1 - John Thain and Gerald PutnamCEO, NYSE Group ; President and Co-Chief Operating Officer, NYSE Group
Thain not ranked last year; Putnam, No. 11.
Putnam: “One of our goals is to get everything on a single platform.”
Six years ago John Thain’s firm, Goldman, Sachs & Co., helped raise money for Gerald Putnam’s upstart stock-trading platform, Archipelago. In 2003, Thain, now 50, left Goldman, where he had been co-president, to become CEO of the New York Stock Exchange; the following year Putnam, now 46, took Archipelago Holdings public. That set the stage for their two very different stock exchanges to come together in one historic entity: NYSE Group. Created last month, the publicly owned company combines Archipelago’s electronic market with the 213-year-old, formerly member-owned Big Board — the last of the world’s major stock exchanges to cling to face-to-face, floor-based auction trading. The merger, announced in April 2005, prompted Nasdaq Stock Market CEO Robert Greifeld (see No. 11) to bolster his electronic market’s technology by acquiring INET, Instinet Corp.'s electronic trading network. Under CEO Thain and technology chief Putnam, NYSE Group initially plans to offer a hybrid market, combining Archipelago’s automatic execution with elements of the Big Board’s vaunted human-to-human auction system. Eventually, the hybrid model is expected to be absorbed into Archipelago’s electronic platform, which will offer trading in bonds and derivatives as well as stocks. “We have to give our customers choices,” says Thain, who became a strong proponent of electronic trading toward the end of his 24 years at Goldman.
2 - Sanjay Gupta
Consumer and Small Business
e-Commerce/ATM Executive, Bank of America Corp.
Last year’s rank: 2
“When it comes to online banking, there is no finish line.”
Bank of America’s Internet numbers are mind-boggling: 14.7 million online subscribers, up from 12.4 million last year, representing nearly 35 percent of all U.S. online banking consumers; 7.3 million bill payers, up from 5.8 million in 2004, who settle 35.4 million bills monthly. At the helm of this online juggernaut and charged with generating even more growth is Sanjay Gupta, 37, who is in his fourth year as e-commerce chief at the
$1.25 trillion-in-assets Charlotte, North Carolina–based bank. Gupta is succeeding, signing up 120,000 new subscribers a month and adding educational content about secure online banking to allay consumer concerns and to further discourage paper statements, which are the source of more identity theft than online banking, he says. A new security system he introduced lets customers choose a unique image and pass code, which discourages phishing (sending phony e-mails to solicit private information) and spoofing (sending an e-mail from a source other than the one indicated). Clients also can aggregate data from accounts outside BofA — 401(k) balances and airline mileage totals, for example — on the same page as their checking account. Soon, Gupta says, the bank’s 16,600 ATMs will add online capability, “making the kiosk screen and Web site interchangeable.”
3 - Peggy White
GENERAL MANAGER, Yahoo! Finance
Not ranked last year
“One of our strengths is aggregating so much information in one place.”
Google’s entry into the financial news and data business had been long anticipated by Web watchers. So when the search engine superpower did a test launch of Google Finance last month, Peggy White, the general manager of the leader in Internet financial sites — Yahoo! Finance — was prepared for the coming battle. After working as general manager of Business Week Online for three years, White, 49, joined Yahoo! in October to help the Web navigator further penetrate a prized demographic segment: highly educated, affluent, mostly 35-to-54-year-old male investors and financial professionals. So far, says White, Yahoo! is “doing things right: We have more than 11 million unique viewers a month and about 46 percent of all page views in financial news.” Just before White arrived, Yahoo! added original content in the form of columnists, including author-actor-economist Ben Stein and aging-expert Dr. Kenneth Dychtwald. White plans to add more columnists, better charts, streaming quotes and tools that will allow smaller Web sites to access Yahoo! charts and other information. She also is arranging content deals with Dow Jones & Co., CNN Money and American City Business Journals, which will help those sites by driving traffic to them and help Yahoo! to compete against Google and others.
4 - Clyde Ostler
GROUP Executive Vice President and Head of INTERNET SERVICES, Wells Fargo & Co.
Not ranked last year
“The Internet is the ultimate relationship channel.”
Ten years ago San Francisco–based Wells Fargo & Co. was the first major U.S. bank to launch a Web service. “We haven’t looked back since,” says Clyde Ostler, 58, who returned last year as head of the bank’s Internet services group after a three-year stint in private client services. The bank’s online activity now surpasses that of its branches and phone centers; active online users rose 17 percent, to 7.2 million, in 2005. Bill payment customers jumped 41 percent, to 3.3 million, and small-business usage increased by 25 percent. “Fifty-six percent of all checking account holders are active users, and all could choose to go online on any given day,” says Ostler, who has shifted his attention from market penetration to increased usage. In February 2005 the bank introduced My Spending Report, a free electronic budgeting tool that resembles a stripped-down Quicken. It automatically aggregates a customer’s credit card, debit card and checking account transactions and organizes them by categories, such as groceries, ATM withdrawals and gas/auto. “Thirty-five percent of our households already use it regularly,” says Ostler. “But it is also useful to occasional users, especially at tax time.” Corporate customers benefited from Desktop Deposit, an Internet-based check-imaging service introduced in July that permits
“real-time, online deposits without a trip to the branch,” explains Ostler. For those customers who do visit a branch or an ATM kiosk, Wells Fargo’s entire ATM network is now Web-enabled. “Our physical channels are beginning to blend into our online channel,” says the banker. “The rate of innovation is definitely not slowing.”
