Desktop Consolidation – Is it finally becoming a reality?
By Ron Quaranta
For years, the financial community has heard rumours of the impending consolidation of desktop capabilities. Yet despite the talk, the anticipated consolidation never seemed to get off the ground. But now, with the economic downturn, firms worldwide are facing shrinking budgets and strict mandates to find ways to do more with less. As a result, Thomson Reuters’ Ron Quaranta argues, consolidation of capabilities at the desktop level may become more than just talk.
A trading desk has a myriad of needs: news, pricing data, fundamental information, risk analysis, liquidity discovery, trading capability, and much more. For the most part, many of these capabilities are resident within different applications or systems provided by different vendors. As a result, intercommunication and integration of these can be challenging, resulting in sub-par efficiency which, so far, has been accepted by most as ‘a way of life’.
The idea behind consolidation is simple. Rather than having data terminals, multiple execution management systems (EMS), order management systems (OMS), risk management systems located at disparate trading desk terminals (or worse, bundled randomly onto a single PC), the idea of consolidation is that a single desktop seamlessly interacts with all of the functionality a user needs. News and information lead to global liquidity discovery, to transactions routing, execution analysis and position management. All effortlessly interacting when and as needed.
Why has it taken so long?
Sounds great in principal, right? But this idyllic working scenario comes with a series of challenges.
Firstly, it requires traders, trade managers, technology heads etc to reconsider and in some cases rework how their trading desks operate. All too often, traders and the internal organizations that support them are comfortable with their current methods of working, are averse to possibly learning new technology, and in fact may not have the time to engage in a new workflow routine.
Secondly, many buy side traders are just using the systems given to them by their brokers. For the types of trading that they are doing, the broker provided system is just fine, so why change?
Also, in many instances the ideal workflow solution simply hasn’t existed. A vendor might be providing price discovery, and now incorporates trade order routing. But what about post trade analysis or position management? Essentially, it hasn’t made sense to move away from the existing method of working to a solution that was still only partially ideal.
Technically, many of these workflow capabilities can’t in fact communicate with each other. This issue has multiple roots, not least of which is the proprietary nature of many of the applications and services. Over time this is becoming easier to handle as more capabilities can communicate using industry standard protocols, notably FIX. Technology vendors are also increasingly open to wider collaborative capabilities since that does lead to greater business all around.
Lastly, in the period prior to the economic downturn, money was not as much of a concern; at least not insofar as technology spending was related. Some traders wanted one type of news and data terminal. Fine, sign it up. Others wanted a different terminal. Sure no problem. It was the needs of the trader, as defined by the trader, that were in focus and accommodated, without question to a great extent. Enough money was being made to justify the costs of multiple disparate systems.