- 1998: Volume 7, No. 1 ZAP Offers Traders an Electronic Link to Order Fills

"Major Change"... "Revolutionary"... " Independent"... Those are the words being used to describe the mass exodus of traditional full service and discount commodity traders to the relatively new consumer phenomenon of on-line trading. Major changes are coming from all directions-brokerage firms, exchanges, brokers and software vendors, just to mention a few. Two years ago people were afraid of the Internet, today they can't live without it. Issues like security on the Internet seem to be all but forgotten now that stock companies have made the Internet not only legitimate, but essential. Information and news are processed and disseminated at the speed of light, so why shouldn't your trades be also? We've created a whole new class of trader that says "I want it, and I want it now!"

One such system in the futures industry that has set the standard for high speed electronic order entry is ZAP. ZAP is a new generation of software that allows you to transmit orders from your computer in as little as two to three seconds directly to the trading floor, broker or Globex (computer to computer trading). ZAPs' most important features are speed, accuracy and ease of use. Without ZAP, a client usually phones a broker, who then calls the order desk where a phone clerk takes a verbal order and then enters the order into TOPS. TOPS is an electronic order routing system developed jointly by the Chicago Board of Trade and the Chicago Mercantile Exchange.

The ZAP system interfaces directly with TOPS thus allowing a client to eliminate the phone clerk and transmit an order directly to the trading floor or pit. In April 1997, LFG, LLC brought the CME's "CUBS", a hand-held electronic trading deck, to the S&P pit. ZAP transmits client orders directly into the S&P pit. S&P trader Eric Todd is amazed. "I can have an order in and out of the S&P's faster than some brokerage firms answer their phones." Fills are received back in an average of 20 to 30 seconds after order is entered.

In September, 1997 the CME introduced the E-Mini S&P500 contract via Globex, which is computer-to-computer trading. No brokers or open outcry is used for orders under a 30 lot; Globex matches buys and sells electronically. When you enter an order to trade E-Mini's on ZAP, if you hit the bid or offer you are in and out of the computer with a fill in as little as five seconds.

Current ZAP clients give high marks for the system's ease of use. "I simply key in my order, press a button, and ZAP does the rest", says institutional bond trader Keith Edgar. Using ZAP really relieves huge amounts of stress because everything is easy and automatic. After I transmit the order, I receive a time stamp and order number in two to three seconds. That is my assurance that my order actually is on the trading floor or pit."

In January, 1998 ZAP-TTP (Total Trading Platform) was released. ZAP Audio is a favorite among S&P and bond day traders. Traders can hear live the opening bells, continuous bids/offers/size, and what the big players are doing. It's like being in the pit without the pushing and shoving!

Technology is advancing every day, and with all the strides we've seen in the past year we can expect to see a dramatic increase in electronic trading by futures traders. It only makes sense in a trading environment where a delay of a few seconds can potentially be very dangerous and/or costly.

Bill Kaiser, Managing Director of ZapFutures, started as a runner at the Chicago Mercantile Exchange in 1968 and has an intimate understanding of the futures industry. ZapFutures is currently the largest electronic trading company with over one million contracts transmitted.