Microsoft Pivots to Serve Wall Street, in Office and Online
June 7, 2010
Most Wall Street firms' desktop computers run on a version of the Microsoft Windows operating system. Critical staff, from chief financial officers to traders, have long used Microsoft's Excel spreadsheet application to analyze market and transaction data, build financial models and track results.
But the software giant wants to move securities firms beyond viewing it principally as a provider of office productivity software and number-crunching worksheets. The firm has bolstered Excel so it can tackle at least 100 million rows of data at one time, and it has enabled securities firms' sophisticated analysis and trading applications to preside and run on its Azure cloud-computing service. The moves are examples of how the Redmond, Wash., firm is priming itself to be part of the digital foundation for the financial industry's moves toward consolidating technology systems and the flow of work between business units.
In fact, Microsoft's efforts to move serious number crunching to the desktop may finally impress some of the biggest naysayers of off-the-shelf software: traders. They have traditionally customized their technology products to digest ever-growing data streams, and build the best trading models and risk-management tools.
John Jacobs, chief operations officer at Lime Brokerage, which caters to high-frequency-trading firms, says high-speed traders are especially apt to develop their own risk-management software, in part because what constitutes risk remains open to interpretation. "Risk management is really the only way to manage the large amount of order and trade-flow activity generated by a high-frequency trader," Jacobs said.
Traders have necessarily become adept programmers in Excel, given the ubiquity of the spreadsheet application and the increasingly analytical nature of their jobs in the data-driven financial markets. Microsoft's bolstering of spreadsheet capacity over the last few years to a million rows of data came in direct response to Wall Street requests, the company has said.
"On every single desk, especially those with quantitative analysts doing modeling, Excel is one tool that is always used," said Lloyd Altman, a senior director in the capital markets practice of Accenture, one of Microsoft's official "partners" that helps tailor software vendor's general applications to clients' needs.
Altman noted Excel strengths, such as its graphical front end, its built-in tools to perform regression analysis and other analytics as well as its ability to pull in and use third-party calculation tools, such as Fincad, which develops derivatives pricing models.
But at a certain point, he says, Excel is no longer enough. Those traders typically have to migrate their work to more robust platforms, especially when performing data-intensive risk analysis or they want extreme speed in trading.
"Algorithms don't want a human involved," said Altman, adding, "You might want Excel to create the algos, but you don't want to use it to deploy them, since it would just slow you down."
Starting May 12, Microsoft began offering business customers the 2010 version of Microsoft Office that includes a more powerful version of Excel. It can be turbocharged by a new application called PowerPivot, launched at the same time, that effectively bolsters Excel's capacity to 100million rows or more of data.
This could change the nature of developing trading models. In the past, trading prioritizing speed has required specially designed software and hardware to send orders to market centers at speeds in which microseconds determine whether a trade results in a profit or loss. But the analysis fueling each order adds to trade latency as well. With 100 million rows of data, Microsoft could score some big points with traders by enabling them to develop more-complex trading and risk models that tap a vast store of data-all in Excel.
