How the Street Learned to Love IM

By Maria Trombly | Securities Industry News | June 7, 2004

June 7, 2004 - From the smallest to the largest firms, instant messaging has become a must-have communications medium on Wall Street. And there's no stopping it, as much as some wish they could find a way.

"As an IT guy, my first choice would be not to have instant messaging," said Brian Varkonda, director of information technology at Memphis-based Wonderlich Securities. "Personally, I don't think we need it. But, according to the brokers, it's an easy way for them to get in touch with their clients, and for in-house communication between brokers. This is stuff that I thought they could live without-but apparently, they couldn't."

So, like other IT managers around the Street, Varkonda had to learn to live with IM. Fortunately, there are a number of vendors on the market today helping firms to manage, monitor and archive their instant messages. Some options are free, or close to it; others scale to the needs of the largest enterprise user.

Good thing, too-according to IDC, there will be 100 million business users of IM worldwide by the end of this year, a number that is expected to triple by the end of 2006. Wall Street users not only represent a big percentage of that group, but they also have some of the most stringent compliance requirements.

"The financial industry is one of the early adopters of IM," said Radicati Group analyst Genelle Hung. "They have a more pressing need than other industries for real-time communications."

Gateways
Most of the products are gateways, which sit on the periphery of a company's network, and monitor all incoming and outgoing messages. Some systems can alert administrators about sensitive key words cropping up in conversations. Others can stop IM spam (or "spim"), deny access to unapproved systems, or offer persistent chat rooms and other functionality.

Varkonda's solution for Wonderlich was to install a gateway product from p2pLog Software that captures ingoing and outgoing instant messages, the same path taken by Simon Janason, director of information technology at Brokerage America.

Until six months ago, Janason was using a competing product from FaceTime Communications, the leading gateway vendor on Wall Street.

"We went with p2pLog because it does the same thing as FaceTime, if not more," he said. "The only thing is with p2pLog, I only have to purchase one license, which gives me one server, and I can archive as many IMs as I want. With FaceTime, I have to purchase as many licenses as buddies that I'm archiving."

Enterprisewide View
LVM Capital Management Ltd. is an investment firm based in Kalamazoo, Mich., with $300 million in assets under management. With one office in Michigan and another in Illinois, the firm needed software that would let employees cross-train by looking at each other's computer screens remotely. The product LVM chose recently, IBM's Lotus Sametime, also came with instant messaging built in.

"I don't know that we would have purchased instant messaging just on its own merits," said Charles Prudhomme, one of the firm's registered financial advisers.

But the benefits of IM were immediately apparent, he said. Now employees could tell at a glance whether their colleagues in the other office were available, and could send them quick messages without interrupting their telephone conversations.

Now, almost everyone uses IM, Prudhomme said, mostly for internal business use such as scheduling, status checks and to determine when someone would be available to talk.

So far, the firm hasn't been using IM to communicate with clients. "Our average age client is 65 years old," said Prudhomme, "so most of them are not sitting in front of the computer all day long."

Unlike free, consumer IM services like AOL IM, MS Messenger and Yahoo! Messenger, enterprise products come equipped with archiving and monitoring functionality. The downside is that there's still a lack of interoperability with outside IM products, though enterprise vendors are working toward the day when IM will be as transparent as e-mail.

"That is clearly the goal that we would like to get to," said Carl Kriger, IBM's senior product manager for Lotus Workplace Realtime and Team Collaboration. "It is growing at a much faster rate than e-mail ever did. We're fully behind the server-side integration approach, where you can have transparent integration and can address messages to anyone in the IM market."

According to Forrester Research, in its first five years, instant messaging has grown more than 30-percent faster than e-mail at its inception.

Two releases ago, IBM integrated the AOL IM access point into the product, Kriger said. IBM has also thrown its weight behind SIP (session initiation protocol) and offers SIP gateways for its products, as an intermediary step towards integration.

Until interoperability finally arrives, however, enterprise IM will not become ubiquitous on Wall Street, said Hung.

