When The Charles Schwab Corporation bought CyberTrader, the direct access, high-tech trading brokerage, in March 2000, it acquired much more than a broker-dealer for very active traders. Schwab obtained a leading-edge technology firm that was profitable in its own business of supporting sophisticated strategic traders. CyberTrader was also fully capable of providing Schwab with cutting-edge, money saving Microsoft-based technology that transformed its brokerage business.

CEO Vincent Phillips said CyberTrader was never about day trading per se, but about customers who need a sophisticated platform to implement their strategies.

“CyberTrader has never been about day trading in particular,” explained Vincent Phillips, the company’s CEO. “We provide a sophisticated platform for strategic, sophisticated traders who have an idea of what kind of strategy they want to implement. They were never just fly-by-night traders, but rather our clients have always been about generating income, investing, and often using strategies that can make them profits no matter what the markets are doing.”

CyberTrader Pro, the company’s premier software-based trading application, is written for Windows and provides clients with a host of advanced trading tools and technology, analysis, research and services they need to trade strategically and employ risk management principles. One of the platform’s newest features, Strategy Center, is a comprehensive suite of technical analysis tools that allows clients to back-test their customized trading strategies, and simultaneously scan the market for stocks that are meeting those strategies in the current market.

Like Lava Trading (see cover story) but aimed mostly at individual investors along with some hedge funds, CyberTrader has been pioneering direct access and intelligent order routing trading technology for over a decade, and as the markets have become increasingly automated, it has raced to stay ahead of client demands.

“In the last 10 years that CyberTrader has been in business, we have seen a ton of automation around trade execution and market data,” explained Phillips. “In addition to driving down trading costs, these technological advances have made it possible for CyberTrader to offer direct connections to the markets via ECNs, all six options exchanges and over 450 market makers.”

Because the ECNs are so highly automated, he added, they provide the speed and transparency CyberTrader clients want.

“Clients can see the price they are going to pay when they enter a trade – and when they see a price, they want to execute at that price. The sheer volume of trades that are directed to the ECNs really shows that clients are voting with their feet. They want automatic execution and transparency,” Phillips said.

Individual traders usually have high speed lines, although a few make do with dial-up, he added. Those who are running their strategies on multiple computers or are implementing complex trading layouts may require a broadband connection.

To meet the demands for very fast market data delivery, CyberTrader developed and runs its own ticker plant on Microsoft servers. The ticker plant quote system supplies clients with faster quotes by providing a direct connection from the market to the trader’s workstation. The central quote processing system aggregates and distributes live quote feeds directly from most US exchanges, ECNs and other market centers, as well as up-to-the-minute news items from Dow Jones and Acquire Media News to CyberTrader and Schwab clients.

“Our ability to stay on top of trends and do appropriate capacity planning for our Windows Server farms are critical,” said Phillips.

Since the acquisition, CyberTrader has operated as an independent, wholly-owned subsidiary as well as the trading and market data technology development arm of Charles Schwab.

“We started off a decade ago licensing our software to trading rooms for execution fees, then in 1998 we changed the focus of our business model to include brokerage services,” said Phillips. “We were acquired in 2000 because Schwab recognized the value of the CyberTrader technology – and immediately began integrating our technology throughout Schwab.”

Schwab integrated CyberTrader’s technology into its StreetSmart Pro trading platform. Next, Schwab replaced its own back-end quote engine, running on a mainframe, with CyberTrader’s faster and significantly more efficient market data engine built on the Microsoft Windows Server platform. More recently, Schwab launched StreetSmart.com, a powerful, Java-based Web trading environment built for speed and ease-of-use. StreetSmart.com, powered by CyberTrader, is integrated into the Schwab.com Web site and provides industry-leading functions and features previously available only on the StreetSmart Pro software application.   

"We are really going in  using Microsoft technology and Intel and AMD boxes and using them to replace big mainframe applications - both software and hardware - with PC's and Windows-based applications," said Phillips

“For Schwab, we are really going in using Microsoft technology and Intel and AMD boxes and using them to replace big mainframe applications – both software and hardware – with PCs and Windows-based applications,” said Phillips. “Anything we do on the CyberTrader side is Windows-based and runs on Intel and AMD. We don’t build the mainframes. Instead, we try to stay very cutting-edge as far as what languages we develop in: C++, C# or .NET.”

Using the Microsoft development environment makes it easy for both CyberTrader and Schwab to launch new products and features, he added.

“That’s a key advantage in a field that is always changing. We have found that one of our core competencies is being nimble. We are able to talk to our clients, understand their needs, develop a response and roll it out in a very short timeframe. That is very difficult with mainframe technology, but we can be fast to market with .NET and Microsoft development tools.”

CyberTrader also finds that a complete Microsoft environment helps with integration.

“All-Microsoft makes it smoother. When you are using different vendors to provide interactive tools at the desktop, you can always run into compatibility issues,” he said.

Phillips expects growth in the online trading world to continue.

“The strategic traders have been around a long time, they are the ones who have survived. Today, they are still trading strategically and exploring new instruments like futures and options. CyberTrader provides these sophisticated traders with tools such as streaming news and data, advanced charting capabilities, technical analysis, trailing stop loses and conditional orders to help clients identify and take advantage of trading opportunities in the markets,” Phillips said. “In addition, our clients benefit from a fully-integrated CyberTrader Pro trading platform that allows them to trade equities, options and futures all from the same platform, without the hassle of opening new trading windows or phoning a broker to place a complex options order. You can watch market data around all those instruments. We have clients who trade equities but want to watch what is happening on the futures market because that can be a predictor of where the trend is on the equities side. Having an integrated platform where you can watch those instruments and manage cash is very important for many of our traders. That’s because our clients prefer very sophisticated trading tools and because it is an all electronic exchange.”

CyberTrader supports cross-asset trading and basket trading as well. “They want integration, transparency, and the ability to trade on any venue out there, and our platform is one of the few that offers all that,” Phillips said.

He’s optimistic about the business.

“As traders become more sophisticated they in turn demand a more sophisticated platform – like CyberTrader.”

http://www.schwab.com/

http://www.cybertrader.com/