Markets may have become increasingly electronic in the 21st century, but there is still a sizeable portion of the trading community that relies on voice-based systems. The mistake that many financial firms make is in thinking these two ways of trading are mutually exclusive. Is it possible to have the deal-making flexibility of voice while still enjoying the technological benefits of electronic systems? The answer is definitely yes, thanks to a new breed of voice-based systems.
In the post-crisis era, it’s hardly surprising that electronic trading has been so popular. Regulators have been demanding clearer and more accessible paper trails, while market participants have been attracted by the speed, predictability and savings that come with e-trading systems.
But for many financial firms, voice-based systems remain essential. Some complex products lend themselves more naturally to voice. Also, negotiation takes on a different meaning when voice is added to the equation.
Until recently, however, voice systems have been inflexible, expensive and difficult to scale. So how can trading firms get the best of both worlds? The solution comes from using fully distributed private peer-to-peer architecture.
For a start, this approach means trading firms can scale their voice networks to meet demand, with significantly less extra cost than in the past whenever they take on additional staff. Firms can also operate enterprise voice and trader voice services on the same platform, which translates into both efficiencies and full interoperability. That means a voice-based system such as Telstra Trader Voice suddenly can be mined for business intelligence, all the while satisfying regulatory compliance needs.
A fully distributed architecture also offers reliability. There is no single point of failure on the network, which is in stark contrast to the centralised or federated architectures for traditional voice-based systems. If you wanted 99.999% availability in a traditional voice-based system, it could thus involve ridiculously high costs.
It’s little wonder, then, that traditional turret systems may cost more than $10,000 per position. A tablet and handset offering soft turret capabilities on a distributed architecture can cost far less, as such voice-based systems may require only a few servers in a managed services environment instead of racks and racks of proprietary hardware.
Still, the onslaught of new regulations has made many firms think twice about upgrading their voice systems. For some, the question is about whether to embrace more of an e-trading ethos. For others, it comes down to whether they can afford to make new investments given all the regulation-related costs that they’re already dealing with. Firms may also be hesitant to upgrade given the size of the investments they’ve already made. The security and reliability a traditional system offers comes at a high price and companies naturally want to squeeze as much as they can from their legacy technology.
But not investing in new systems could end up being costly too. When disputes arise over terms of trades in voice transactions, as they occasionally do, firms using traditional systems can end up spending hours and hours finding the voice record and even then may find the audio quality for multiple voices on a single channel has created unintelligible crosstalk.
Modern IP-based voices systems capture audio in uncompressed multi-channel format. Every speaker has his or her own recording channel, so cross-talk is eliminated. The audio is recorded as uncompressed WAV files, which means there is no loss of quality.
In addition, making the transition from hardware-based turrets to software-based voice systems can offer possibilities that could not have been imagined when the traditional systems were developed. In the past, dealers had no choice but to do their trading wherever the turret was located. Imagine instead a system that allows a voice-based service to travel with the trader, wherever he or she happens to be. The trader can be on a business trip in another country and all he has to do is log in and voila, he’s connected with clients on a system that will record, tag and store the conversation securely.
At the moment, the turret and dealer board market has fewer than 200,000 users worldwide. The cost-benefit ratio from upgrading their voice systems has not made a lot of sense until recently. But those users live in a competitive and highly regulated world. They still need to serve their clients and comply with an increasingly long list of regulatory demands. New technological solutions mean that the cost-benefit ratio for voice systems has changed dramatically, and for the better. Welcome to the “turrets-as-a-service” model. It’s the voice of the future.
For a more in-depth article that explores the changing landscape for voice-based trading, readers can click here.