Trader Voice Strategy
How do you choose the technology that your trading staff use to communicate with counterparties, clients, and colleagues? I have rewritten this post for 2020 because the world has changed quickly since the start of the pandemic. The technology transition that was underway in 2018 has accelerated significantly since so many traders found themselves working from home. Investment banks still know that one size does not fit all in an optimum working environment. However, when most traders were working remotely at the peak of lockdown there was some homogenization within institutions. Voice is a much smaller part of trading nowadays, but it is still important for traders to have voice systems that support their regular operating styles plus a new range of contingencies that hadn’t been seriously contemplated before. This remains a multi-billion-dollar sector, and the topic of high-value decision making for senior IT managers.
The Trading Turret
The primary desktop hardware device in Trader Voice is the trading turret, also known as the dealer-board. Newer versions of this high-end telecommunication device run on SIP infrastructure, rather than the TDM of old. They allow a trader to visualize and prioritize multiple incoming calls and to use hundreds of buttons to call contacts efficiently. The latest units are modular, allowing capacity and channels to be proportionate to the individual user’s requirements. Turrets also feature multiple handsets, microphones, speaker channels, hoots, and intercom systems. Lower volume users and those with support roles may use a reduced spec version, a soft client, or high-spec PBX phones supported by an intercom where necessary.
UC functionality is available through some modern turrets, but the integration is not fully established. Instant messaging and IP conferencing work well whereas presence, signified by the red, amber, green system familiar to Microsoft Teams users, is more of a challenge. It is complex to establish a meaningful presence status on a turret because of the number of channels, some of which are open, and the different ways a user may be engaged in communication or core activity at any given time. Teams is not fit for purpose as a turret replacement, not that Microsoft ever claimed it would be. Large UC providers who also manufacture turrets have generally not sustained their products for the trading floor.
Soft Voice Clients
The trend across all industries is away from phones and towards soft-voice-clients with users wearing headphones plugged into their PCs. Trader Voice is no different. So, not only are the bulky server cabinets becoming a thing of the past, but the desktop equipment will also eventually go that way too. A clear advantage of a soft-client is flexibility. The system can be accessed anywhere with a straightforward online security log-in. With the trading floor remaining one of the last bastions of the stationary workforce, some of that advantage only became truly relevant in 2020. It remains the case that lower total cost of ownership, reduced desk space, and simpler upgrades, mean that soft-clients are a relevant part of any modern Trader Voice System [TVS] and consequently, the decision-making process becomes more complex. There are three fundamental soft-voice-client offerings associated with Trader Voice:
- An enterprise offering in which a soft-client is offered to all staff. The system is accessed securely online with no software installed in the user device. “Full turret functionality” is achieved with the addition of peripherals.
- A subscription “as a service” [AAS] model where users subscribe and unsubscribe as required, with their accounts provisioned in minutes. As well as subscribing to the service, users essentially subscribe to other internal and external contacts in communities of interest. This model has the lowest costs and is generally the least feature-rich, but it can be effective when the relevant communities are complete. Even with peripherals, it can’t be considered a turret replacement.
- A hybrid where the enterprise solution is sold but the AAS aspect is also pushed.
This changing paradigm has ushered in the final generation of traditional turrets. So, although the sector still sees new entrants with desktop hardware, anyone who buys physical turrets can expect to be offered soft-clients as part of a business continuity [BCP] or disaster recovery [DR] solution. DR should enable users to start working again when a crisis renders their office unviable. Previously, we said that the pure AAS model would struggle to facilitate this if a significant number of DR positions were required by heavy turret users.
This is true. However, when lockdowns and social distancing were introduced, although some banks set up traders with hard turrets over VPN, most had at least some heavy turret users working on soft clients, so their DR credentials were put to the test.
Business Continuity Post COVID
Despite positive news about a vaccine, virus control will be with us for some time and it has already redefined disaster recovery. Rather than a building becoming completely unviable, it is more likely to face severe capacity restrictions along with most buildings in a wide area around it. We have now undergone extended periods of remote working during which Trader Voice over soft client has undergone widespread live acceptance testing. Operational and compliance issues are pushed out to the edge of the WAN in this use case, expanding the risk register. Some banks attempted to buy secure laptops for every trader. Some found that the soft client licenses which they thought they owned were still subject to activation fees, and the set-up process was clunkier than expected. Others, who knew they had no licenses, found that they were able to pay and provision users quickly in a seamless process, either through TVS vendors or pure AAS. There will be more diligence applied to all aspects of any purchasing decision in future.
A key difference between a turret and a soft client is the turret’s superior processing power. When using a turret at home, the main limitation is the capacity and performance of the relevant ISP. In comparison, whether using TVS soft clients or pure AAS suppliers, users faced a lack of capacity. The number of available lines typically fell from the hundreds to fewer than twenty, regardless of endpoint. Speaker channels on average dropped from twenty-four to eight. During the first wave, traders were accepting of soft solutions they were given but the majority of technology owners felt the AAS solutions were not ready to take the place of genuine TVS and would be switched off when possible.
In general, banks seek advantage from new technology while remaining cautious about any risk of service disruption. With lockdown, the philosophy was to provide something that would work as quickly as possible and then improve it. For the time being, BCP ceases to be a supplementary aspect of a TVS selection. The flexibility to operate to the highest standards in any situation becomes a critical selection factor.
More than ever, banks want the cost savings and flexibility of soft client solutions, but they now have a clearer picture of the shortfalls when it comes to their heaviest trading floor users. They understand the operational and emotional turmoil that would arise from pushing through lower capacity solutions for all users. External assistance from specialist consultancies is valuable in reaching defensible strategies to the approval of all stakeholders.
