Hayley McDowell: How did you come to be CEO at TradingScreen (TS) and what has been your strategy for the company so far?
Pierre Schroeder: I’m relatively new in my role, but I’ve been close to this industry throughout my entire career. I joined TS as chief executive in 2016 having been on the board eight years ago, and I have previously been both an investor and a customer. Before that I spent 20 years at Société Générale in various roles across capital markets and proprietary trading, but I was always closely involved with trading technology. I would say throughout my career I have managed the entire spectrum of the industry, including the buy-side, sell-side and trading technology.
Since joining TS in 2016, my focus has been building out a strategy that I’m convinced positions us for offering the trading system of the future. We are poised to make this year the best this company has ever had financially. I’ve worked hard on making sure that TS has shifted from delivering just products to actually delivering comprehensive workflow solutions to our clients, expanding our client base and embarking on distribution partnerships. We have recently built out our executive team and reorganised the management structure. TS has changed quite a bit over the last 18 months, but we believe we are the market leading multi-asset class order and execution management system (OEMS) provider. Our goal is to simplify the complexities of the market by automating the workflow of our clients – from pre-trade decision making, to execution routing and execution optimisation.
HM: How important is it to offer a multi-asset OEMS as a vendor?
PS: If you are not multi-asset as a vendor today, it will be difficult to sell your system to buy-side clients. There’s really no reason to settle for the equities-only system that has been so prevalent in the past. More than ever with MiFID II, best execution will encourage the electronification of markets and workflows, particularly in fixed income which is traditionally an over the counter (OTC) traded asset. We have also been in the foreign exchange (FX) space for a number of years and we have spun off this business as a separate subsidiary called BidFX, which provides an FX workflow OEMS – and that’s what the clients want in terms of their need for complete automation. The growth in that platform has been driven by the client need for automation and also for liquidity they cannot access from a number of our competitors.
As the trading desk continues to evolve, the EMS industry will have to produce an increasing number of tools allowing for compliant order generation, optimum liquidity discovery, best execution and post-trade analysis. EMS will become the buy-side trader’s control tower allowing them to navigate in a progressively complex environment, and I am certain that combination of OMS and EMS means there will no longer be an all-size-fits-all EMS solution. Our OEMS is one single platform and it’s great for hedge funds. We realised that in order to have the same EMS experience for asset managers, we needed to partner with SimCorp to develop the tool for those clients too. The future of EMS will be about integration with other specialist applications, analytics packages and making the system as seamless as possible for the client. It’s clear to me that systems and solutions that do not comprehensively cover all asset classes will go out of business. Technically speaking, we firmly believe the future of EMS will also be software as a service (SaaS), which is a space we have been in for a long time. Some firms don’t take advantage of the speed and low cost of implementation SaaS can offer.
HM: How have you developed your services for fixed income amid liquidity and data challenges?
PS: For fixed income, we have a substantial lead on our competition because we have been in that space since 2011. We developed TS FastPass which is really about our connectivity in that area. It connects buy-side participants through their OMS to brokers, dealers, platforms regardless of what OMS they currently use. We are really leveraging our fixed income expertise gained since 2011 with 19 years network and connectivity business. We are particularly bullish on the prospects and the impact of MiFID II for fixed income markets more than any other asset class. It will force a significant step in terms of transparency and easier client access to improve liquidity. That long standing lead in fixed income means we are uniquely positioned for the future. In the past the shortcoming of our solution was the frequently closed or heavily guarded access to liquidity pools, but this has changed under MiFID II.
We really provide everything for fixed income from the TS FastPass connectivity, OEMS and transaction cost analysis (TCA), to delivering a bond trading platform for the Singapore Exchange (SGX). Just as we saw years ago with equities and foreign exchange, fixed income is at a critical juncture where market participants need to connect to a plethora of new trading venues and data repositories not only to enable the buy-side access those liquidity pools, but also to meet best execution in Europe and the US.
HM: How have the first few months been under the new MiFID II regime?
PS: MiFID II is really about trading transparency and best execution for the investor community. Best execution has been the very DNA of TS’s flagship products since its inception in 2000 – finding and routing orders under that best execution principle from one single screen is the heart of our solution. It’s natively embedded in our workflow services so we are completely aligned with our clients’ obligations in that aspect. As for the 3 January deadline, our clients were ready to meet those requirements for all asset classes across 185 certified MiFID II broker FIX connections in 35 exchanges and destinations across Europe. So for us, it was simply business as usual. The only major technical challenge has been the recertification of the additional fields in the context of MiFID II.
There was clearly an increased demand for our services in the run-up to MiFID II. The rules are certainly a positive for our business and it has allowed us to sign a number of new clients and prospects. There might still be some firms out there expecting leniency from the regulators and it might be that the regulators will leave the industry a few months of flexibility before stricter compliance and enforcement. But certainly MiFID II has driven a boost in sales for TS and I believe it will continue to do so, with the next step in Switzerland where they will adopt their MiFID directive next year, external asset managers will have to do the exact same thing as in Europe – electronify their workflows.
HM: TS announced several major partnerships with a few companies last year. How important is it for vendors to work together?
PS: Partnerships are incredibly important for us to offer our clients, and those of our partners, the absolute best available solution for their specific workflow environment. As a vendor I believe you have to make a choice as to whether you do everything by yourself at the risk of being average across the business, or specialise and focus on your strength. That integration with other providers offers the best possible combination of products and services. The better the software integration the more efficient the solution becomes for the buy-side client, and our history is it about aggregating, connecting and integrating. It has been a major contributing factor in the past to aggregate and integrate with our products and that’s what we do with our partners.
There are two types of partnerships to consider – the distribution partnership and the integration of third-party applications. The two types may be different but the aim is always to improve the services and products for the buy-side. We will continue to pursue this route in all of our business lines and we remain an extremely open participant. I believe the partnerships not only extend our reach to a larger potential client base and improve our products, but they also allow us to focus on areas where we are strongest and provide the most value.
HM: What is the focus for TS in 2018?
PS: The focus is two-fold; to further the development of our new business lines that are derived from our core EMS, and international growth. On the new business line, rolling out the TS FastPass product consists of repurposing some technological aspects in a way that makes it user friendly. For BidFX, we have 30 people in that business line right now and we are planning to expand staff with client facing teams in London, Singapore and New York, as well as in Hong Kong, Mainland China, Tokyo and Sydney. We tripled the volume last year on the BidFX platform and we want to at least double that volume again this year. That’s a very ambitious business development plan we are undertaking right now.
On top of those, we will launch a new subsidiary developing a suite of three dedicated products addressing the specific needs of the wealth management sector – from external asset managers to relationship managers at private banks. Again we will leverage our traditional core business of aggregating positions which are for all brokers and all asset classes with a single user interface. In Switzerland, there are 3,000 external asset managers who will all need to comply with MiFID II, and we believe the easiest way to do that is to step away from the Excel spreadsheet and digitise those workflows.