You Make the Call

Posted inID Mag
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Ask Wall Street honchos what they want from a trading system and they won’t even pause to reflect. Speed and accuracy are the twin goals; other features, they’ll insist, are just icing on the cake.

Now Peak6, a Chicago-based options-trading firm, is laying the icing on thick in the form of a new professionally designed online trading platform, which it hopes will attract investors in a crowded field. “True, it was a risk for us to make this investment, but we had to differentiate ourselves from competitors,” says John Hass, co-CEO of the fledgling OptionsHouse system, which caters to individual investors rather than Peak6’s professional trader clientele. “And we thought why not design a better trading experience?”

Why not, indeed? While brokers, from Charles Schwab & Co. down to the smallest regional firm, offer the ability to execute trades online, design has rarely been considered a key ingredient in figuring out how those website pages should appear to the investor. And when it comes to options—complex financial instruments that allow investors to bet on whether a security will gain or lose value at a particular time—the amount of data involved made Hass and his co-CEO, Danny Rosenthal, throw up their hands.

At that point, they approached Gong Szeto. “If we could clone him, we would,” says Rosenthal. “He is transforming the way we handle and analyze all the data we need in this business.”

That’s unusual praise to heap on a designer, which is Szeto’s calling. Like most other service providers whose labors don’t translate into obvious profits, designers and their products are often viewed by Wall Street firms as nice but not vital to business success. But then Szeto, 40, a graduate of the University of Texas’s architecture school, isn’t exactly your classic design geek. Not only has he made his reputation working with advanced communications technology, but he has also studied subjects ranging from accounting to intellectual property. “There is an unfortunate gulf between the financial world and the rest of the world, and I’d like to be able to help bridge that,” he says.

Rosenthal first encountered Szeto when the latter was chief creative officer at Rare Medium Inc., a publicly traded company that develops websites and other technology solutions for corporate giants such as Goldman Sachs. When Peak6’s founders first came up with the idea for OptionsHouse, Rosenthal remembered Szeto’s technological knowledge and design skills: “I could conceptualize things, but Gong is intellectually curious,” he says. “He wants to do more than just design something; he goes the next step and develops a whole concept and solution.” Szeto had just relocated from New York to New Mexico, and it took two years to woo him. What ultimately convinced the designer to spend every other week in Chicago, he says, was “the incredibly appealing professional challenge of designing a total trading platform in a way that made transactions simple and rational.”

Szeto’s background in architecture helped him deal with some of the initial hurdles: “It allowed me to think about systems, and how different elements interrelate and interact.” That, in turn, made it at least conceptually easier to work within the complex trading universe, where a well-designed system doesn’t just look good but meets all the technical requirements and keeps regulators happy as well.

The project’s essence was to transform the enormous amount of data options traders need to make informed decisions into a visual display that would be simple to access and understand. Investors dealing in options have to be aware not just of a stock’s price but also of what’s happening to the prices of a wide array of possible options on that stock. Since each stock option gives the holder the right to buy or sell the stock at a particular “strike” price on a specified date, the potential combinations of dates and prices can be vast. Holders also need to study factors that can affect their chances of earning money from their trades, such as volatility indicators, which measure the degree to which a stock’s price fluctuates and thus the likelihood that it will hit the strike price and make a profit. Szeto knew that the more data he could clearly display, the better the trader’s experience with the website would be. “The trick was to appeal to experienced active traders, giving them all the information they need, but in a way that would not cause the less experienced folks to flip out,” he says.

He designed a core screen at the center of the site that displays portfolio holdings, which can be expanded to show details with a single click of the mouse. One click on any stock symbol takes the user to a pop-up menu of additional trading options or information. Across the top is a smaller menu giving the full details of the client’s account, including the capital invested and how much remains. Down the right side of the screen is a markets window, where a trader can monitor stock price movements while placing a trade in the options. “The last thing anyone wants to do in a dynamic market is click back and forth from one page to another just to be able to see the data they need,” Szeto says. Indeed, the OptionsHouse site doesn’t even have a “page back” button.

Some of Szeto’s solutions are so obvious one wonders why they haven’t been implemented on other sites. For instance, stocks that are falling or positions that are losing money are shown in red; stocks that are gaining or profitable positions are displayed in green. “It’s not rocket science, but it’s handy to know at a glance what’s happening,” says Szeto. His own favorite feature is the “risk viewer”: Investors can click on a tab and be told what will happen to their positions if the market moves 5 percent in either direction. “This was one of the most widely used features during the market sell-off in late February,” Szeto says.

Peak6 isn’t the first financial firm to apply design principles to make vast quantities of data more digestible to traders. Companies that make a living supplying data, such as Bloomberg or Reuters, retain teams of design consultants to advise them. On brokerage desks, skilled traders have favorite ways to display data, with the most useful charting tools closest to hand on a central screen. And back in 1997, Fane Lozman, a former Marine fighter pilot turned futures and options trader, launched a new kind of trading screen that drew on his understanding of instrument panels, using a variety of rectangles, lines, and arrows to indicate which kinds of securities were moving and what that movement signaled.

While Lozman’s solutions were conceived for professionals who could digest complex data, online firms that catered to individual investors—people who trade for themselves as an avocation—still based their designs on the old paper “tickets” used to buy and sell stocks on the floor of the New York Stock Exchange. Users would have to know the ticker symbol for each option—say, the July option to buy Dell Computer stock at $35 a share—before they could place a trade. Professionals commit hundreds of these symbols to memory, but amateurs often have to flip back and forth between screens to find the right code. Szeto simply did away with the need to insert a ticker symbol; instead, clients click on the July $35 Dell call option, and the OptionsHouse system converts it automatically into trader lingo.

Szeto isn’t entirely satisfied with the project, however. He’s already refining the site to offer an interactive menu that will walk newer traders through the process one step at a time. “We’ll start with questions like, ‘What is your goal?—Do you want to lock in the price of your stock, or protect your portfolio?’ then move on to ask if they want to buy or sell, and end up presenting them with
a couple of trading ideas—all in just two screens.” Meanwhile, the Peak6 professional traders are demanding more of Szeto’s time to make their own data easier to manage.

It’s too early too tell how OptionsHouse will fare in the battle against giants like Schwab or specialist competitors like OptionsXpress. The company, which is privately held, declined to disclose the number of customers who have signed up for the trading service since its launch in January. As options trading continues to boom and stock markets become more volatile, however, more traders are likely to turn to the new system to execute their orders. “One thing is already clear: People who try the system are sticking with it,” says Hass. “Our retention rate is higher than we had hoped for, and we believe that will spill over into word-of-mouth recommendations—many of which will be due to the way that this ‘look’ is something created and designed from scratch to meet this market’s needs.”

Based in New York, Suzanne McGee writes about business, finance, philanthropy, and the art market.