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

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