"In financial services, you want to talk to a bunch of people, not just to people in your own corporation," she said.

Whatever the Customer Wants
Meeting customer demand is a big reason for many firms to start using IM. At Themis Trading LLC, an institutional trading firm based in Chatham, N.J., the "customer is already right" attitude means that the firm's employees use AOL IM and Bloomberg, among other IM platforms.

"It really comes down to what our customers are comfortable with," said Pal Zajac, a partner at Themis Trading. "We want to make it as easy as possible to communicate with them and some customers just have different preferences of what they want to use. Some firms don't like AOL, don't use AOL, don't permit AOL. Some don't mind either way. And if a trader has been on Bloomberg his whole career, he tends to use the messaging system there."

To catch the message flow for compliance purposes, Zajac said he uses a product from Stellar IM.

Another firm that didn't have a choice about using IM is OTA LLC, where institutional sales traders and sales staff use AOL IM, Yahoo! and MS Messenger to communicate with clients.

"Our clients have asked us to be able to communicate via IM," said Anthony Tarricone, the firm's network administrator. "It's been put on us. It's a client-based need."

By combining the public IM networks and a gateway compliance product from IM Logic, OTA has been able to meet both customer demands and regulatory requirements-but not without a cost.

"We're at the mercy of the public IM systems," said Tarricone. "If AOL goes down, we go down, and there's nothing we can do about it. And it does go down occasionally. It's been a lot more stable recently but in the past year the system has been down in the middle of the business day. We're completely at the mercy of AOL or Yahoo! or MSN."

In addition, the public IM accounts are not firm-specific, he added. "Someone can very easily log in from home," Tarricone said. "We've had to set up our own internal policy so that traders are not supposed to use these [IM] IDs unless they're in the office working."

Helpful IM
There's more to IM than traders talking to other traders. At optionsXpress, retail customers can click a button on the company's Web site to be immediately connected to a live person.

The product, which is, in fact, called LivePerson, comes with archiving functionality built right in.

"Our customers love it," said Phil Bennett, EVP in charge of customer service at optionsXpress. "It is one of the most flexible tools that we have to offer our customers. It's something that we put a lot of effort and training into."

The best thing about using IM to help customers, he said, is that nobody ever needs to wait on hold-no matter how busy the staff is, someone can always take on another IM conversation. To help employees carry on multiple conversations at once, LivePerson has pre-set messages for employees to select, such as, "Welcome to optionsXpress, how can we help you?"

"You can shift through your chats and help people as they come in," said Bennett. "It's much more responsive than calling a brokerage firm and waiting on hold, waiting for someone to pick up. We have telephone support as well, but because of the one-on-one aspect-you can only take one phone call at a time-I firmly believe in LivePerson."

In addition to pre-set messages, LivePerson also gives employees the ability to push pages to the customer.

"If you're online, I can open up a screen on your computer," Bennett said. "It's not something that will allow me to see what you're doing but it allows me to reach out and make sure we're looking at the same page at the same time."

Like many other firms, optionsXpress doesn't just rely on one instant messaging platform, however. In addition to LivePerson, for communicating with customers, optionsXpress also uses Microsoft Messenger to communicate internally.

Cue Up AI
UBS Investment Bank has a whole IT department devoted to nothing but instant messages. The company sees 55 million messages a month pass through its internal IM network, and supports 21,000 users and 17,000 "chat" channels.

"We can't live without them," said Scot Lynch, the UBS director who manages the chat IT department.

It all started in the mid-1990s with a home-built application that allowed tech support people to chat with one another while fielding calls. The application quickly spread to the business areas and was eventually spun off into its own company, Parlano, which now sells the product under the MindAlign brand name.

"We have a trading floor mentality," said Lynch, adding that UBS has the single largest trading floor in the world. "And the trading floor model works for us. If you have a question and you stand up in the middle of that floor and yell, somebody there is going to know the answer. I can't do that with a telephone. We have chat channels for virtually every topic discussed at UBS, some with thousands of participants in multiple geographic locations. It's like one huge trading floor."