5 - Steven Elterich
Chief INFORMATION Officer, Fidelity Investments
Last year’s rank: 4
“We are on a never-ending journey to provide excellent user experiences.”
It’s hard for a firm to be more virtual than Fidelity Investments, the $1.2 trillion mutual fund complex that handles approximately 1.3 million customer contacts a day over the Internet. “Ninety-five percent of our conventional trades are executed online, and 85 percent of our customer servicing is done through the Net,” says Steven Elterich, 56, an 18-year company veteran who became Fidelity’s technology chief last year after a brief stint as chief information officer of its corporate benefits outsourcing unit and five years as president of Fidelity EBusiness. Because Elterich wants users to “manage their accumulated web of financial links from one site,” customers now can access their Social Security accounts online through Fidelity, for example, and initiate direct deposit of benefits, whether the check goes to Fidelity or elsewhere. Planning and account management tools are being added, and Fidelity phone reps now collaborate online with customers in real time. “We can provide the power of a branch office in a customer’s home,” Elterich says. Late last year he introduced Fidelity Labs, a section of the Web site that solicits feedback from customers willing to test contemplated improvements. “It’s a vehicle for getting our ideas into our customers’ hands sooner,” he says.
6 - Kevin Kessinger
CHIEF OPERATIONS & TECHNOLOGY OFFICER, Citigroup
Not ranked last year
“We want to build commonalities, reduce complexity and strengthen information security.” In August, when Kevin Kessinger, Citibank’s president of consumer finance for North America, was tapped to head parent Citigroup’s technology operations, his mandate was clear: apply what he had learned managing the bank’s successful credit card business to leveraging technology throughout Citigroup’s far-flung empire. Kessinger, 52, got to work quickly. He gave clients of Citi’s brokerage offshoot, Smith Barney, access to their accounts through Citibank ATMs and financial centers. Acknowledging consumers’ concerns about security, he extended the Citi Identity Theft Solutions service beyond credit cards to more of Citi’s 200 million global customers and to its upward of 30 million online clients. He also earmarked for expansion CitiMobile, a highly secure retail banking application already available to the bank’s Australian and Japanese customers that allows them to use cell phones to locate ATMs and branches, check balances, transfer funds and pay bills. For institutions, Kessinger had Citi create a consolidated platform, TreasuryVision, that aggregates banking and asset data into a single Web site so that treasury management duties can be performed online. And to complement its 10 percent stakes in the Boston and Philadelphia Stock Exchanges, Citi said in January that it would build a trading platform on top of the OnTrade electronic communications network that it bought last year from Clearwater, Florida–based NexTrade Holdings.
7 - Peter Kight
CHAIRMAN AND CEO, CheckFree Corp.
Last year’s rank: 6
“We’re seeing the final shift away from paper-based processes and practices.”
It has been 25 years since Peter Kight, 49, staked out a corner of his grandmother’s basement to start an electronic bill-paying and fund transfer service. Fears of identity theft and online fraud kept customers away at first, but those who tried Kight’s service told him that once they hit the keys, “there was no turning back.” That support kept Kight going, and now Atlanta-based CheckFree Corp. is an international e-commerce leader that reported revenues of $215.9 million for its fiscal second quarter, ended December; net income of $33.8 million was up 160 percent over the year-earlier quarter. The business consists of an electronic commerce division, whose 270.7 million transactions in the quarter were up 9 percent year-over-year; a software division, whose revenue increased 23 percent year-over-year through sales of payment-related services to more than 600 banks; and an investment services division, which has more than 2.1 million portfolios under management, up from 1.7 million in December 2004. Coming next is an online managed-account platform that financial institutions can offer clients. “We’re committed to bringing down the cost of managed accounts,” Kight says. CheckFree’s share price has reflected its growth, rising 19.5 percent last year and adding a further 3.7 percent to close at $47.60 in mid-March.
8 - Joe Moglia
CEO, TD Ameritrade Holding Corp.
Last year’s rank: 10
“How well you do in a horrible market often determines your real strength.”
Late in 2004, Joe Moglia thought that after four years at Omaha-based discount broker Ameritrade Holding Corp. he might ease out of his CEO duties by the fall of 2005. Instead, he found himself rejecting a takeover offer from ETrade Financial Corp. in June. Immediately afterward he engineered Ameritrade’s purchase of the U.S. retail securities brokerage business of TD Waterhouse Group in a complex stock-and-cash transaction that gives Canada’s TD Bank Financial Group 32.6 percent of TD Ameritrade and ownership of Ameritrade’s Canadian brokerage operations. Moglia, 56, has decided to stick around and improve services for the traders, long-term investors and independent financial advisers who collectively maintain more than 6 million retail accounts at the firm. “A million companies will try to do different things,” he says. “Our entire future rests on doing a good job in just those three [client] areas. We are not trying to sell insurance.” TD Ameritrade plans to cut its branch network from 144 to 100, redeploy resources to remaining branches and possibly open new ones. In its first fiscal quarter, ended December 31, the company reported net income of $86 million, versus $93 million a year earlier.
