commissioner.org
| Source | Peter Hollings |
| Date | 11/11/04/13:39 |
| IT'D BE A stretch to call this a story about economics, but maybe it is of
interest to the group. I arrived on Wall Street in the early '80s and worked at the intersection of information technology, investment banking and trading. In some respects competition between leading firms was like warfare, IT was an important weapon in this and technological progress was marked by epochs as the technology evolved. Michael Bloomberg had midwifed one of these epochs. (I am not speaking here of the famous Bloomberg box, that, certainly was significant, but it was more of a refinement of existing technology.) At that time traders were accustomed to have on their trading desks monitors from the several different market data vendors. These monitors were closer to television sets than computer monitors, they were proprietary closed systems, fed video data via a cable and leased from vendors like Dow Jones, Reuters, Quotron, etc. Well, they had grown to clutter the traders' desks and there was a definite limit to the number of them that could be placed within reach of a trader, thus limiting access to data and constraining a trader's competitive advantage. Bloomberg, then at Salomon Bros., enlisted the aid of a small company, Micrognosis, up in Westchester County, I believe, to develop a "video switch". With this technology a trader might have 4 or 6 monitors and a single keyboard on his desk. With the keyboard he could select a monitor, communicate with the video switch and cause any of potentially dozens of data feeds to be displayed. This was revolutionary -- every player in the game had to have it. ASAP. Earlier in history, telephone switches had been introduced, marking another epoch. Traders usually communicate with counterparties via dedicated, leased phone lines because of the disadvantage caused by the time required to dial a number. The voice switch allowed a trader to instantly communicate with any of numerous counterparties from a single handset. By the mid-'80s Wall Street was on the cusp of yet another IT revolution as Internet technology allowed market data to flow to trading floors in digital form replacing the old video technology. The compelling feature of this is that, unlike video data, the digital data could drive computer algorithms; for example, bond prices could be converted to yields and sorted from high to low, arbitrage opportunities could be spotted automatically, etc. It was never clear to me that any value was added to society by all of this "progress". |
Copyright (c) 1998, Joongpil Cho