San Francisco Conference: Software Is Crucial; PCS As Workstations And Non-Pro Market Remain Controversial

How the personal computer will evolve as a quotation terminal remains a question marked by much disagreement. This conclusion emerged clearly at the recent San Francisco conference, "Real-Time Quotations and the Microcomputer," sponsored by Waters Information Services, Inc., publisher of Micro Ticker Report.

Speakers representing leading industry players failed to agree on whether there is a "home" market for PC delivery of real-time market data, or even whether the PC is the most appropriate terminal in tomorrow's brokerage branch office. If there was any consensus, it was the none-too-surprising conclusion that software will be king, with "integration" and "artificial intelligence" -- however defined -- promising breakthroughs for brokers and traders.

"The software of the future will find one of its biggest values in finding and seeing small, short-lived arbitraging situations" in the 24-hour global market, says Paul Tucker, senior vice president, technology, at Knight-Ridder Business Information Services. "Today there are hundreds and hundreds of them all the time. There just isn't enough software and there isn't enough communications and there isn't enough distribution for people to take advantage of that."

Tomorrow's microcomputer software will incorporate many of the arcane tools of technical analysis, says Tucker. "These kinds of secret things are going to come out of the closet and sit on every trader's desk." Such advances, however, will primarily benefit corporate and institutional traders in the futures, options, and foreign exchange markets, "where arbitrage opportunities will exist most often and be most obscure." They will be least effective in the equities market, because rumors and inside information are difficult to deal with in software.

Most account execs do not need PCs, according to Craig Maxwell, director of new business development at Quotron Systems, Inc. "In most cases, only 20 per cent or so of the total office population require the convenience of personal computing or will readily benefit from PCs," he says. As a result, "solutions comprised of 100 per cent PCs are overkill and will add millions of dollars of unnecessary costs."

"Most PCs today do not support financial character sets," says Maxwell, "nor are block keyboards available which many brokers have become accustomed to." In a fast-moving branch office environment, "a machine which requires software loads, diskette handling, and several minutes between activity initiations will not survive," he says.

Only in offices "with fewer than five or six workstations" does a 100 per cent PC solution make sense, says Maxwell. Otherwise it is more economical to go with a mix of 20 per cent PCs and 80 per cent cluster terminals, "assuming the local controller can provide the same performance per terminal as derived on a PC." Even an office with 10 to 14 workstations can save 50 per cent using the 20/80 ratio, he says.

Not surprisingly, this view was not universal. "I believe that we have just about seen the end of the obsolete group of black boxes which in most cases qualify as customized ASCII terminals or character generators," says Hal Roberts, president of Roberts-Slade, Inc., Spanish Fork, UT. "I think you're going to see people spending a lot more of their resources in software development rather than hardware design and development of specialized ASCII terminals."

Roberts identifies three trends that are driving developments in quote systems: (1) a proliferation of data sources, (2) low-cost, high-quality transmission services, and (3) increased sophistication in data presentation. He agrees with Knight-Ridder's Tucker that technical concepts such as stochastics and relative strength index "are going to become standard tools that everybody understands and knows how to use." A state-of-the-art micro-based quote system should allow the user to program his own trading strategy and optimize it with real historical prices, he says. Not just graphics, but "zooming graphics" would be part of such a system.

Whether there is a market for real time information among non-professional users -- and the extent of that market if it exists -- were subjects that came up frequently during the course of the meeting. Vendors serving the professional market are in a position to address non-pros, says Gerard Higgins, vice president, marketing and market development, at International Marketnet. "Not only can you, but you probably must," he says, in order "to provide a similar technology base to not only the clients, but also to clients' users."

"The non-professional user requires a subset of what the professional user needs," says Higgins -- particularly a network architecture to minimize communications costs. He applauds the exchanges that have instituted sharply reduced fees for the non-pro segment. "We hope that this trend continues, that the exchanges appreciate elasticity of markets in that by lowering their price for market information, they'll sell a lot more information and their bottom line will actually increase."

"What you're talking about is entering a price war" through emphasis on cheap quotes for non-pros, says David Lockton, former chairman of Dataspeed, Inc. The individual investors market "will not have a lot of margin in it," he says. "Quotes and information are starting to be fungible commodities" and price is going to be the determining factor in purchasing. Several segments comprise the emerging market for standalone quote systems, says Lockton. These include smaller fund managers and trust departments in smaller institutions, brokers stationed in remote locations like bank lobbies, and investment bankers, who he says have not needed real-time information but would probably buy it if the price hit the $250-$500 range.