On Wall Street, where trades are made based on the best price data available, information is the most volatile commodity. But institutional investors have to pay dearly for that data, often shelling out US$1,600 per month in subscription fees to access the most timely research from proprietary online services like Bloomberg or Dow Jones.
But information can give investors an edge in the market. If they know something before another investor does - perhaps a big buyer in Geneva is gobbling up US Treasury bills - they may be able to negotiate terms with that buyer more effectively.
But two companies are about to challenge this tradition of charging customers huge subscription fees for up-to-the-minute bond trading data.
The first challenger - a small bond trading boutique called Arbor Trading - is seeking to boost its presence on Wall Street by offering free information services over the Internet. Doing so may give the Barrington, Illinois-based firm, which trades about $40 billion in US government bonds per year, a strategic advantage in the battle for customer mindshare. Arbor is beta testing new software called Gov.View that allows clients to obtain accurate trading data about bonds over the Net in real-time - up-to-the-minute charts, graphs, and price movements.
Another contender in the market - British Telecommunications - is planning to debut a similar product, called Infer, for general availability shortly. The BT tool offers similar functionality: the look and feel of charts and graphs is preserved throughout their electronic transmission.
The idea of giving away information to woo institutional investors is admittedly a radical one, but one that, behind the scenes, has been percolating for years. Back in the early 1990s, Stevens created his first software program; customers had to download a 100 Mbyte file with the latest information, and run it on their own networks before initiating a trade. But it got to be too much of a hassle for the small shop, which has about 25 employees. Clients constantly complained that the app crashed their computers. But it was better than the alternative: faxing hundreds of pages of information to people all over the world every hour.
In recent months, Stevens has been working with a development tool called Open Dialog, from Online Innovations, also of Barrington, Illinois, which enabled him to transform his monstrous app into an "ultra-thin-client technology," with a nifty GUI that could be seen in real-time over the Web, he said.
The data on Arbor's NT server is constantly updated, incorporating news of trades around the world, so clients have access to a free research resource, as long as they keep doing deals with Arbor.
Why doesn't Arbor charge for the information? In the world of Wall Street, Arbor is definitely a minnow among sharks. Giving away the information is what keeps people coming back.
"That is his strategic advantage," said Ivy Schmerken, editor-in-chief of the trade magazine Wall Street & Technology.
BT, on the other hand, has a worldwide marketing force and can hope to create a new market for the software. The telecom giant is selling the software to financial service professionals, who then must resell it to their own investment clients to recoup the cost, said Tony Fitzakerly, a spokesman for the company.
"On the client end, users can set alerts so that reports on a topic of interest are highlighted immediately and placed in an in-box on the PC," he said. Which model will work - free or costly - won't be determined for some time.
But the concept of free, real-time info has its converts. One Gov.View user, Mark Straub, vice president and controller of PlainsBank of Des Plaines, Illinois, is enthusiastic about the concept.
"It already has saved us money. If we make just one trade a month it, it is helpful," said Straub.
Bloomberg, the leading purveyor of online research, is, however, unimpressed with the competition's offerings. A spokesman in New York says that a proprietary system, offered via a dedicated phone line, is a better choice for investors.
"Everybody is PC-based now, but we don't want to offer this over the Internet," he said. "We think a dedicated phone line is a better bet because there is a backup system in case the network goes down."
But, surely, the culture of Wall Street is in for an interesting technological challenge, if investors around the globe start buying into this free-information concept.
"When I was younger, I used to like the trading part of this. But now, the more interesting part of this is the creative part: the technology," said Stevens. "One day, I realized that being in the bond business without computer-based tools was like backing your car into the garage without a rearview mirror. We're really in the computer and technology business. It is analysis. That is how all of this has come about."
