The trading floor received a complete overhaul in October 1992, when Natwest moved its headquarters from New York to Jersey City. Chief among the changes was the switch from an analog to a digitalbased processing framework, which completely redefined the way information is distributed to the 250 or so employees in the capital markets group.
The trading floor was designed with the help of WalshLowe Associates of Hoboken, N.J. The networked market data distribution system was built by Sun Microsystems.
The changes have helped Natwest expand its base of middle market corporate investors and individuals.
"We have gained many more new customers," says Hugh Chaimoff, executive vice president at the U.S. holding company for National Westminster PLC in London. "It's a combination of the trading floor and the capabilities we make available to our salespeople and traders."
In aiming for the middle market rather than Fortune 100 companies, Natwest tailored its trading system to the most important functions and ruled out expensive features that were not deemed necessary, such as voice recognition. "That would be overkill," says John Felicetti, senior vice president of the capital markets group.
"Transaction size is more modest in the middle market," Mr. Chaimoff says. Thus, cost management and discipfine become absolutely critical if you are to make a fair profit and meet your commitment to your customer.
"Technology has played a critical role in giving us the capacity to handle more volume over the same fixed cost. It has given us the ability to provide responsiveness, timeliness, and accuracy to our customers."
Natwest provides a full range of investment products, including government securities, foreign exchange, and taxexempt securities, both in the underwriting and secondary markets; and mortgage-backed securities, both pass-through and collatemlized obhgations, also in the secondary market.
The capital markets group includes interest rate hedge products, such as rate swaps, caps, options, and rate locks, a wide range of derivatives, as well as the traditional money market instruments, including commercial paper, repos, bankers' acceptances, and certificates of deposit.
With the new trading system, information on these investments is distributed over 80 or so miles of cable and more than 350 broker screens. Because it is digitally based and works within Microsoff Corp.'s Windows operating system, brokers can reformat screens, collect dam, and import real-me data to spreadsheets for analytical modeling.
The system has made it easier for traders to track the numerous broker and analytic screens, condensing them to just two 19-inch screens that can display data from six or more data feeds.
Some of these feeds are straight from the bank's own mainframe. Application software residing on the trading floor PCs makes them appear to the mainframe as if they were dedicated terminals. Data are transmitted from the mainframe through a window on the PC. This enables traders to simultaneously view information, for example, from a customer information file on one screen while monitoring price changes on U.S. Treasury securities on another.
At the same time, traders can have a customer on the telephone mulling over a transaction. "We can track the market as it moves," Mr. Chaimoff says, "and tell customers the value of a uansaction. There can be any number of customer models on the screen, all inreal - time pricing, so we can show what's driving the market and help customers reach a decision as to when to execute the transaction." Real-time processing is particularly important for the bank' s foreign exchange customers, who typically execute multiple transactions in a single day.
"Our customers know they are getting the latest prices based on what' s happening in the market," Mr. Chaimoff says. 'That's particularly important when a commercial client is trying to hedge their foreign exchange position." The new trading system also gives customers more options.
"In the case of foreign exchange, they can do a forward transaction to hedge their position or they can do it with options, or a they can use a comb'mation of the two. For each scenario, a salesperson can do an evaluation right on the screen and communicate it directly to the customer."
Information also flows more smoothly within the capital markets group through a system of Unix- and DOS-based workstations that provide a bridge between networks operating in the front and back offices.
The bottom fine of these capabilities is better customer service, says Mr. Chairnoff, citing an example involving derivative products. "Derivatives are customized for each particular customer' s circumstances," he says, so traders use the system's analytical functions to help them price each customer according to their individual circumstances."
Another important element of the new trading floor is the portability of the workstations is a significant issue considering the inevitable movement of desks and people in a large department.
"When we want to move someone from one end of the room to another, we just put in a password and transfer their phone service and data base to their new position," Mr. Felicetti says. "So the marginal cost of moving or reconfigufing the room is very low, assuring that customers receive the same level of responsiveness at a reasonable cost to us. Clearing trades is also more streamlined. When a trader approves a transaction at the end of the day, confirmation is electronically relayed to the salesperson, who reviews it carefully with the broker to ensure that the deal was completed properly.
"We know before final batch processing that every transaction is accounted for and is accurately reported in the system," says Mr. Felicetti. Thus the bank avoids the cosfly process of correcting errors once they reside on the mainframe. Electronically proofing trades saves storage space as well as money by eliminating the need for transaction rickets. It also means that customers can confirm their transactions by phone rather than walt for notification by mail. 'The focus is always on the customer, Mr. Chaimoff says. "Not only in terms ofproviding the middlemarket customer service that the large institutional market is used to, but by providing us with an operating effidency that allows us to provide that service at affordable prices."
