Hayley McDowell: How was your first year as CEO of Instinet, and what were your priorities for the business upon taking up the role?
Ralston Roberts, chief executive officer, Instinet
Ralston Roberts: I had the good fortune to join a legendary brand, with a unique global agency model franchise, in its fiftieth anniversary year. That’s pretty special. As you can imagine, my first few months were spent getting to know my team, meeting with as many of our major clients as possible, and doing a deep dive into the business.
These days we all happen to find ourselves in a pivot point in the financial markets – the industry is undergoing a major transformation that is impacting the market microstructure of many asset classes, and is changing the way the buy-side and sell-side do business.
The last year for us was a period of tremendous strategic reflection about the past and the future. We brought on board a new CTO, Minor Huffman, and we made a number of key strategic hires in areas of focus for us, such as Quantitative Analysis and Electronic Execution. We launched FX agency trading with our Newport FX desktop, and we rolled out BlockCross for EMEA trading. It’s been busy.
HM: In light of Instinet’s recent 50th anniversary, what impact has the institution had on the electronic trading industry?
RR: In 1969 Instinet gave birth to electronic trading, and over the last five decades, we’ve made it our mission to remain at the forefront of advancements that shape the financial markets. The firm started with a simple mission: To connect our clients to information, the markets and each other with greater transparency and efficiency through the use of advanced technology. That focus has meant that we’ve been a driver of positive change.
We created an array of now industry-standard technologies and the world’s first major electronic trading venue. Our founders envisioned a more efficient marketplace where everyone had access to the same market data, and could connect to other buyers and sellers directly. That was important, because it meant that investors could lower their cost of trading, find better prices, and put more of their capital to work where it really counts – in finding opportunities for investment performance.
This was a very revolutionary idea back in 1969 – of course today the entire marketplace has embraced these principles of efficiency, fair access and transparency.
HM: How has the agency-model brokerage space changed over the period, and what do you foresee for the future of agency brokers?
RR: There are not many agency-only firms anymore. Instinet remains true to its roots as one of the largest, global agency-model brokers. This client centric, “best execution-focused” model seems to actually be where market regulation and client appetite is going.
Removing potential conflicts of interest and providing clients with access to transparency and efficiency will, in our view, always be critical.
The consolidation that we’re seeing in the industry right now seems to be more about achieving scale and profitability, and right-sizing the competitive landscape. Broker lists continue to shrink, and clients are increasingly focused on firms that can demonstrate, in a data-driven way, their ability to deliver execution performance.
HM: In what ways have your clients adapted to the evolving execution landscape globally in light of regulatory and market structure changes?
RR: We’ve seen an increase in the consumption of quantitative data analytics, and in clients’ demand for and use of workflow automation and liquidity aggregation. The unbundling of execution commissions has meant that their focus on measurable quality has dramatically increased, along with their use of advanced electronic platforms.
HM: What are your core focuses for the business this year and beyond?
RR: Our fiscal year begins in April – so we’re currently in our fourth quarter of the 2019-2020 year. We’ve recently participated in the go-live of Paxos, the blockchain based settlement service. It’s another exciting first for Instinet and the marketplace.
We will continue to deliver advanced technology workflow solutions to both the buy- and sell-side, we’ll keep investing in next level quantitative analytics capabilities and execution quality consultation, and our work in expanding our capabilities into other asset classes will also continue.
And what’s fascinating is that the original mission we started with in 1969 continues to hold true for Instinet today: To connect our clients to information, the markets and each other with greater transparency and efficiency through the use of advanced technology.