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Clearing Firms Support Wireless Apps in Tough Market

Staying the course, clearing firms continue to offer wireless applications to correspondent brokers.

Pershing, Fidelity and Bear Stearns support wireless apps for correspondents and their retail investors, expecting demand to pick up.

Major clearing firms are staying the course with internally developed wireless-brokerage applications, despite the pull back in the securities industry and the slow rate of adoption by retail customers. The top three clearing firms - National Financial, the clearing arm of Fidelity Investments; Pershing and Bear Stearns - continue to offer wireless applications to correspondent firms as well as their retail clients. Executives say that is the case because they regard it as an important channel and one that will give them competitive advantage once network providers roll out 2.5G and 3G technologies when they expect consumer demand to pick up. "We believe in wireless and we continue to develop and maintain an environment for it," says Marc Butler, director of Pershing, a division of Donaldson, Lufkin & Jenrette Securities Corporation, a Credit Suisse First Boston Company. Pershing modeled its offerings after its two workstation products: Net Exchange Pro for investment professionals, including financial planners and brokers, and NetExchange Client for the end-customer.

Supporting Palm V and Palm VII hand-held devices and Web-enabled cell phones, Pershing introduced mobile-brokerage applications in September of 2001. Pershing and Fidelity also develop private-labeled wireless applications for correspondent brokerages to offer to their retail clients, and in Fidelity's case, for the brokers as well. "The look and feel is that of the Northern Trust online brokerage Web site. It's all branded, it has our 800 numbers and our logos. When you sign (on) you wouldn't have any idea that Pershing had anything to do with it," says Terry Ransford, senior vice president, director of e-commerce for Northern Trust Securities, a wholly owned brokerage subsidiary of The Northern Trust Corporation.

Similarly, Fidelity, one of the first firms to market wireless applications in the brokerage space, has two main offerings: the RIM 950 pager with Cingular, which it launched in October 1999 and is aimed at professionals, and MyStreetscape, an Internet-based-workstation application made available in April 2000 on PDAs and cell phones to both end-consumers and registered representatives.

"We continue to focus on and pay attention to the wireless front as an important piece of our line up," says Scott Novack, vice president of product management for consumer technology products, Fidelity Investments Institutional Brokerage Group, which develops technology for National Financial. "We literally think of it as a three-legged stool - wireless, Internet and telephony," adds Novack.

Bear Stearns also offers wireless applications, but Benneth Egeth, senior managing director of Global Clearing Services, says, "There has been little client demand. We are not planning anything new in the near future."

Adoption Lags
Ed Kountz, senior analyst, mobile financial strategies at TowerGroup, says, "Retail wireless in the U.S. remains fairly sleepy" and assumes that clearing firms are not spending "90 percent" of their budget on mobile. TowerGroup is telling clients, "Now is not the time to bet all of your IT dollars on mobile, but now is the time to begin to understand these technologies, how they play into a multichannel-delivery environment, what value they can add for a corporate client, (such as) a financial adviser or on an enterprise basis," Kountz says. For clearing firms, Kountz also imagines that their professional usage is probably higher than their overall retail usage. But according to the clearing firms, that is not necessarily the case.

Pershing's Butler finds that adoption is higher among the retail-account holders than on the part of the investment professionals - but less than the 5,000 to 10,000 average number of users per retail-brokerage firm cited in a recent Celent Communications report. On the account-holder side, adoption is "probably a little bit lower than expected," he says. Even though Pershing is "committed to wireless," Butler agrees that for account holders, firms aren't spending a lot on wireless. That's why, in addition to the custom version, which it develops for retail clients of correspondent firms like Northern Trust, Pershing has come up with a non-custom version of Net Exchange Wireless Client, a "one-size-fits all," he says. "People can get up and running quickly, and probably more important, it's relatively inexpensive to get started with."

Why did Pershing develop the mobile products? On the professional side, "Probably more (to be) innovative. There weren't customers demanding it," says Butler. But Butler believes that having a wireless application for financial planners who visit their clients and need to access information will be a competitive advantage for Pershing. Having a wireless application "really works well for our audience," says Butler, who notes that Pershing has 42,000 users for Net Exchange Pro which includes many financial planners.

"You'd be hard pressed to find a brokerage workstation that has a wireless version, in fact we don't think that anyone has one," he contends.