It's also hard to do that with e-mail, he added, envisioning an avalanche of mass e-mails.

"Would you wish that on your worst enemy?" he asked. "Jack Welch was absolutely right when he said the best productivity boost Microsoft could offer is eliminating the "reply to all" button from Outlook."

The other problem with e-mails is that they require the user to click, scroll and open individual messages in order to read them. With the chat rooms at UBS, a trader can quickly scan ongoing discussions on any of the hundreds of topical research or trading channels to see if anything relevant is going on.

"If you're monitoring your channels wisely and effectively, you're hands-off," he said. "Around here, we multi-task and we're very hands-off."

Lynch said that UBS also uses other IM products, but in a very controlled manner. "We have a very small percentage of AOL and Yahoo! users for a very specific set of clients, mostly from the equity and energy sectors," he said. "Consumer IM has its own set of issues, like regulatory commitments we have as a bank, and we have to be careful in how we use it."

Since UBS has been using IM for so long, the firm has really pushed the boundaries of what the technology is capable of.

For example, UBS has "chat bots" (short for robots)-virtual assistants who communicate to employees via instant messaging. Bots are applications written in Perl or Java and check the status of applications and report the results regularly to chat channels, or wait for users to ask questions and then go out and look up answers. Bots are even used to broadcast custom UBS pricing data and news events to client users of their external "secure" chat product, Lynch said.

There are more than 1,200 business-critical bots at UBS, according to Lynch. "Say something happens in an application that makes it go down or keeps a trade from getting cleared properly." Lynch said. "The bot will initiate a private chat or send an alert to certain channels so the issue can be responded to."

Some bots post a constant flow of statistics to particular channels. Missed a number? Other bots gather up those statistics and produce reports for reference purposes.

"We have a contest every quarter for the most clever, innovative bot, and the CTO hands out a $100 prize to the winning developer. In order to enter the contest, you have to post your source code. If you've never written a bot before, you can look at how the other bots work, step through it and write your own," Lynch said. "We're happy that this has encouraged a lot of operational innovation."

The bots don't replace application-to-application messaging frameworks, Lynch said. However, they have enabled the automation of repetitive tasks that were previously handled by people. "Over the last three years, we've had to

become a lot more efficient as an

IT organization," he said. "We have scraped every possible area for labor-saving opportunities, and much of that has come from chat bots."

Paper Trail
On the other side of the technology spectrum are firms that have only just realized that their employees are using IM at all.

One senior trader at a buy-side firm with $1.2 billion in assets under management says that her firm has no formal policy on instant messaging. As a result, to comply with regulations, traders print out the transcripts of their IM sessions.

"We keep it with any other paperwork we have on that order for the day," she said.

According to the trader, who asked that her name not be used, the trading staff uses AOL Instant Messenger because it's much more efficient and less of an interruption than a phone call.

"You can keep working on your highest priority and wait a few minutes or seconds to respond to an instant message," she said. "You don't have to stop what you're doing like you would if you had to pick up the phone. I would not like to go back to being on a phone all day."

Instant Messaging Glossary
Chat
Chat is real-time communication, often involving more than two people. It can be done through instant messaging or in chat rooms, a related technology.

Presence
Most IM systems show whether buddies are logged onto the network. Some also show how long their computers have been idle, a good indicator of whether users are logged in but away from their desks.

Persistence
Most chats vanish forever when the windows are closed (except for archived copies). Some vendors offer persistent chat rooms, which remain in place even if all the users log off. Then, when new people log in, they can scroll through previous postings to catch up on what's happened.

Spim
Spam on IM. Unlike e-mail spam, which clogs up an in-box but doesn't actively interfere with work, spim pops up on the desktop, interfering with business. Like spam, spim can also carry viruses, hoaxes and other security threats.

Gateway
A gateway compliance product is one that sits on the periphery of a firm's network and catches outgoing and incoming emails for monitoring and archiving. Some can also block certain IM systems, stop viruses and generate alerts, scan internal instant messages and block spim.