Trader Voice Strategy
How do you choose the technology that your trading staff use to communicate with clients and counterparties?The sector is moving quickly so we have updated this article again, and despite keeping “Trader Voice” in the title, the scope of any replacement or upgrade project has to be more holistic now. We use the term “Trading Communications,” of which Trader Voice is part. Trading Communications encompasses trading turrets (dealerboards), their associated soft clients, and any system used in the trading workflow for collaboration, contact management or order placement.
Voice is a much smaller part of trading nowadays, but although the majority of trade-related conversations are held on text applications, many traders still see voice as their primary channel. While a minority use voice exclusively, especially in some brokers, many use it for discussing complex and high value trades and for closing transactions. It remains important for traders to have voice systems that support and complement their regular operating styles, plus the new range of contingencies that have been ushered in by the pandemic. This means that Trader Voice solution selection still involves high-value decision making for senior IT managers, and as part of the wider Trading Communications environment, it is central to mission-critical strategy planning.
Since the start of the pandemic, established enterprise trends have accelerated and become more relevant to financial trading organizations. These include the adoption of Cloud computing, digital transformation, and the increase in flexible working practices. Video conferencing was not such a trend pre-pandemic but emerged quickly to become a familiar communication medium. After two years of lockdowns and disruptions the “Great Resignation” became a significant event that has seen staff turnover increase across most industries as people re-evaluated their working lives. At a technological level, TDM networks are timetabled for retirement around the world.
At the start of 2020, Cloud security had achieved standards that meant banks were ready to adopt it more comprehensively. By contrast, flexible working was still anathema to most trading floor stakeholders, including the traders themselves. This remains the case now, but remote working has at times eclipsed the disaster recovery [DR] facility as the primary business continuity [BCP] solution – partly because, with viruses as the top risk factor, local facilities became nonviable except when used to reduce occupation density.
The great resignation has relevance to the trading floor. Traders don’t want to work from home but, when they do, they want technology in place that allows them to function productively and to collaborate in a team environment. Some just like the buzz of the floor. Whether for business-as-usual or when working in continuity situations, technology is a tangible feature of talent attraction and retention. This also applies to sales staff who may be expected to travel more but need to be in contact with relevant contacts. Another trend in financial trading is the reduction in the human execution of trades. As flow business trading moves to electronic execution by data driven business units, it is important to understand which activities will make up trading employee workflows and how long for.
Trading Communications Tech
When considering new systems in this sector the focus should be on long term competitive advantage with cost control balanced against operational considerations including productivity, user experience, scalability, and flexibility. Risk management aspects include resilience, integration, compliance, and security. Trader Voice can be central to strategic technology planning and have its own selection process, but it must be considered as part of a wider portfolio of systems and infrastructure; just as the conversations it supports are part of wider workflows. As long as specialist hardware remains relevant, one size will not fit all in an optimum working environment. However, the industry did see some homogenization across user profiles when staff were working remotely. As Cloud applications play an increasing role in trading workflows, we are likely to see greater alignment within any given organization but there will still be choices to make.
The Trading Turret
The primary desktop hardware of Trader Voice is the trading turret. Modern versions run on SIP infrastructure, but some banks still have TDM-based equipment that will soon need to be replaced. The turret allows a trader to visualize and prioritize multiple incoming calls and to use hundreds of buttons to make calls efficiently.
New 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 using SIP level integration via session border controller [SBC]. 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 focused on command-and-control sectors and are unlikely to reenter financial trading.
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 will eventually go that way too although there will have to be a way to cater for multiple channels. A soft-client has excellent flexibility. The system can be accessed anywhere with a secure online log-in, this feature benefit became truly relevant in 2020. Lower cost of ownership, reduced desk space, and simpler upgrades mean that soft-clients are a relevant part of any modern Trader Communications System and consequently, the decision-making process becomes more complex.
There are three fundamental soft-voice-client offerings:
- An enterprise offering with 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. Some also offer to let clients host the service on their own corporate intranet but this loses many of the advantages of Cloud.
- A subscription “as a service” [AAS] model where users subscribe and unsubscribe as required, with 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 community aspect is also pushed.
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
Disaster recovery facilities should enable users to restart work as usual when a crisis renders their office nonviable. The pure AAS model struggles to achieve this if a significant number of DR positions are required by heavy turret users. However, expectations have changed both in terms of the most likely cause of disruption and the level of functionality necessary when it occurs.
When high-capacity traders had to work from home, some used hard turrets over VPN while others worked on soft clients. In the home environment the key limiters on a turret, with its impressive processing power, are the speed and capacity of the ISP. Soft clients and AAS applications are more limited in capacity terms. So, both groups experienced limited channels and functionality, the number of available lines typically fell to below 20% of trading floor levels, regardless of endpoint. Speaker channels on average dropped from twenty-four to eight. There was an acceptance that this was workable in the short term – but not as a permanent replacement for a full turret. NB. Working from home is not a primary DR option, even with the secured laptops that some banks trialed, because it pushes operational and compliance issues to the edge of the WAN and expands the risk register.
Airborne virus control is now a constant threat that has redefined BCP. Rather than a building becoming completely nonviable, it is more likely to face capacity restrictions along with buildings in a wide area around it. With soft clients having been accepted by users as temporary continuity solutions, DR facilities still have a role to play, but they will have fewer hard turrets and some organizations will choose not to maintain any.
More than ever, banks want the cost savings and flexibility of soft solutions, but they now have a clearer gap analysis against the needs of their heaviest trading floor users. They understand the operational and emotional turmoil that would still arise from pushing through lower capacity solutions for all users.