Fidelity's Novack continues to see more adoption on the client-side, but also sees a lot of interest from representatives. "They always ask about it ... but we get a lot more inquiries than people signing up," he says. Still, even with the substantial decline in the stock market, Novack says that wireless customers trade more frequently than their non-wireless counterparts, though the number of trades is very different, he admits.

Ransford says most of Northern Trust's wireless capabilities are used by high-end clients in the private banking and trust company. Some portfolio managers use them on the corporate side when they travel to see clients or make company visits. Northern currently supports the PDAs running the Palm operating system, including Palm Vs with wireless access, Palm VIIs and the Handspring devices, on which clients can view their account balances, holdings, positions, trade and receive market information and news. But the more broadly used service is an alerting capability that sends text-based messages to any device with an e-mail address, including cell phones and pagers. "Some clients use the alert system to be notified mid-day of the quotes on their holdings or at the close, rather than call their broker."

Unlike the PDAs where someone logs onto a secure server as they would on the Internet, e-mail is not secure, so the alerts are used for market information and news; they do not allow someone to log into a Blackberry or cell phone and look at their balance or trade. By contrast, when retail customers use the PDA they are logging into a secure server which is hosted behind the Pershing firewalls. The trades are extracted from the original server and passed through another firewall and then processed by the mainframe in a so-called demilitarized-zone data center - a safe zone located in between the company's firewalls, explains Ransford.


What's NEW in Wireless-Clearing Applications
In April, on the retail-client side, Pershing participated in AT&T's 2.5G roll out and is using WML 1.1, which makes for a faster application, says Peter Antonucci, vice president in Pershing's technology department.

"Some of the users that aren't happy with the slowness of running applications have given us more positive feedback on the 2.5G application," he says.

While the rollout isn't available in New York yet, it is available across a dozen or more cities where Pershing has Net Exchange Wireless Client running. With previous speeds of 19.6 kilobytes per second, Pershing's application is now running two to three times faster.

"Once the carriers come out with their 2.5G and 3G rollouts, we'll be able to do more robust applications, that will make the applications on the cell phone look like Windows applications," says Antonucci, who says the firm is waiting for each carrier's specifications for WML 2.0 and J2ME.

Pershing is also looking into multi-modal technology to allow users to input data by speaking into a cell phone.


Leveraging Web Development
Rather than reinvent the wheel when they develop wireless applications, clearing firms are leveraging their Web-based broker workstations. In Fidelity's case, it partnered with Ajaxo, a Cupertino, Calf.-based middleware provider. Ajaxo servers as a conduit to translate the content on Fidelity's Web servers into a viewable format for wireless devices.

The advantage for Fidelity Institutional Brokerage Group is that "as new devices or new networks are introduced, I don' t have any custom development that I need to do," says Scott Novack, vice president of product management for consumer technology products, Fidelity Investments IBG. Second, if IBM continues to add features and services to the Web site it provides, "I don't have to make a decision to include that on the wireless platform, it's automatically there," says Novack.

In Pershing's case, leveraging the Net Exchange Professional platform, rather than building from scratch, allowed the firm to come to market much more quickly, says Marc Butler, a director of Pershing, a division of Donaldson, Lufkin & Jenrette. "It's consistent, as much as possible, to what they have on the Web," explains Butler, who notes that to fit on the smaller devices, Pershing scaled the application down to exclude research that it delivers via the workstations.

Financial planners or clients can look at their accounts, check balances, place trades and get different pieces of market data and news. Pershing uses ILX as its data provider and for news it uses a combination of Reuters, PR Newswire and Business Wire for Net Exchange Pro Mobile, Dow Jones, and Businesswire for Net Exchange Client Mobile.

According to Peter Antonucci, vice president in Pershing's technology department, Pershing has a three-to-four-tier back-end architecture that can leverage a message, whether it's pulling a quote from the Web, Windows, or an integrated-voice-response (IVR) system, or any of its mobile platforms.

"It's an internal-proprietary technology that we use in order to offer that on multiple channels," says Antonucci. On the front-end, Pershing uses wireless-markup languages, such as HDML and WML, for cellular phones. "We take our content and we just render it for the different types of devices, whether it be Palm, phone, Pocket PC, or Blackberry," says Antonucci, who says the firm has a team of eight developers who understand the different form factors of the devices, usability and graphics. Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio

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