9 - Mitchell Caplan
CEO, E*Trade Financial Corp.
Last year’s rank: 8
“The customer must understand that you are investing in functionality and innovative products.”
The E*Trade that opened a glitzy office on New York’s Madison Avenue in 2000 with facilities for day traders is not today’s E*Trade. “We were then about one thing — online trading,” says Mitchell Caplan, 48, who came to the company in 2001 after its acquisition of his Telebanc Financial Corp. and became CEO in 2003. “Today that accounts for 19 or 20 percent of our revenue. We are a business that focuses on the global retail customer and connects them to assets, cash and credit.” Both banking and investing have grown: The number of investing and trading accounts was up more than 20 percent last year, to 3.6 million, reflecting the acquisition of online trading firms Harrisdirect from BMO Financial Group in October and BrownCo from J.P. Morgan Chase & Co. in December (see Jane Wheeler, No. 27). Deposit and lending accounts were up by 6.2 percent, to 666,000. Net income last year was a record $430 million, while total client assets grew to $178.5 billion. “We leverage one global back office, and that helped us take margins from the low 20s to 43 percent last year,” says Caplan. Gone are Sun Solaris computers, replaced by smaller IBM machines running on Linux, saving $13 million. Also gone are businesses that didn’t fit the model, including an ATM network and a professional trading operation.
10 - Craig Donohue
CEO, Chicago Mercantile Exchange Holdings
Last year’s rank: 13
“Technology is beginning to replicate the full array of what human beings are capable of doing.”
As recently as 2003 the Chicago Mercantile Exchange was predominantly an open-outcry market. But each year the CME goes more and more electronic. In 2005, 70 percent of its volume — which exceeded 1 billion contracts per year for the first time — took place on its Globex electronic trading platform. That was up from 54 percent in 2004, the year that Craig Donohue, now 44 and an 18-year CME veteran, became CEO. “Our results last year — earnings were up 40 percent, to $307 million — were driven by volume growth of more than 20 percent in every product category, with 62 percent growth in electronic trading,” he says. The CME will continue to invest in Globex to improve the platform’s speed, functionality and reliability. Launched in 1992, Globex has been upgraded for the Web in recent years to fend off competition from Europe’s all-electronic Eurex and Euronext.liffe systems. Now it is being readied to handle additional electronic options products being developed by the CME. In February, Globex added an exclusive contract: futures on the CME snowfall index, which allows ski resorts, for instance, to hedge against a lack of snow.
11 - Robert Greifeld
President and CEO, Nasdaq Stock Market
Last year’s rank: 17
“Competing against the New York Stock Exchange has been our focus, is our focus and will be our focus.”
There has been one constant in Robert Greifeld’s almost three-year term as the Nasdaq Stock Market’s CEO: his fierce competition with the New York Stock Exchange. Now officially a stock exchange after a five-year approval process by the Securities and Exchange Commission, Nasdaq has stepped up efforts to woo Big Board companies, persuading Charles Schwab & Co. to list on Nasdaq exclusively and attracting the new Sears Holding Corp. In 2005, for the first time, Nasdaq took more listings from the NYSE on a market cap basis ($23 billion-plus) than vice versa ($5 billion). It has eroded the Big Board’s share of trading in its own issues, to 71.7 percent in January from 89.4 percent in 1978. A former executive vice president at SunGard Data Systems, Greifeld, 48, is rebuilding Nasdaq’s technological heart, combining the INET electronic communications network that came with December’s $1.88 billion acquisition of Instinet Group with Brut ECN, purchased from SunGard in 2004 for $190 million. “Our plan is to have the entire Nasdaq stock market running on the INET platform by December if not sooner,” he says. In March, jumping ahead of the newly public NYSE, Greifeld made a $4.2 billion cash bid for the London Stock Exchange. The LSE rejected the bid, which Nasdaq later dropped. But the U.S. exchange also said it may make a future offer.
12 - David Krell
PRESIDENT AND CEO, International Securities Exchange
Last year’s rank: 7
“Institutional investors are using options as an asset class more actively.”
David Krell likes to be first. In May 2000 he and several others, including E*Trade Group’s then-chairman, William Porter, launched the New York–based International Securities Exchange as the first all-electronic options market. Last March the ISE became the first securities exchange to sell shares in an initial public offering, netting $77 million. CEO Krell welcomed the capital infusion as well as the opportunity to meet potential customers and explain how the exchange went from a zero share of the options market at its start to 31.3 percent in February. Just 0.4 percentage points behind the Chicago Board Options Exchange that month, ISE is often the market-share leader. Its average daily trading volume climbed by 22.3 percent in 2005, and a record 4.6 million contracts traded in a single day in January. For 2005, revenue increased 16.4 percent, to $145.9 million, and net income rose 35.1 percent, to $35.3 million. Krell, 59, a former vice president of options and index products at the New York Stock Exchange, says revenue growth has come from “three i’s": institutions, indexes and international. A fourth “i,” information — in the form of historical market data that subscribers can use to back-test trading models — was introduced in January.
13 - Seth Merrin
CEO, Liquidnet Holdings
Last year’s rank: 9
“We’re fixing the country’s market structure.”
