Draper, Fisher, mistaken

Draper, Fisher, mistaken

Financial backer of wannabe terminal disrupter says terminals will be disrupted

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Morgan Stanley is a backer of the bank-led chat project, Symphony, crafted to woo trader talk back to a channel the banks can control. And here’s a Morgan Stanley built theory of the terminal business: We view the evolution of the industry in three stages: Phase 1 (now to 2018): High-Cost, Bundled Products Prevalent: Historically, the network effect has been a gating factor that led participants in the market data terminals industry to keep their existing high-cost terminals. Legacy terminals have comprehensive functionality, so customers only need to purchase one main product. Counterparties purchase the same product, so that business can transact through the terminals (i.e. through chat). Learning of specific shortcuts enhances stickiness. Changes to workflow is typically disruptive, which leads to high retention rates. Examples include Bloomberg and TRI’s Eikon product. Some current products in the market contain full-functionality, but do not have the network effect (FDS, CapIQ). Customers requiring less frequent interaction with outside parties (i.e. trading) may choose to use these products. The cost of the products is often lower than the premium legacy products with network effects, but remains high given switching costs and bundling of the underlying products. Phase 2 (2017 – 2019): Facilitating Escape:

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