As Friday morning proved, when Bloomberg terminals go down, the trading world stops dead in its tracks. In this case, it was an internal "network issue" according to the company, which is settling news to markets overall because a hack for these 300,000 work stations used mainly by professionals would be a disaster.
Bloomberg is a privately held financial software, data and media company that was founded by Michael Bloomberg in 1981 with the help of an investment by Merrill Lynch ($MER). If you go back to 2001, when the company had about 160,000 terminal subscribers (it now has 315,000 subscribersand $25,000 per year -per terminal). These are not day traders, these are pro's who have relied on the "Bloomberg Brain" to make trading decisions.
When this system is down – which it was last night – you have markets affected differently than they would have had the terminals been up. The result is noticeable in opening markets today,that small window caused undue volatility as news events went unfettered, and the markets had a stutter-step which manifested itself in a higher volume opening in US markets.
Who Benefits When the Markets Fall Out of Step?
The main beneficiaries were European traders who caught the US traders with no execution and analytics amid the change in the way Chinese markets allow short selling in its markets, this spread across US Indexes and everyone who was trading outside Bloomberg had a free look to short without the pro's on the desk hitting bids. You can see this trading activity and where the volume came from - it was not done from the normal terminals and with the Dow down 200+ at the opening this is an opportunity missed for many professional trading desks.
This raises the question about redundancy at trading desks – and I can tell you there are head traders schooling the staff on what to do if Bloomberg goes down – and not to rely on single point execution. They will do this because it costs them money and opportunity, and if you are paying $25,000 per terminal for 100 guys, you better be making money!
Bloomberg is famously averse to discounting, and only offers one level of subscription with access to all data. But it does charge a lower price—currently about $20,000 a year—for customers with two or more subscriptions, including large banks than can have hundreds of terminals. That price, however, increased proportionally with the single-terminal price over the past decade.
Bloomberg provides financial software tools such as an analytics and equity trading platform, data services and news-to-financial companies and organizations through the Bloomberg terminal (via its Bloomberg Professional Service). Its core money-generating product also includes a wire service, a global television network (Bloomberg Television), a radio station (WBBR), websites, subscription-only newsletters and three magazines.
The number of terminal subscriptions grew steeply before the financial crisis, hitting 270,000 in 2007 when growth slowed as some of Bloomberg’s biggest customers trimmed budgets or went under entirely. Bloomberg’s revenue was $8 billion last year, most of it from terminals. With concern about flash crashes and hackings and a lofty US Stock Market, this is a wake-up call to the world about execution and redundancy.
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