Practical analysis for investment professionals
05 February 2014

The Doomsday Device in the War of the Trading Terminals

Posted In: Drivers of Value

Two simple words could radically change the whole power dynamics in the huge financial software industry. They are “Federated Chat”.

In the past few months, the financial software sector has suffered something of a disruption. Namely the very powerful, very expensive Bloomberg platforms came under criticism in relation to journalists reportedly snooping on customers to get stories.

And not just any stories. One of the scoops by the people at Bloomberg was the outing of Bruno Iksil as the infamous London Whale. All done by monitoring terminal logins.

Considering how high banks value security, it’s no surprise that the security breach has caused banks and Bloomberg competitors to scramble to make a product that can take on Bloomberg’s possibly most important feature: the chat.

Just days after the first scandal broke earlier this year, it was already clear that Markit and a few partners was working on a open source chatting program called Federated Chat.

Well. It’s become a big thing.

The partner list has become long with Bank of America Merrill Lynch, Credit Suisse, Citigroup, JPMorgan Chase, and CFI Group having just joined the alliance with the original partners Deutsche Bank, Goldman Sachs, Morgan Stanley, and Thomson Reuters.

The 12 registered partners might be joined by about 12 more soon and there is reportedly several hundred more in the pipeline, according to Markit.

This is probably something along the lines of 3/4th of Bloomberg’s client list that could be free to use any chatting service they would like, considering that Federated Chat is an open solution any provider can feed into.

The new service has three main features: a phone book (Markit Directory), a chat platform that allows any XMPP and SIP instant messaging platform (like Thomson Reuters Eikon Messenger, Microsoft Lync, and Cisco Jabber) to talk amongst each other, and finally, a way to feed these chats into most workflows and platforms.

The global chat in the Bloomberg and Reuters platforms are a big selling point for the high priced services. Considering how strong the partners are, it is very likely that the market leader Bloomberg will seeing some cancellations in the comings months, especially from sell side firms, that rely on the chatting service but often little more.

Bloomberg currently has 315,000 subscribers each paying in excess of $20,000/year for the platform, while Thomson Reuters Eikon has 190,000 subscribers.

The war of the terminals is not over yet.

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Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.

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About the Author(s)
Sverre Rørvik Nilsen aka finanskarobat

Sverre Rørvik Nilsen is a financial entrepreneur working out of Oslo, Norway. He runs two financial startups: One is a trading platform; the other a newswire. Nilsen also consults for a number of different clients. He has a weekly webshow with Howard Lindzon at Stocktwits.

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