Swiss Bank Upgrades Trading With Artificial Intelligence
Swiss Bank Corp. has launched a trading system that lets users integrate real-time market data with an artificial intelligence program that identifies arbitrage and other trading opportunities.
In the first phase of the project, which went into use last week, 32 traders in New York, Chicago, and San Francisco are using the system to trade in the Treasury bills, capital markets, and foreign exchange areas.
In the Forefront
Like Bankers Trust Co. and J.P. Morgan & Co., Swiss Bank is in the forefront of merchant banks that are installing sophisticated systems to identify trading opportunities and manage risk. These banks rank among the top 10 financial institutions in currency, securities, and derivatives trading.
"The most successful organizations mix all the components well," said Christopher A. Green, vice president of First Manhattan Consulting Group in New York.
"They need good analytics, which include risk management, pricing, and market arbitrage models," Mr. Green said.
Swiss Bank chose to build their trading system on computer workstations from Sun Microsystems Inc. The bank had also considered hardware from International Business Machines Corp.
The new system incorporates up-to-the-minute market data with spreadsheet and graphics packages. Traders also use an expert system, developed inhouse, that performs quantitative analysis. Expert systems, a branch of artificial intelligence programming, let computers emulate complex human reasoning.
Manipulation of Data
The expert system allows traders to look at long-term historical trends, and set parameters for prices that, when triggered, will alert the trader to an investment opportunity.
The use of digital communications technology enables traders to manipulate market data that could not be accomplished using older analog video transmissions.
Currently, most traders are reenter data into a spreadsheet program on a personal computer for analysis. But in the process, they lose time and may make errors.
|More Money for the Bank'
The new trading system "frees up traders to spend more time thinking about the market, and hopefully, making more money for the bank," said Mr. McArdle.
The majority of traders at Swiss Bank will continue to use older video terminals, which eventually will be able to receive market data in digital form, and spreadsheet and other data from the workstations. In New York, about 150 traders are using trading terminals from Micrognosis Inc., and 25 are using the Sun workstations.
In the first phase of the project, scheduled to be completed by the first week in July, traders will learn how to extract market data from pages of data fed by Reuters and Telerate services, and then put the information into a database. This data is then broadcast to the traders in digital format by a software product from F.D. Consulting, New York.
Traders will then learn how to incorporate the data into realtime spreadsheets supplied by Access Technology Inc., Natick, Mass.
In the second phase, Swiss Bank will complete a gateway between the video and digital broadcast systems so that analog data can be translated into digital format.
Other Offices May Be Added
This process will work both ways, so that traders sitting at traditional video trading terminals will be able to receive data digitally, and will be able to view spreadsheets that have been sent by traders with Sun workstations across the network. This phase is scheduled for completion at the end of August.
In the third phase, the digital broadcast system will be extended over a wide area network to the Chicago and San Francisco offices.
Beginning next year, other offices in North America and the Caribbean may be added to the network.