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John Morton, IPC Systems
John Morton, IPC Systems

Voice Trading in Derivatives Is Not Dead: Long Live the Squawk Box!

Sweeping financial reform of the OTC derivative market targets aspects of voice trading, however today’s traders rely on voice solutions more than ever.

Jonathan Morton
Recently, President Obama signed into law the most sweeping overhaul of Wall Street regulations since the 1930s. One of the main focus areas targets the trading of over-the-counter (OTC) derivatives. Although the trading of OTC derivatives products, from commodities options to credit default swaps, has traditionally been linked to voice trading, electronic platforms are now springing up in every part of the market. In order to underscore the need for transparency in trading these financial instruments, regulators have recommended exchange-type electronic trading for derivatives.

It has been hypothesized that this could lead to a sharp decline in voice trading on many trading floors. On the contrary, the role of voice communications will continue to play a significant part in the trade lifecycle long after the reforms have taken place. If the trading of OTC derivatives is moved to new swap execution facilities, traders will still need to rely on voice solutions for sharing information and collaboration between traders and other experts within their organizations.

As electronic trading increases, whether it is across the derivatives or the bond market, there is still a tremendous amount of voice traffic that takes places even if the trades are ultimately processed electronically. By nature, derivatives trading is very complex. These high-monetary value trades demand a certain amount of voice interaction from multiple parties in order to come to a decision on an execution process.

A trading floor communication system is designed to operate as a finely tuned machine. There is an extensive array of required capabilities, ranging from voice facilities such as intercom and archival systems, to integration with the PC applications traders use, such as CRM, OMS, and market data applications. More and more, integration with other systems and applications using industry and open standards is critical to allowing traders to work efficiently and maximize their productivity.

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