IBM Japan Equips Nikko's Tokyo Trading Room With New Trading, Decision Support Network

THIS WEEK'S LEAD STORIES

On the top two floors of a brand spanking new 14-story building in Tokyo's Shinkawa district, The Nikko Securities Co., Ltd. hopes to realize its dream of an integrated trading system. At the same time, IBM Corp. will realize its own dream -- of supplying a back-to-front digital communications system for a 500-position world-class trading room.

Nikko's old trading facility is antiquated by Western standards, relying on a broad assortment of stand-alone terminals, PCs and workstations. The new trading floors, which TST visited last week, are scheduled for occupancy in May and will have the benefit of both color video-switching (via Fujitsu) and digital data subsystems (via IBM Japan Ltd.)

One of Japan's "Big Four" securities firms, Nikko cultivates its image as a leader in "investment technology." Similarly, IBM is striving to boost its image as a supplier of front-office trading systems. Nikko, however, hasn't chosen to use any of the trading system packages IBM has promoted lately. Neither Datatrade or Seer (TST, Mar. 26, 1990) nor DR-One (TST, Dec. 19, 1988) are used in the Nikko installation.

This isn't too surprising, though, given the timing of the Seer and Datatrade launches and the vaunted Japanification of IBM Japan Ltd. IBM has wholly given over the management of IBM Japan to native Japanese, and according to some observers, the country unit operates in a comparatively independent manner.

Image Management

Indeed, due to the peculiar processing and display demands of the Kanji character set, the 450 or so IBM PS 5571s and PS 5574s that sit under Nikko's new trading desks differ substantially from the PS/2 range sold in the U.S. or Europe. More of the Japanese PS 55 series' 80386 processor and RAM are devoted to Kanji display management, according to one source.

Sanyo Securities' mammoth trading room also is equipped with several hundred IBM PS-model processors. Despite the fact that Sanyo's PSs act only as terminals linked to five IBM 3090s in the basement, the firm's trading systems investment was widely publicized for marketing and recruiting purposes.

IBM stands to benefit from that promotion. From a marketing standpoint, IBM Japan's installations at Sanyo and Nikko have established its credibility as a supplier of non-video information subsystems to Tokyo's mega-trading rooms.

Despite the recent stock market plunge, Tokyo's market for trading room systems is likely to thrive over the near term. Tokyo's continuing financial deregulation is stimulating information technology investment on a number of fronts.

As Japanese banks and securities firms invest more of their capital in foreign markets, synthetic instruments and proprietary trading activities, a strategic processing and communications architecture will become a major concern, and risk management an imperative. While a few major players -- such as Sanyo Securities and Mitsubishi Bank -- have begun to deploy new systems, many large and mid-sized trading organizations are still studying their options, and are poised for major purchases.

Roll Out the Hardware

Nikko's new trading and decision support architecture employs a slew of IBM hardware and software products. Nikko's new digital trading information system may be the first in the world to use an IBM-standard operating system (OS/2-J), network communications software (Communications Manager and Token Ring) and graphical user interface (Presentation Manager) in the context of a large trading room project.

A 3090 mainframe in Nikko's Nagoya data center running a proprietary VSAM database management system receives high speed digital data feeds from Brokers Broker -- Japan's sole interdealer broker for government securities -- and the Tokyo Stock Exchange.

Two T-1 (1.544 megabit/sec.) lines connect Nagoya to the new Tokyo (Shinkawa) trading center, where the equipment room houses an AS/400, two IBM 3745-410 network control processors, two IBM 8228 LAN concentrators and several IBM PS 5551 LAN bridges to support the four high-speed IBM Token Ring LANs.

Approximately 125 IBM PS model 55XX machines are served by each LAN, three operating at 16 mebabits/second and one at 4 megabits/second. The higher-speed LANs connect Decision Support System terminals, while the four megabit/second LAN links the Trading Support System terminals. DSS users can access TSS from their terminals but TSS users don't have access to DSS.

Nikko's Fujitsu color video-switching system will give traders access to Telerate, Reuters, QUICK 10, CNN Headline News (a popular item in Tokyo trading rooms), JiJi Main and the Nikko Online System, among other sources.

A La Carte Menu

About 350 of the projected 500 positions in Nikko's new trading area will be occupied by domestic (Japanese) equity sales traders, equity position traders and their assistants. The remaining spots will be taken by bond traders and salesmen and by traders in various derivative instruments.

There are several permutations of the Nikko trader workstation. The number of high-resolution Fujitsu video screens at each position will vary from three to none. The video switching system requires a dedicated keyboard. The Hitachi trader turret system includes both programmable pushbutton and touch-sensitive plasma input mechanisms, two handsets, two intercom speakers and a microphone.

Position traders and trading strategists will have IBM PS/5574 Decision Support System terminals with standard keyboard, mouse and high resolution 16" color display. In addition, some position traders will have Sun workstations running Nikko's Futures Decision Support System. An SNA gateway connects the Sun workstations to the IBM subsystems.

Salesmen and trading assistants will use the Trade Support System with a hacked IBM keyboard manufactured specifically for trading rooms. The suitably named "Keyboard for Trading Business" includes only 10 function keys and a numeric keypad and has a small footprint. TSS users have a 14" high-resolution color display.

TSS allows traders to enter orders for electronic delivery to Nikko floor booths on Japanese exchanges; it also sends orders directly to exchange-based computer assisted execution systems such as the Tokyo Stock Exchange's CORES systems for stocks, stock index futures, government bond futures and options on same.

Trade confirmations will be received by TSS users in as little as five or six seconds for computer-assisted trades or as long as 20 to 30 minutes for manually traded stocks. TSS also serves as a position-keeping system.

Buy or sell lists of stocks, bonds and convertible bonds can be uploaded to TSS for execution from the various Nikko-BARRA investment management models.

The Decision Support System's point-and-click menu-driven interface offers access to a Microsoft Excel spreadsheet, a Fortran application development utility and a variety of other applications, including continuous local calculation of stock indices, statistical data on individual stock behavior, fundamental corporate data, industry group analyses and a database of each customer's transactional history and tendencies.

Nikko's DSS makes effective use of the trade data delivered via the TSE's 48 kilobit/sec. digital feed. Along with last-sale and volume information, the TSE releases the identity of the buyer or seller firms. Nikko compiles this data and generates a profile of its competitors' transactional histories for listed stocks. DSS charts this information and updates it twice a day. While U.S. and European banks and securities firms have been slow to incorporate IBM products in their front-office trading systems, Nikko has adopted IBM with the same fervor that Bankers Trust embraced Digital Equipment Corp. No doubt there are benefits to these relatively homogenous computing architectures.

But the suitability of a Sanyo or Nikko-type solution may depend, in part, on the more orderly manner in which Japanese traders are typically managed and the more closely circumscribed set of trading activities in which Japanese firms participate.

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