Celebrating its fifth anniversary, electronic block-trading network Liquidnet Holdings is rolling out an update: Liquidnet H2O. The new service will gather retail-size liquidity from direct-market-access aggregators, electronic communications networks, exchanges and agency brokers, and assemble blocks for Liquidnet’s buy-side client base. “This is a truly disruptive technology,” boasts Liquidnet founder Seth Merrin, using the lingo of techies to describe a radical innovation. The 45-year-old former Oppenheimer & Co. risk arbitrage trader developed the first order management system for buy-side firms 21 years ago. By aggregating small orders that usually go to the floor, Merrin says, H2O will function as a wholesaler, cutting trading costs and providing a better price for institutions and the originators of the small orders. Last year Liquidnet’s volume grew 53 percent, making it the tenth-biggest brokerage on the New York Stock Exchange and the 11th-biggest on Nasdaq. Yet Merrin insists the company has plenty of room to grow: Liquidnet’s average daily trading volume in 2005’s fourth quarter was 34.9 million shares, a 52 percent increase over the same quarter in 2004; the NYSE’s average daily volume in last year’s final quarter, meanwhile, was 1.7 billion shares.
14 - Jeff Maggioncalda
PRESIDENT AND CEO, Financial Engines
Last year’s rank: 15
“The retirement story is very big and getting bigger.”
With baby boomers quickly approaching a retirement fraught with financial uncertainty, it’s not surprising that Financial Engines, the Palo Alto, California–based advisory firm founded by Nobel Prize–winning economist William Sharpe, would triple the assets in its two-and-a-half-year-old Personal Asset Manager program last year. Using the company’s high-tech analytics to deliver financial counsel, the program enables participating plan sponsors to offer professional, personalized management of employees’ 401(k) investments. “In 2004 we had 17 retirement plan sponsors with 460,000 participants and $23 billion in plan assets, and we were managing a little over $1 billion,” says CEO Jeff Maggioncalda, a former McKinsey & Co. consultant who joined Financial Engines in 1996. “Today we’ve got 86 sponsors representing 1.3 million participants and $80 billion in plan assets, and we’re managing $3.7 billion.” Maggioncalda sees his main challenge as preparing Financial Engines for a “tidal wave” of inflows as more companies abandon defined benefit plans and become more receptive to having professional advisers help their employees make investment decisions. While gearing up for those inflows, Maggioncalda, 37, is working on retirement account disbursement products. “The past has been exciting, but the future will be more exciting,” he declares.
15 - James Toffey
President, Fixed Income, Equity & Retail Wealth Management, Thomson Financial
Last year’s rank: 16
“We’re working hard to provide even better value.”
While heading fixed-income trading at Credit Suisse First Boston in 1996 and 1997, Jim Toffey conceived of a Web site for bond trading. So in 1998, with the backing of a consortium of eight investment banks, he launched TradeWeb, which soon was handling a full range of fixed-income and derivatives products. In May 2004, Toffey sold the Jersey City, New Jersey–based company to Thomson Corp. for $385 million in cash and $145 million in potential performance earn-outs. TradeWeb posted record results in 2005: volume of $42.8 trillion, up 63 percent from 2004’s, including a 14 percent gain in trading of U.S. Treasuries and agencies. Last year it launched marketplaces in dollar and euro interest rate swaps, U.S. triparty repurchase agreements and a global credit default swaps index. In March, just six months after adding interest rate swaps to its U.S. platform, TradeWeb said it would integrate its service with SwapsWire (see Chip Carver, No. 39). That allows customers and dealers trading interest rate derivatives on TradeWeb to benefit from straight-through processing if they confirm the transactions electronically on SwapsWire. “Reducing operational risk is a big driver in having the market go electronic,” notes Toffey, 44, who now also heads Thomson Financial’s equity and retail wealth management businesses.
16 - Kenneth McBride
GLOBAL INDUSTRY MANAGER, SECURITIES AND CAPITAL MARKETS, Microsoft Corp.
Last year’s rank: 12
“Firms must build collaborative work-flow solutions on top of an agile infrastructure.”
Not so many years ago, few Microsoft programs other than the ubiquitous Office were used on Wall Street. Today investment banks run whole businesses built around Microsoft’s Windows and its SQL Server database. Serendipitous acquisitions explain part of this breakthrough: Citigroup purchased New York–based direct-market-access firm Lava Trading in 2004; that same year Bank of America Corp. bought Dallas-based Direct Access Financial Corp.; and Lehman Brothers acquired Chicago-based trading software developer Townsend Analytics late last year. All these investment bank tech offshoots rely on Microsoft programs. Kenneth McBride, 42, a Scotsman and former foreign exchange trader who heads the software giant’s Wall Street business, says its market position “just gets better.” He notes that major financial enterprises, including Citigroup, Credit Suisse and Nasdaq, use Microsoft-equipped servers to surpass the performance of mainframe computers and proprietary technology. Citi, for example, worked with Microsoft to create a corporate treasury tool called Treasury Vision (see Kevin Kessinger, No. 6), landing PepsiCo as its first customer. “Enhancing productivity and the overall customer experience is the key to staying ahead,” says McBride, who notes that Microsoft’s .NET Web services platform enables firms to move online quickly. “We’re now playing in the major leagues.”
17 - Mortimer (Tim) Buckley
Managing Director of Information Technology, Vanguard Group
Last year’s rank: 14
“We plan to use our online presence to accentuate the talents of our crew.”
