Bernard Weinstein founded ILX Systems Inc. in the wake of the 1987 stock market crash on Wall Street. It wasn’t an ideal time to leave a 21-year career at a major brokerage house and start pitching software to investment firms.
But the former E.F. Hutton and Co. technology head turned out to be prescient. Today, ILX is pulling down $100 million a year in sales to investment houses, brokerages and banks. It is one of dozens of software developers spawned by Wall Street’s endless desire – crash or no crash – for cutting-edge technology. Elsewhere, the high-tech revolution is about personal computers and computer products, but in New York, it’s Wall Street that calls the tune.

Systems a critical tool
"Systems are the mission-critical tools for brokers, traders, and money managers," says Mr. Weinstein. "It’s what distinguishes them competitively."
More and more companies are popping up to satisfy Wall Street’s multibillion-dollar appetite for technology. Nearly half of all local software companies do business principally with financial firms, according to a study by KPMG Peat Marwick.
A recent survey by the Wall Street Telecommunications Association found that even medium-sized brokerages spend an average of $80 million a year on systems. That doesn’t include giants such as Merrill Lynch & Co., which is spending $800 million over three years on a desktop broker system, or Chase Manhattan Bank, which recently laid out $100 million for a trading floor.
Last year, J.P. Morgan & Co., spent $645 million on technology, nearly 12% of its revenues.
For the most part, the money is being used in the quest for two holy grails: less risk and more speed.

Staff quadrupled in last year
When TechHackers Inc., a lower Manhattan-based software developer created its flagship product @nalyst in 1987, traders still had to calculate yields on the fly in order to analyze transactions. Atul Jain, TechHackers Inc. cofounder and president, simply inserted formulas into off-the-shelf Lotus and Excel spreadsheets. The $2 million company has quadrupled its staff to 25.
"Firms had huge internal systems organizations but no time and no room for error," says Mr.Jain, a Stuyvesant High School and Massachusetts Institute of Technology graduate. "So they needed a crack team (whom) they could quickly tell what they needed."
Other firms are working on melding market data fields and analytic tools into one integrated system that saves time and frees up real estate on a trader’s desk.

Trader’s firm trades up
Software by Market Vision Corp., for example, delivers data from services such as Telerate and Reuters and puts the information into a spreadsheet or database for analysis. Started by a trader, the $20 million company is now part of Global Financial Information Corp., a $150 million holding company founded by a venture firm Welsh Carson Anderson & Stowe.
GFIC is packaging products from three different companies to challenge one of the biggest Wall Street technology success stories, Bloomberg Financial Markets.
The need for market data also drove ILX’s Mr. Weinstein into software development. Frustrated by the inflexibility of the two major players, ADP and Quotron, he and his partners came up with a fast, one-stop shopping mechanism to deliver market information to traders. The concept was alluring enough to attract Canadian publisher Thompson Financial, now ILX’s parent.
Driving much of the development is the need for firms to distribute information globally. John Faccibene, senior vice president for technology at government bond broker dealer Garban Inc., wants clients to have access to some of Garbans analytical tools.
"Our focus is on reducing expenses and sharing information," says Mr. Faccibene.

Many building own systems
Despite the growing number of high-tech firms serving Wall Street, investment houses are still building many of their own systems. At the same time, many software tools, such as those involved with equity swaps, are becoming commodities. Small software outfits are going to have to get more sophisticated.
"What’s innovative is packing things together," says Stuart Sugarman, chief technology officer for Deutsche Bank North America. "A lot of development is going on on the trading side because of the global perspective."

Reprinted with permission from Crain’s New York Business, September 17, 1995