October 11, 2012

Walk onto any Wall Street trading floor -- once you get past security, of course -- and look around. It doesn't matter if you're perusing a buy side or sell side firm, a hedge fund or a broker-dealer, because you'll see the same thing: Rows and rows of well-dressed, smart-looking people staring at flat panel displays. What are they looking at? Along with email and IM, Web browsers and proprietary tools, more often than not they're staring into Microsoft Excel.

It has been this way since the mid-1990s. So why hasn't Microsoft added a "Buy" button to its ubiquitous spreadsheet and called it an order management system (OMS)? Or an execution management system (EMS)?

According to the industry experts, Excel is perfect for displaying data and crunching numbers, but it would keel over if it became a true OMS.

To be fair, when Microsoft created Excel 2.0 for Windows in the late 1980s, it was never meant for ordering stocks and bonds. It was designed as an alternative to the killer spreadsheet apps of its day: VisiCalc in the early '80s and Lotus 1-2-3 in the early '90s. Those were the days when The Simpsons was America's rudest cartoon, Amazon was just a river and Mark Zuc­ker­berg's Facebook was probably a baby book with a mirror on the plastic cover.

As Asset Control CEO Phil Lynch remembers, Lotus 1-2-3 ruled the DOS landscape before Windows 3.1, the version of Microsoft's OS that was finally considered stable and ready for business. "Everyone knew the Lotus macros by heart," Lynch says, "and once they understood the logic, it was both very powerful and very fast--but it lacked the real-time interface that Excel introduced." Once Excel added a macro conversion function, he recalls, users could convert all of the old spreadsheets.

When Microsoft unveiled Windows 3.1 and later Windows for Workgroups, its network-enabled OS, traders and portfolio managers started installing their own IBM and IBM clone PCs with a stack of floppies labeled Microsoft Excel for Windows.

Steve Rubinow remembers the time well. The CIO of FXAll tells Advanced Trading that traders brought their own solutions from home. "It's not unlike what you have today with bring your own device. It's about familiarity," Rubinow says. "You would install it, and it was not that expensive. It was easy to do. Desk software wasn't locked down and everyone did what they wanted to do to make them more productive."

Excel's rise dovetailed with Wall Street's adoption of electronic trading. Buy side traders began to use specialized programs for executing trades: namely, OMSs. To ensure that buy siders would execute and pro­cess their trades through the sell side or specific broker-dealers, these entities offered OMSs for free or at a nominal price. At the same time, the numbers of screens that a typical trader stared at expanded from two to four and sometimes even six--and Microsoft's spreadsheet program was on every one of those screens.

So, again, why didn't Microsoft turn Excel into an OMS? It's a little complicated.