Many firms hope their Web sites will discourage clients from phoning; Vanguard Group invites the calls. “We want to create a rich, interactive environment to help our shareholders manage their investments and collaborate with our crew,” says Mortimer (Tim) Buckley, a 12-year Vanguard veteran and CIO since October 2001. The Valley Forge, Pennsylvania–based mutual fund firm is in the process of adding a voice over Internet protocol click-to-talk feature on its Web site that will enable Vanguard’s 3.3 million registered users to hold audio conferences with reps who will be viewing the same screen. In September, Vanguard added new retirement planning tools to the site, including interactive features that help clients estimate required minimum distributions and determine optimum withdrawal strategies. By enriching the site and moving routine transactions to the Web, Vanguard has “freed hundreds of crew members to provide more value-added services,” says Buckley, 36, adding that 55 percent of Vanguard’s current shareholders opened their accounts on the site, which records more than 550,000 log-ons a day and handles 60 percent of all transactions. He says that as clients become more self-sufficient, reps can spend less time answering account-balance or share-price questions and more time helping investors reach their goals.
18 - David Rutter
CEO, ICAP Electronic Broking for the Americas and Asia
Last year’s rank: 19
“We’re an industrial strength OTC exchange with a lot of infrastructure.”
Attesting to the decline of voice broking in fixed-income and derivatives markets, ICAP Electronic Broking for the Americas and Asia, the London-based interdealer-broker, conducted half of its $1 trillion in transactions electronically last year, a 32 percent increase over the level of 2004. ICAP subsidiary BrokerTec, the electronic fixed-income trading platform that was acquired from a 14-bank consortium in 2003, was responsible for much of that gain. Last year Jersey City, New Jersey–based ICAP Electronic Broking, which runs BrokerTec, increased its market share of trading in benchmark Treasury issues by 5 percentage points, to 60 percent; its average daily volume increased 37 percent, from $146 billion in 2004 to $200 billion. But the biggest story last year was mortgages, says ICAP CEO David Rutter, 43, who took over the firm two years ago after serving as a consultant to ICAP’s Garban Capital Markets unit. In electronic trading of to-be-announced mortgage pass-throughs, ICAP increased its market share from 3 percent in 2004 to 16 percent in 2005. “When you get critical mass at the inflection point, your growth rate accelerates exponentially,” says Rutter, whose firm has captured 45 to 50 percent of the repurchase market, averaging $185 billion in transactions per day. It also boasts 40 percent of the agency market, in which it is the only electronic broker. ICAP ducked a threat to its market clout recently: In February a Delaware court ruled that a patent infringement claim filed by rival ESpeed (see Howard Lutnick, No. 26) was invalid and that ICAP would not face liability for damages.
19 - Tao Huang
Chief Operating Officer, Morningstar
Not ranked last year
“To succeed in the information age, all companies must fully harness technology.”
Responsible for Morningstar’s corporate strategy and day-to-day operations, COO Tao Huang had his plate full even before being tapped to lead the team integrating Ibbotson Associates, the Chicago-based investment research and education firm that Morningstar bought in December. The $83 million acquisition will enable Morningstar.com to offer its 3.6 million registered users asset allocation data as well as proprietary research on 125,000 investment options. Adding Ibbotson’s $3.5 billion in assets under management for retirement plan participants will make Morningstar one of the nation’s largest independent providers of managed retirement accounts. “Our mission is to create great products that help investors reach their financial goals,” says Huang, 43, who emigrated to the U.S. in 1987 after working as a computer programmer in China. Huang joined Morningstar in 1990 as a software developer, was promoted to chief technology officer in 1996 and, after heading international operations, assumed his current duties six years ago. He is responsible for Web platforms for the company’s three markets: individual investors, financial advisers and institutions. “Because we are an information company, it goes without saying that technology will drive our business,” says Huang, who last year added hedge fund databases to his firm’s online offerings, among other upgrades.
20 - Gideon Sasson
Executive Vice President and CIO, Charles Schwab Corp.
Last year’s rank: 22
“We are using technology to personalize the client-firm relationship.”
Stepping into his company’s top technology position in July 2004 when chairman Charles Schwab replaced David Pottruck as CEO, Gideon Sasson wasted no time implementing cost cuts, efficiency improvements and greater profitability. “Our business model has completely changed,” says Sasson, 50, who formerly ran Schwab’s active trader business. “We now assign our financial consultants specific clients — double or more the number than at traditional full-commission brokerages. The only way to achieve that kind of efficiency and serve clients well is through technology.” Schwab invests $100 million a year in tech maintenance, enhancements and new applications, Sasson says, and last year introduced Client Central, a new desktop application that allows reps to view the complete client relationship and alerts them to call clients when, for example, a bond matures or there is a dramatic move in a particular security. Sasson says Schwab’s technology investments have enabled the firm to cut its operational expenses by 28 percent in the past 18 months even as greater demands are being placed on its system. Roughly 90 percent of its 225,000 daily average trades are now executed online, compared with 80 percent of 178,000 trades in 2004.
21 - Simon Wilson-Taylor
Global Head of Global Link, State Street Corp.
Last year’s ranking: 21
“We’ve become a mature, successful business, but we try to retain the entrepreneurial flair.”
