SA traders realise need to create seamless trading

The global financial trading environment today is under pressure with small margins, fewer traders expected to process more than ever before, and many instruments being traded 24-hours-a-day. South African organisations are fast plugging into this frenetic world as they establish a global trading presence, putting local traders under huge pressure to perform. Trading businesses have to drastically reduce costs and improve efficiency. Key to success in this fast-paced, dynamic industry are technology tools to ensure competitive advantage, as well as global technology partners who can provide the right levels of support.

According to US research house TowerGroup, secure, reliable and cost-effective connectivity is becoming a critical requirement in the global financial securities industry. (Source: Dashyant Shahrawat, Tower Group, May 2001.)

"Trading organisations will simply go out of business if they do not have the correct technology," says Gregory Kenepp, senior vice president of Global Crossing Financial Markets, leading suppliers of voice trading systems, or dealerboards. Kenepp was in SA recently to address customers of local partner, Dimension Data.

"South African organisations, like their foreign counterparts, recognise the need to create efficient, seamless trading environments," he says.

"They are joining a world in which the costs of missing a trade are enormous," says Kenepp. "Huge costs are incurred if settling and clearing processes do not happen automatically. The risk of outstanding settlement exposure increases as the numbers of trades processed grows. The Securities Industry Association (SIA), which controls the equity trading market, estimates that this exposure is more than $250 billion per day in the US alone."

Kenepp believes a trading revolution is taking place globally, and says organisations are waking up to what technology can offer them.

"Trading is no longer a nine to five job," says Kenepp. "As the world moves towards a global trading environment, so more customers now have trading floors in London, New York, Singapore and Hong Kong. They no longer close the book at the end of the trading day. Instead, they pass it on to their operations in another country. They operate 24 hours a day, and customer calls are answered seamlessly from offices around the world, no matter what the time."

As the world gets smaller and margins tighter, so financial organisations need to further differentiate themselves. Here again, technology plays a key role in helping them to better understand customer needs, respond in a more timely manner, and offer more value - such as real-time sharing of analyst reports.

"All this is starting to happen, and organisations are ensuring they have the correct technology tools in place," says Kenepp. "Brokers who provide customised, instantaneous, push/pull, anywhere/anytime information services to their clients will succeed. Tools for traders are evolving and correlation between market information and specific customer profiles is key to success."

He says that the best way to reduce costs and improve overall trade process efficiency is by reducing the number of manual steps required. There must be as little human intervention as possible at the trader`s desktop.

"Sophisticated technology can radically improve current trading processes," says Kenepp. "For example, why should both parties fill in forms when one buys shares from the other? There really only needs to be one deal ticket, tagged with the voice recording associated with that deal."

Technology must be able to deal with the extremes under which traders work, such as having to handle up to 200 calls in 15 minutes. And new technologies, such as IP-enabled dealer boards are having a dramatic effect on global financial markets.

There are many benefits of using IP-enabled products. Business applications that can be developed around IP-enabled switches give more value than those developed around traditional digital switches.

"IP also enables a rich media services environment," says Kenepp. "We see the future of communications as including a video component, so our IP- platform is designed to support the delivery and display of broadband interactive multimedia at the desktop.

"Although many benefits of using IP have been identified, many more will only emerge as we move into this new space. It is therefore important for customers to be well-positioned to take advantage of these capabilities as they emerge."

"In the past, trading floors used islands of technology," says Gary McHugh, managing director of Dimension Data Interactive Media. "The business value Dimension Data adds is to get those disparate islands working together. We create the seamless trading environment necessary in today`s world, and have the depth of skills to integrate application development to their decision support systems.

"A trading environment is one of the most mission critical environments - if a trading floor system goes down, the losses are enormous."

Dimension Data has approximately 55% of the South African trading market place, achieving this within four years. Of the past 24 trading deals awarded, Dimension Data has won an impressive 17. Its clients include major financial companies like Absa, Nedcor, Deutsche Bank, JP Morgan Chase, Liberty Life Asset Management, Gensec and De Beers.