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Handhelds beat paper on stock exchange floor

November 25, 1998
Web posted at: 10:00 AM EST

by Thomas Hoffman

(IDG) -- Goldman, Sachs & Co. has been able to improve the productivity of 20 floor brokers by 300% by making their handheld devices even simpler than the pads of paper they once used to scribble down all-important "looks," or bids on stock prices.

Floor brokers for the venerable Wall Street brokerage have been using Microsoft Corp.'s Windows CE pen-based systems since August to provide looks based on requests from stock traders perched above the floor of the New York Stock Exchange (NYSE). Historically, the floor brokers would receive such a request, say, for the going price on 10,000 shares of General Electric Co. stock, scribble down a response from a market maker and run it back to the trading desk.

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But that process took at least five minutes, and the stock price information wasn't always accurate. Now, floor brokers can write down those responses on a Casio Inc. PA 2400 device running Windows CE 2.0 and transmit them to a trader within a few seconds over the Big Board's 2.4-GHz spread-spectrum network.

Using the handheld devices, Goldman Sachs floor brokers now can generate 450 to 500 looks per day, up from the 100 to 150 daily looks they averaged with conventional paper and pens. "We're in the information business, and if you can move information about the market faster than the next guy you're doing a good job," said John Hewitt, vice president of equities at Goldman Sachs.

Other exchanges have struggled to adopt handheld devices, including the Chicago Board of Trade and the NYSE. Their problems ranged from using systems that were too sophisticated to forcing the technology upon floor brokers who felt threatened by it.

"For an application to work well in a trading environment, the [graphical user interface] has to be really clean and simple," said Larry Tabb, an analyst at Tower Group, a Newton, Mass.-based financial services and technology consultant.

If an application requires too much effort and distracts a floor broker from concentrating on the market, "it's not going to be successful," Tabb said.

Goldman Sachs and development partner Microsoft took that simplicity to heart. For example, the handheld actually fits in the pocket of a broker's smock. Previous devices tested at other exchanges were bulky and required clunky battery packs that lasted only two hours at a clip.

Microsoft's Consulting Services division worked closely with Goldman Sachs' floor brokers to study how they worked. "These systems are designed to replace pads of paper, and that's kind of hard to do. You can write anything on paper. It always works," said Mitch Prince, a Microsoft consultant who worked on the project.

So Microsoft engineers built the screen on the handheld to look like a pad of paper. And they added a pull-down menu with a list of the most frequently traded stocks.

Because of the frenzied pace on the exchange floor, brokers' handwriting often is illegible, which would have made handwriting recognition difficult. So Goldman Sachs scans the images into the trading systems as it would with scraps of paper.

Goldman Sachs' management kept the floor brokers in the loop every step of the way. In fact, the head floor broker was part of the project team that traveled to Seattle, and he personally selected the Casio handheld device used, Hewitt said.

The next phase of the project is to use the devices for order execution between the floor brokers and the traders, perhaps by next summer.

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