When Global Link, the e-finance unit of Boston financial services giant State Street Corp., launched the FX Connect foreign currency trading service in 1996, probably few of its fund manager clients imagined that one day many banks would be vying for their business electronically. Today, 75 percent of the world’s professionally managed assets are connected to the FX Connect multibank platform, through which average daily turnover hit a record $45 billion last year, up from $30 billion in 2004. “We’re almost running out of clients to go after,” says Simon Wilson-Taylor, 49, who has been running Global Link, conceived as a value-added data provider, since 1999. Outside of forex, Global Link updated its five-year-old Fund Connect platform last spring, making it easier for corporate customers to repatriate overseas profits into dollar-denominated index funds. A comprehensive overhaul of equity trading products in late 2004 brought crossing, direct market access and FIX connectivity together under the Equity Connect brand; trading volume there is up significantly, and more upgrades are due in 2007. Wilson-Taylor also envisions new platforms designed for high-frequency traders. “There’s a lot more we can do in the hedge fund sector,” he says.
22 - Richard McVey
Chairman and CEO, MarketAxess Holdings
Rank last year: 18
“Our goal is to create a truly global standard for trading credit products online.”
MarketAxess Holdings more than held its own in a high-grade corporate bond market whose volume plunged 19 percent last year. The New York–based operator of an electronic trading platform for U.S. and European high grades and emerging-markets bonds increased its revenue from $75.8 million in 2004 to $78.6 million. MarketAxess “defended its turf,” declares CEO Richard McVey. The firm boosted its U.S. high-grade trading as a percentage of NASD TRACE (trade reporting and compliance engine) volume from 6.4 percent in 2004 to 7.6 percent last year. Facing fresh competition from TradeWeb, Thomson Corp.'s multidealer-to-client Treasury platform, which has expanded into high-grade corporates and derivatives (see James Toffey, No. 15), MarketAxess in September beat its rival by a month in launching a client-to-multidealer electronic trading system for credit default swap indexes. It added 118 institutional investors as clients, along with three dealers, bringing the totals to 657 and 25, respectively. “We also made our fees more accounting-friendly by adding them to every trade rather than billing monthly,” says McVey, 46, who headed fixed-income sales at J.P. Morgan Chase & Co. before helping to create MarketAxess in 2001.
23 - Thomas Peterffy
Chairman, Interactive Brokers
Last year’s rank: 30
“We can prevail in a continuing price war in our industry.”
Thomas Peterffy is an efficiency junkie. The 61-year-old founder and chairman of Interactive Brokers, a Greenwich, Connecticut–based online brokerage that serves institutions and wealthy individuals, insists that markets, though they may be more efficient than ever, fall short of their potential. “There’s still more need for liquidity, sophisticated dynamic-order routing, long and short position financing and direct access to some foreign markets,” he says. That view might surprise the firm’s clients, who can open an account in any of eight major currencies and trade international and domestic equities, options, futures and currencies. Peterffy, who emigrated to the U.S. from Hungary in 1965, founded Interactive’s predecessor, electronic trading firm Timber Hill Group, in 1982. Today, Interactive handles 500,000 transactions daily, on average, a 25 percent increase from the 2004 level. The firm has an especially high volume of options and futures trades. With its 500-strong workforce concentrated in Greenwich but also spread among offices in Chicago; Hong Kong; London; Montreal; Sydney, Australia; and Zug, Switzerland, the firm generated revenue of more than $2 million per employee last year — more than $1 billion in all — half of which represented pretax profits. Productivity, says Peterffy, who owns 84 percent of Interactive, is the reason it will continue to win the brokerage price war.
24 - James Hale III and Robert Huret
Managing Partners, FTVentures
Last year’s rank: 25
Huret: “We like to find a company before someone brings that company to us.”
Even during the information technology bust, San Francisco private equity firm FTVentures was busy building momentum. In fact, Robert Huret, 61, and James Hale, 54, both alumni of Montgomery Securities, were so disciplined in their approach to the financial technology industry that it took them until 2004 — six years after they founded their firm — to place their first $200 million. Huret attributes FTVentures’ longevity to its limited partners, 38 of the world’s biggest financial institutions — including Citigroup, Credit Suisse and ING Group — that not only invested $623 million in the firm’s two funds but also provide a rich perspective on the technologies they may implement themselves. In 2005 that input helped bring telecommunications cost management company ProfitLine and marketing research firm Global Market Insite into the portfolio. U.K.-based mutual fund company Amvescap’s recent decision to acquire PowerShares Capital Management for as much as $730 million could turn FTVentures’ year-old $10 million stake in the Wheaton, Illinois, exchange-traded-funds provider into a bonanza. Recently, Hale has focused on exit strategies. “The market is very attractive, strategic investors whose stocks have been bullied are back, and there’s an extraordinary amount of money at larger private equity funds,” he says. “The buyers are there.”
25 - Sunil Hirani
CEO, Creditex
Last year’s rank: 27
“We’ve had phenomenal impact on the European credit derivatives market.”
