As IPC celebrates its 50th anniversary at the forefront of innovation in communications and connectivity technologies, we reflect on how global financial markets have evolved since 1973, and how IPC Systems has supported market participants to flex and adapt to ever changing industry trends and challenges. 

It is a remarkable accomplishment for a fintech firm being around for 50 years and remain the leader in our industry.  Our journey began in 1973 when IPC’s pioneers were approached by financial firms seeking an expert partner to provide vast improvement to unstable and unreliable trading communications tools. This request gave rise to the birth of the very first trading communications device – the IPC Series 1 “turret” –that dramatically reduced trader downtime associated with mechanical solutions. 

The Series 1 turret was adopted quickly and globally by market participants. From that point on, IPC has grown to become the global leader in trading communications and connectivity technologies, with over $1 trillion of daily trading business transacted every day over our financial markets network.   

“From our first engagement to today, our strategy for success has continued to be built on the foundations of close collaboration and cooperation with customers and industry partners – it is an essential element of our corporate DNA”. 

50 years of radical technological advances 

 

Like many other industries, the financial markets ecosystem has undergone significant evolution and change over the past 50 years, not least with respect to the rise and rise of fintech as an industry segment in its own right. 

In 1973, banks and trading firms were in early stage of looking at new type of (main frame) computers to support banking operations.  It was also the year that the SWIFT payment network was launched, heralding the first ‘automated’ payment systems (domestically, then cross border).   

By the 80s, turret communications technologies on trading floors were being augmented by the first quasi-electronic trading boards that enabled brokers and traders to reach and talk to each other more readily.   

The ‘Fintech Age’ in financial markets trading took off in earnest in the mid to late 80s, with the advent of the first automated trading tools. These tools evolved quickly from basic, screen-based communications solutions to more sophisticated rate distribution, conversational (RFQ) trading, and later, price matching systems that revolutionized the way traditional markets were traded.  

The 80s also saw the technology-led ‘Big Bang’ that transformed equities trading. By the 90s, fintech advances had revolutionised FX trading floors with the advent of electronic (automated) conversational RFQ networks such as Reuters Dealing. 2023 is also the 30th anniversary of the launch of the EBS (Electronic Broking Services) price-matching platform that very quickly became the dominant venue for interbank spot FX trading. EBS was followed in short order by other technology-led market innovations including the CLS (Continuous Linked Settlement) FX settlement venue. 

Despite the view from traditional voice brokers at that time that electronic trading would never replace an experienced and savvy human trader – or reflect the nuances of market sentiment – electronic trading quickly became the dominant method for financial and capital markets trading. Fast forward to today, the majority of wholesale trading activity for equities, FX and fixed income is transacted through e-exchanges and e-matching venues (increasingly using automated and algorithmic trading technologies and strategies).   

Connectivity and communication – key drivers of an effective trading ecosystem 

 

While today’s trading environment may look and feel completely different vs. 50 years ago, technology evolution in financial markets has primarily focused on the two key drivers of connectivity and communication. 

It is also important to note that no markets – nor transaction lifecycles – are completely automated/electronic from end to end.  Despite continuing ‘electronification’ of trade execution workflows, there IS still a vital role for voice communications solutions and innovation. Even when trades are routed through electronic channels, trading professionals still use voice, chat and email channels for associated pre- and post-trade activity in the transaction lifecycle.  Yesterday’s turret has become today’s terminal and device. 

The pandemic (and post-pandemic ‘new normal’) has underscored the fundamental requirement to connect this multitude of communications channels together efficiently, in order to enable traders to work away from the trading floor exactly as if they were on the trading floor, on mobile phones and in home offices, while remaining compliant with employers’ and regulators’ onerous trade surveillance, security and data protection obligations.  There is significant demand for ‘soft’ trading environments, including virtual devices, that replace physical trading desk hardware with software-based applications, fully integrated with other trading desk tools and accessible on and off physical trading floors.   

More recently, the advent of digital assets and technologies are introducing myriad new players and potential trading connections into the trading supply chain, bringing with it the potential evolution of traditional, centralized markets’ infrastructure to a more decentralized, democratized approach to financial services and transactions.  

Financial markets have certainly come a long way in a relatively short time from a trading environment of open outcry pits, broker ‘voice boxes’, telephones and telexes, with manual trade recording, reconciliation and settlement.  Not only has technology transformed the trading function, it has also opened up financial markets (and access to them) to more and more participants, trading venues and ‘end points’, all of which need to be connected. 

In this 4.0 technological age, with an increasingly techno-savvy demographic occupying traditional trading roles, technology has to be multi-faceted and multi-dimensional.  An increasingly ‘distributed’ workforce, particularly post-pandemic, requires highly interoperable, multi-channel communications that must satisfy ever more rigorous transparency and conduct-driven regulatory compliance obligations.  Beyond this, it must also be able to capture, consolidate and distribute market data from multiple, multiplying end points, and integrate it within internal and external workflows.  

We know from talking to customers that investment in new trading-related technologies, systems and platforms is a key business driver in the coming years, particularly in relation to the establishment of a fully connected, fully integrated trading infrastructure that links together all participants in the ‘trading supply chain’ – sell and buy side firms, platforms, exchanges, clearing and settlement systems, custodians, market data providers and all those involved in the trading lifecycle.  IPC enthusiastically embraces the future and looks forward to supporting customers and financial markets for the next 50 years. 

 

– Bob Santella, CEO, IPC Systems