As we stated above, Trader Voice should only be considered as part of a larger technology strategy that may still require definition. External assistance from specialist consultancies is valuable in establishing strategies with the consensus of all stakeholders, especially when an organization has embedded silos of departments that make it hard for people to see the big picture.
Rather than simply looking at the capacity, performance, and features of Trader Voice solutions, we recommend first gathering data to understand how the business wants and needs to operate. We identify the goals and priorities of senior stakeholders, the frustrations and requests of staff, and the solutions that could help them. This approach is not purely focused on voice but looks at the whole trading work-stream from initial contact through to execution.
The aim is to meet the requirements of different groups while increasing productivity and remaining compliant and secure. Part of the optimum solution is to build in flexibility. This would include giving traveling staff access to hoots and direct circuits, being able to flex service capacity up and down with headcount, simplifying relocations, and managing BCP. It also includes having the ability to change and add suppliers as seamlessly as possible, which used to be very challenging.
The traditional trader voice manufacturers still sell physical units and tend to have service models that reflect a hardware-based history. The transition is happening though. They have productized soft-clients, set up their own AAS style trading communities and acquired software-focused competitors. 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 and moving away from the pure Cloud-based solutions they brought to market.
To optimize workflow and flexibility, the practical approach is to digitize infrastructure and to access as many services as possible via the Cloud. An over-riding strategy should be to create a Trading Communications System [TCS] by ensuring the highest level of integration between Trader Voice and platforms like UC, CRM and OMS using APIs and CTI. The kind of user benefits to target include auto-populating fields, click to dial, and the ability to switch seamlessly between modalities such as text, voice, video, and conferencing. Integration also facilitates centralized compliance, separating capture from storage and analysis.
You will need to prioritize upgrades to remove your highest risks first, especially if your current portfolio exposes you to compliance risk or loss of service. If your preferred vendors cannot yet meet your AAS and integration requirements, then try to obtain firm commitments to a development roadmap that fits your longer-term strategy.
JP Reis takes an independent position. We have worked with most of the biggest banks and we are familiar with all the manufacturers and suppliers, each of which has their own differentiators and could 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 market that has changed more in the past 5 years than in the 30 that preceded them.
Rightsizing the Solution
We have already made it clear that flexibility is a priority but, as of February 2022, a Trader Voice upgrade – as part of a wider TCS strategy – is still likely to require some turrets. It is important to limit the quantity and specifications. The first part of the approach is to evaluate the usage behavior of your Trader Voice users and the other colleagues you have responsibility for. Most banks have many turrets with screens of unused button capacity, and live 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. In this phase, we use our proprietary TIMM™ software to analyze enriched data from the TVS, call logger, circuit database and approved user records. With or without our tool-set, the process is the same, although our approach does draw on wider sources for a greater level of insight.
Functionality and User Groups
The selection and implementation of voice solutions for wider enterprise can be addressed based on locations, buildings, floors, or departments. This is too simplistic for a wholesale finance environment, especially if more than one vendor will be chosen. Some users genuinely need 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. Having the right technology is important for attracting the best talent as well as keeping existing traders happy.
Consultancies like JP Reis have always helped to manage this process but, with soft-clients now prevalent in target solutions, and contingency use cases becoming a part of business as usual, the complexity has ramped up. Our software has a visual hypothesis tool that helps IT managers establish the best way to transform their TVS estates in the context of a wider TCS. Usage thresholds, groupings, functions, and other parameters can be dragged in and out of a decision-tree interface to test the effect of the product and service mix on cost and operations. This solution helps remove the emotion when moving users to smaller systems by presenting usage data on “skins” of their current and proposed interfaces. It also serves to validate any decision making that has already been performed.
Compliance and Legal Defense
Regulatory compliance is a key aspect of the selection criteria. European MiFID II regulations 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. The change of American administration has seen stronger regulatory enforcement in the US. In the past few months, we have seen significant fines imposed on big banks and brokers by the CFTC in America and the FCA in the UK.
Compliance governance for remote voice trading is so challenging that off-site trading will only ever be a last resort. Even in a controlled environment, there are aspects of Trader Voice that require scrutiny. We are seeing Compliance, Legal and Security departments playing a greater role in selection processes and they have understandably expressed strong concerns about Trader Voice.
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 Trader Voice standard that can give people unintended access to restricted information and has previously been implicated in “front-running” scandals.
A Compliance Officer’s ideal solution would adapt a CRM 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. Our recommendation to aim for a fully integrated environment extends this concept and brings it a step closer.
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. Cloud-based compliance aggregators are a game changer in this area, pulling structured and unstructured data from numerous systems into a central data pool for storage, analysis, surveillance, and business intelligence. By separating capture, which most systems are good at, from normalization, cleansing, and storage, a powerful resource is created that meets the needs of multiple stakeholders and to which new services can easily be added.
Even as part of a wider Trading Communications environment, your Trader Voice solution may require more than one vendor. It is best to approach selection with full market visibility as new innovations continue to appear. We always aim to give each long list vendor the chance to pitch on their own terms based on a client’s specific requirements. In this way, the client can appraise key differentiators while still seeing how well the company’s circumstances have been considered. Once again, we advise prioritizing suppliers with strong interoperability credentials or, at the very least, a convincing roadmap to greater integration, to achieve a robust product and service mix that is cost efficient.
Transformation and TCO
Pricing disparities still exist in the marketplace, even between similar vendors. We don’t want to make a seemingly biased statement so our 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. Companies like ours 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, operating 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 are hardening as we expected. The demands of compliance will shape the market and the drive towards software solutions, especially cloud-hosted ones, has reached a tipping point. 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.