A tripling of volume and a $60 million capital infusion from Boston-based private equity investor TA Associates were among last year’s big events at Creditex, the first electronic trading platform for credit derivatives. The New York–based company, headed by co-founder Sunil Hirani, 39, a software engineer and former Deutsche Bank derivatives executive, is riding the boom in the credit default swaps market, where the notional value of trading hit $12.43 trillion in the first half of 2005, up almost 48 percent from the $8.42 trillion traded six months earlier and 128 percent above the $5.44 trillion traded in the first half of 2004. Last March, Creditex and Markit Group, in cooperation with seven major dealers, launched a weekly tradable CDS credit fixing in London intended as a global benchmark and settlement rate. In June the two companies conducted Europe’s first electronic auction to determine cash settlement prices for defaulted bonds. Hirani is also a tireless advocate of straight-through processing as a means to reduce operational risk and transaction costs. To facilitate STP for firms that don’t use his platform, Hirani spun off T-Zero, Creditex’s electronic trade-processing engine, last summer “to process trades for anyone and everyone.”
26 - Howard Lutnick
Chairman and CEO, ESpeed
Last year’s rank: 26
“Treasury market volume should double by 2008.”
The return of the 30-year U.S. Treasury bond in February after a four-and-a-half-year hiatus should be good news for ESpeed and Howard Lutnick, 44. Spun off in 1999 from interdealer brokerage Cantor Fitzgerald, which Lutnick also heads, ESpeed quickly came to dominate the electronic fixed-income trading marketplace — and the long bond in particular. But the September 11, 2001, World Trade Center attacks, in which Cantor and ESpeed lost nearly 700 employees, along with competition from ICAP (see David Rutter, No. 18), have eroded its supremacy. Net income in 2005 was $2 million on revenues of $152.9 million, down from net of $25.9 million on revenues of $166.5 million in 2004. Lutnick notes, however, that ESpeed’s trading volume is rising at a healthy rate and that a revenue-sharing arrangement with BGC Partners, Cantor’s voice brokerage subsidiary, is likely to become more lucrative as online trading grows. ESpeed’s $14 million acquisition of London-based electronic-platform developer ITSEcco Holdings in 2004 has increased volume at its nascent futures business. And though ESpeed’s $301 million bid for European bond trading platform MTS Group was rebuffed in July, Lutnick looks on the bright side, saying that the months (and $2.1 million) spent pursuing the deal enhanced ESpeed’s relationships with European customers.
27 - Jane Wheeler
Senior Managing Director, Evercore Partners
Last year’s rank: 24
“I try to position a company and articulate the story it wants to tell potential investors.”
In July, just a few weeks after joining Evercore Partners, a New York–based boutique advisory and private equity firm, from Morgan Stanley, Jane Wheeler counseled E*Trade Financial Corp. (see Mitchell Caplan, No. 9) on both its $700 million purchase of rival Harrisdirect and its $1.6 billion acquisition of BrownCo, J.P. Morgan Chase & Co.'s online brokerage service. A few months later she advised Hotspot FX, a Watchung, New Jersey–based firm that operates an electronic foreign exchange trade execution platform, on its $77.5 million acquisition by Jersey City, New Jersey–based Knight Capital Group. At Morgan Stanley, where she pioneered a financial technology investment banking effort, Wheeler, 37, advised the International Securities Exchange (see David Krell, No. 12) and the IntercontinentalExchange (see Jeffrey Sprecher, No. 29) on their IPOs, valued at $542 million and $416 million, respectively; SunGard Data Systems on its $11.4 billion LBO, then the second-largest in history; and Reuters on its $1.9 billion sale of Instinet Group to the Nasdaq Stock Market (see Robert Greifeld, No. 11). Wheeler says she feels a special connection to the financial technology sector — where she seems to know everyone — but defines her niche as nothing less than global financial services. “Technology will continue to reshape financial services,” she contends
28 - Satish Nandapurkar
CEO, Eurex US
Last year’s rank: 20
“Bringing the first users to the table is hard and painful, but once you hit the inflection point, there’s a lot of upside.”
Derivatives trading boomed in 2005, but not at Eurex US. Volume at the Chicago-based American unit of Swiss-German derivatives exchange Eurex fell from 6.2 million contracts in 2004 to 2.2 million, despite the introduction in September of futures trading in currencies and equity indexes What happened? Trading volume in the all-electronic exchange’s U.S. Treasury futures contracts — launched in February 2004 to grab market share away from the Chicago Board of Trade and the Chicago Mercantile Exchange — simply evaporated as those markets thwarted the incursion. Eurex US CEO Satish Nandapurkar, 42, a former CME e-business executive, insists that the new forex and stock index futures, combined with Eurex US’s overseas ties, will rescue it from the trading drought. “European volumes into the U.S. just exploded last year,” he says. “The market is here, the customers are there, so it’s just a matter of linking them together.” Nandapurkar says Eurex US’s recently broadened forex product line now includes seven U.S. dollar pairs and 11 cross-currency swaps, all popular with Europeans. “We’re continuing to increase the number of participants and build liquidity,” he says. “We’re not at a critical mass yet.”
29 - Jeffrey Sprecher
Chairman and CEO, IntercontinentalExchange
Not ranked last year
“Energy product trading volume went through the roof last year; we see it accelerating.”
