May 15, 2006

Despite clear advantages in business continuity, operational efficiency and enhanced productivity, industry response to voice over IP (VOIP) has been tepid, with greater adoption being slowed by lingering worries over voice quality. According to research from Finextra (sponsored by telecom provider BT), of the 37 percent of survey respondents that have upgraded their turret and network infrastructure since 2001, only 38 percent have deployed a network and turrets that use any kind of VOIP technology.

But as VOIP providers work the kinks out of their products and services, the industry may not be able to afford to ignore the technology. With the arrival of converged voice and data networks and some old-fashioned ingenuity, some firms are finding creative ways to improve their business with VOIP. >>

One VOIP application in the financial services industry that is gaining traction is the use of the technology for ring-down circuits -- dedicated telephone lines that allow a user to connect to another by pushing a single preset button or simply lifting the handset. To spur adoption, the Securities Industry Association (SIA) has approached vendors with a request for information about IP ring-down circuits with the intention of choosing a provider with which they can negotiate a volume discount for member firms (see related sidebar below).

Still, some firms are pursuing their own VOIP solutions. When Greenwich, Conn.-based hedge fund AQR Capital Management decided to implement direct ring-downs in 2004, the firm's voice engineer, Sachin Marwah, arrived at a creative solution for avoiding the considerable cost of purchasing trading turrets. The AQR team -- including Ismail Coskun, development manager, and Bill Santarsiero, network manager -- devised a unique plan to use the firm's existing Cisco (San Jose, Calif.) core network infrastructure for voice communication. The plan included the development of a Web interface called SimTurret that allows traders to customize their Cisco IP phones and create speed-dial-like buttons. Using SimTurret and a Cisco IP Phone 7960G, AQR traders are empowered "to not only interact with our database to call up [broker] pages, ... but also to be able to change all of the speed-dial buttons," explains Jerry Levine, VP of IT at AQR.

"In the past, typically, they'd have to go out and buy a very state-of-the-art and very expensive turret system," explains Michael Payne, global financial services solutions manager with Cisco Systems. "But in this case, ... they avoided a lot of cost in the setup, and now they have a very flexible solution the traders can manage themselves."

Having implemented the SimTurret solution, AQR more recently has focused its attention on transitioning its 60 ring-down circuits from traditional, time-division multiplexing (TDM) circuits to IP circuits, and doing so within the Cisco Call Manager environment that already had been created. For the project, AQR's Levine turned to the firm's circuit supplier, New York-based KGM Circuit Solutions, which began developing a solution to integrate its Secure IP Trader Voice Service with Call Manager in March 2006.

A major challenge of implementing IP ring-down circuits for AQR was ensuring the ability of the firm to communicate externally with its counterparties, the vast majority of which remain on TDM circuits, relates Kevin Gurl, president of KGM Circuit Solutions. KGM, along with partner Verisign, ensured interoperability by emulating every possible iteration of interconnectivity among existing trading turret vendors, soft phone providers and other legacy TDM solutions. "We're actually bridging the gap between IP endpoints at AQR and the other 95 percent of the community that is still TDM," he says. "We can enable those who want the benefits of IP to go to IP with their ring-downs and connect into their trading partners that are not yet there."

The benefits, says AQR's Levine, boil down to business continuity planning. "The primary reason to even be investigating [VOIP ring-downs] is to be able to provide a better level of redundancy and flexibility," he explains, adding that the technology will "allow us to have a presence in our [disaster recovery] facility as well as our headquarters facility."

AQR went live with the solution in May 2006. KGM's Gurl estimates that by using the existing communication infrastructure rather than purchasing IP turrets for 20 individual users, the firm has saved between $100,000 and $150,000.