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Trading Technology

02:01 PM
Jon Beyman
Jon Beyman
Commentary
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Dear CIO...

What are some examples of mission-critical business technology projects that Lehman is funding, and what are the benefits to shareholders and clients?

Question: What are some examples of mission-critical business technology projects that Lehman is funding, and what are the benefits to shareholders and clients?

So many to choose from! So few words to do it in! One of the more interesting global projects we have deployed recently, in the Equities division, is an Autotrader system that automatically monitors the market and implements a particular trading strategy over the course of minutes and hours. These are mostly single-stock strategies that implement common trading algorithms such as volume weighted average price (VWAP) and trade-with-volume. This mimics the orders we often receive from customers.

Since we had been giving clients indirect access to the autotrader - either via phone orders or FIX orders that stop at the trading desk - the next logical step was to let the customer actually route the order directly to the autotrader. This required changes to our internal order-management systems, client-connectivity platform and client-facing systems for the client's order entry. This last item has been the most challenging, because our strategies have parameters that are specified by the client on a per-order basis.

Our first implementations of clients' "Direct to Model" capability are via our own native front end and via a modified Bloomberg order-entry screen. While it's not as capable as our native implementation, many buy-side traders are using Bloomberg's electronic ticketing capability to enter orders and route them via FIX to Lehman.

The benefits from this project for Lehman are enhanced productivity of our sales traders, as we continue to take low-value-added work away from them, and increased order flow (and, thus, increased commission revenue). From a customer standpoint, we provide an enhanced offering: direct VWAP execution to clients, in a seamless and easy-to-use fashion. This further helps us capture business, at a low marginal cost.

Oh yeah, and our shareholders like the fact that these types of technology projects enhance the bottom line!

Jonathan Beyman is chief of operations and technology at Lehman Brothers, as well as an executive vice president. In addition, Beyman has served as the firm's CIO since 2000.

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