000 turret for anyone who might need to have even a few ring down circuits or trading lines on their telephone. In addition, since traditional turrets do not offer many of the convenience of an office telephone (voice mail comes to mind), this might result in users having a turret and a telephone on their desk.

WCS has really changed all of this. With the introduction of a single platform system we eliminated the limitations associated with sharing lines among turret devices and phones. On our system, all devices are created equal(ly) and have access to lines in the system as well all of the turret and “PBX” features associated with the system.

By introducing a system that gives firms the option to offer dial tone (analog, PRI, SIP trunking) as well as trading turret capabilities in the same platform, WCS eliminated the requirement to purchase, integrate and support two voice systems.

Finally, The Crossover Series, our IP Trading Desktop portfolio, further disrupts the status quo by offering customers a choice of trading devices in various form factors, capacities and prices. Any of these  devices can support dial tone, ring downs, speed dials and pagination/floating answer keys while sharing lines with the 5560 IP Turret.

The price range of the Crossover Series desktop is $750-$2,750. This means that once you determine the mix of desktops and add in the back room elements and services the per position price for our system comes in drastically less than the old metric. And this is compounded to the positive for the customer when calculating total system life-cycle costs as annual operating costs are generally derived from the list price of the system purchased.

Brings to mind the old adage that “change can be  good.”

Category:Buying A New System, The Turret Market | Comments Off on Saying Goodbye to $10K Per Position | Autor:

The Case for Voice Virtualization

Friday, 11. February 2011 9:49

Without doubt one of the biggest trends in IT is virtualization. This post will, I hope, answer: what it is, why it is meaningful and why it should be on the radar of anyone with responsibility for voice platforms and services.

Exactly what is virtualization?

Virtualization, in computing, is the creation of a virtual version of something, such as a hardware platform, operating system, a storage device or network resources. The goal of virtualization is to centralize administrative tasks while improving scalability, efficiency and availability of these computing resources.

Why does it matter?

Virtualization, done correctly, achieves important two of the “holy grails” for any enterprise: increasing efficiency of assets and resources while decreasing costs and risk.

Why should it be on my radar?

If your competitors are doing it, and every piece of research on the adoption rate of virtualization says that the majority are, then you risk being lapped by your competition. To carry the racing analogy a little further: think of it as a race where your competition is driving a Formula One car that is faster, more durable, easier to drive, less prone to crashing, costs less, is easier to fix and takes up less space in the garage (and of course looks better) while you jump into a vintage stock car.

Okay. Now let’s discuss voice virtualization. Voice is different from other applications in its sensitivity to latency. In other words, if you have latency with voice, users are going to notice. If those users happen to be on a trading floor then the likelihood that they will not tolerate latency is, in my experience, nearly 100%.

Virtualization has the potential to introduce latency. This is why, until now, many have not considered the idea of virtualizing their voice platforms, especially in trading environments. Two years ago, two leading companies in their respective fields, VMware in virtualization software, and Mitel in IP communications, set out to solve the latency issue with voice. After 18 months of hard labor, it was mission accomplished.

What this means is that now customers have the option of deploying their entire voice infrastructure as a virtualized software application on industry standard hardware with VMware hypervisors. This could include trading turrets, enterprise voice and unified communications.

The result is that what previously was a proprietary, multi-vendor hardware/software environment that required ongoing integration and multiple support partners is now a single, normalized software application that can be managed, for the most part, by in-house IT staff.

The outcome, of course, being lower costs, improved scalability, system management and availability. And when the bonus check has arrived for all of this performance could that Ferrari be far off?

To see more on virtualizing voice in a financial trading enterprise please go to: http://www.wesleycloversolutions.com/nrl_empyrean_capital.htm

or for an in-depth white paper on voice virtualization please go to:

http://go.mitel.com/pages/start/google-ads-virtualization/index.html?Campaign_Id=131&Activity_Id=68

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