There is something of a moving target when making decisions. Suppliers are all trying to cater for all parts of the market. As the traditional manufacturers have productized soft-clients, set up their own AAS style trading communities, and acquired software-focused competitors they have never stopped selling physical units. Meanwhile, the subscription suppliers, who haven’t achieved world domination, even after the enforced trial that 2020 presented, are looking to wrap hardware around their soft turrets, adding more peripherals than they envisaged, and integrating gateways so that external calls can be handled on their platforms; in all cases, increasing costs significantly and moving away from the pure Cloud-based solutions they brought to market.
My company takes an entirely independent position. We have worked with most of the biggest banks and we are familiar with all the manufacturers and suppliers. I believe they all have their own differentiators and could each find a deserved place in the shake-out. This post is not about which suppliers to choose or avoid, it’s about the challenge of decision making in a changing market that suddenly finds itself in a dramatically new context.
The first part of the approach is to evaluate the usage profiles of your TVS users and the other colleagues you have responsibility for. Most companies are over-equipped with turrets that are only used to a fraction of their capacity, and with some circuits that are barely used at all.
By pulling in data from all relevant sources it is possible to analyze not only call volumes but the preference for channels, speakers, and handsets etc. This first phase is accelerated by users of our TIMM™ service that evaluates, and cross-references enriched data from the TVS, call logger, private wire, and HR databases. Our service is popular with investment banks, but the concept is the same however you go about it. Intelligence from this analysis helps to establish the capacity of voice solution that individual users need after the rationalization and migration process takes place.
Functionality and User Groups
In wider enterprise, the selection of voice solutions and the migration to them can be addressed based on locations, buildings, floors, or departments. This approach is too simplistic for a wholesale finance environment, especially if more than one vendor will be chosen. Some users have a genuine need for full turret functionality. Establishing who needs what is more complicated than looking at the department, asset class or job title. As well as cost and performance issues there is also an emotional response to deal with because people feel their status is being disrespected when a turret is removed.
Consultancies like JP Reis have always helped to manage this process but, with soft-clients now prevalent among target solutions, and contingency use cases becoming a part of business as usual, the complexity has ramped up. Our TIMM Map™ app is a visual hypothesis tool that helps IT managers work out the best way to transform their TVS estates. Usage thresholds, groupings, functions, and other parameters can be dragged in and out of a decision-tree interface to test the effect on cost and product mix. Our well-established TIMM Viewer™ app has already been used to help migrate over 20,000 users. This tablet-based solution takes the emotion out of moving users to smaller systems by presenting usage data on “skins” of the user’s current and proposed interfaces. It also serves to validate any decision making that has already been performed.
Compliance and Litigation Defense
Despite the US Government rolling back some aspects of Dodd-Frank in 2018, it remains important to be rigorous about compliance aspects of the selection criteria. MiFID II was the most recent big regulatory release that broadened the scope of compliance to more users and communication channels with the aim of facilitating the reconstruction of interactions leading up to a trade. Working out best compliance practice for remote voice trading is a whole gnarly subject of its own and a spike of unethical behavior is likely to emerge as a result of remote trading.
As well as add on solutions, there are aspects of Trader Voice that require scrutiny. We are seeing Compliance and Security departments playing a greater role in the selection process and they have understandably expressed strong concerns about TVS. Below are three, non-vendor specific issues that ring alarm bells.
- Intercom, hoots, and speaker channels are audible to people who aren’t on the official access lists.
- It is difficult to record open speaker channels in order to identify individuals involved and discern the details of conversations.
- Barge-in functionality is a TVS standard, it can give people access to information that is unintended for them and has previously been implicated in “front-running” scandals.
A Compliance Officer’s ideal TVS would adapt a customer relationship management system [CRM] like SalesForce in such a way that users could only initiate a call from the CRM to existing counterparties, and details of interactions would be captured across all channels. That may be for the future and the current situation may accelerate development. In the meantime, some vendors go further than others in supplying integrated voice recording and surveillance, but in reality, none of them supplies more than a partial solution. We help clients define appropriate compliance requirements and build them into a stepwise system selection process. The focus is generally on integration rather than on native features.
Your total solution may well require more than one vendor, it is best to approach selection with full market visibility as new innovations are appearing with far greater frequency than before. I always aim to give each candidate the chance to pitch on their own terms based on a client’s specific requirements. In this way, the client gets clear visibility of key differentiators while still seeing how well the company’s circumstances have been considered. In the current climate, I would advise finding suppliers that will play well together to achieve a robust product and service mix at the right price.
Transformation and Total Cost of Ownership
Huge pricing disparities still exist in the marketplace, even between some of the more similar vendors. I don’t want to make a seemingly biased statement so my advice would be to consider TCO and the further investment required to extend the life of any chosen solution. As well as demonstrating openness, viable TCO and current capabilities, it’s also important to assess the credibility of the development roadmap because the industry is clearly in flux. Companies like mine are available to perform integration engineering and testing but that is another expense that needs to be factored in. The industry has moved away from large cabinet requirements now, but some systems still come to market at a surprisingly conceptual level. We have had the dubious privilege of being the first consultancy to perform integration work on at least one well-known platform that was little more than a beta release at the outset. Some come with high predicted maintenance costs, and some need a greater number of supplementary peripherals. We help to build contractual expectations around integration, running costs, reliability, and compliance so that our clients have a good grip on predictable costs and indemnity against unexpected problems.
The Near Future
Voice communication is still part of trading wherever it takes place and regulations won’t soften in the long-term despite some regional relaxation during lockdown. The demands of compliance will shape the market but the drive towards software solutions will continue to drag until significant development work has been performed. In the past, companies have taken a path of least resistance approach to system replacement without considering the full implications of their choices. In the transitional marketplace we see today, it is more important than ever to make informed, strategic decisions and I believe JP Reis is better placed to support that process than anyone else.