Jeffrey Sprecher has attained his goal of creating an all-electronic marketplace for the trading of energy futures and physical products. His IntercontinentalExchange, based in Atlanta and founded in 2000 to bring electronic exchange trading to the over-the-counter physical energy market, bought the International Petroleum Exchange, an open-outcry market in London, in 2001 as an entrŽe into futures. Electronic futures trading was introduced at the IPE (now ICE Futures) in 2004, and since then Sprecher, 51, has encouraged the migration of trading from the floor. By last April the transition was complete and ICE closed its floor, making electronic trading the rule in futures and physicals. In November, ICE went public on the New York Stock Exchange at $26 a share. The stock closed in mid-March at $69.29. In February, ICE reported that average daily trading commissions in its OTC segment rose 73.2 percent for the month, to a record $421,205, while average daily futures volume increased 81.8 percent, to a record 255,396 contracts. Despite the boom, Sprecher believes “we’re in the early stages of a shift in asset allocation” toward commodities.
30 - Robert Slaymaker
CEO, BondDesk Group
Last year’s rank: 32
“Customers are asking for new compliance tools.”
When Robert Slaymaker, 54, became CEO of BondDesk Group in December 2004, his goal was to make the nation’s largest retail fixed-income online trading platform “more client-focused.” The 30-year bond veteran quickly reorganized management and added several positions he calls “client-facing,” increasing staff by 30 percent, to 130 professionals. The result: Revenue at the Mill Valley, California–based firm, owned by a consortium of 14 brokerages, catapulted 50 percent last year, and operating income more than doubled. Nearly 20,000 transactions now take place through BondDesk every day, 43 percent more than did a year ago. Brokers and advisers at more than 90 retail brokerage firms access the service on a typical day, viewing about 26,000 bids and offers. Committed to giving retail advisers easy online access to institutional markets and information, Slaymaker hopes to make retail fixed-income trading so manageable that clients will actually trade more often. To that end, BondDesk last year launched MarketView & Trade Monitor System, an electronic tool kit created to promote best execution by automatically alerting a firm if its customers’ trades are out of line with prevailing market prices. Slaymaker says his firm developed the product “by listening to our clients’ most pressing regulatory concerns.”
31 - David Gershon
CEO, SuperDerivatives
Last year’s rank: 36
“We have the potential to change the financial world.”
In 1997, David Gershon concluded that the foundation of modern options pricing — the Nobel Prize–inspiring Black-Scholes model — was wrong. As head of trading in exotic currency options at Barclays Capital in London, Gershon, who holds a Ph.D. in physics (emphasis: superstring theory) from Tel Aviv University, developed an alternative model based on his trading experience. He left the firm in 2000 and started New York–based SuperDerivatives with the aim of bringing greater transparency to options pricing. “Our model is based on real prices rather than on theoretical values and is constantly updated,” says Gershon, 40. His firm’s Web site — which he calls “a Bloomberg for options” — is an online data portal for the currency options market and has become that market’s de facto benchmark. In October, SuperDerivatives launched a real-time commodity option-pricing platform linked to its existing service so that users can price commodity options in any currency. Gershon contends that efficiently priced commodity options will help not only traders but also society at large. “If options on petroleum had been more transparent, for example, companies could have protected themselves and their customers better” against rising prices, he says. “Futures are a lousy hedge.”
32 - Randolph Altschuler and Joseph Sigelman
Co-CEOs, OfficeTiger
Last year’s rank: 35
Altschuler: “We want people to come to us because we’re better.”
Since former investment bankers Randolph Altschuler and Joseph Sigelman, both 35, launched OfficeTiger in 1999, the company has doubled revenue every year — reaching $100 million in 2005. It sells “judgment-driven professional services,” in the words of Madras, India–based Sigelman, a Harvard MBA like his co-CEO, Altschuler. For its investment banking clients, OfficeTiger performs financial analytics, creates pitch books and performs other desktop publishing jobs. Last year, fueled by a $52 million investment from venture capital fund Francisco Partners, OfficeTiger expanded its workforce by more than 50 percent, to 3,800 — 550 of whom are in the U.S. (most in New York, where Altschuler is based, and a growing number in Salt Lake City), 300 in Europe and the remainder in India, Sri Lanka and the Philippines. Over time Sigelman wants OfficeTiger to be known not only as an inexpensive, efficient alternative to in-house work but also as a provider of expert knowledge and superior processes. Late last year OfficeTiger purchased MortgageRamp from General Motors Acceptance Corp., giving it entrŽe into the real estate securities market, a base near Atlanta and an anticipated 35 percent sales boost. In March, Chicago-based printer RR Donnelley & Sons Co. said it would acquire OfficeTiger for $250 million.
33 - Susan Peters
CEO, ESecLending
Last year’s rank: 38
“We’ll continue to lead the way in providing the most electronically enhanced features possible.”
When institutional investors want to lend securities, more and more are turning to ESecLending for an online auction rather than automatically turning to their customary custodians. Founded in 2000 and majority-owned by U.K. insurer Old Mutual, the company auctioned 240 billion in assets last year, a 47 percent jump from 2004’s total. More than 15 institutions use the firm, including multinational portfolio manager Russell Investment Group, with $2.3 trillion in assets; mutual fund manager Janus Capital Group, with $148.5 billion in assets; and the $194 billion California Public Employees’ Retirement System, ESecLending’s founding client. “We bring investment management discipline and techniques, including risk modeling and benchmarking, to securities lending,” explains CEO Susan Peters, 54, who joined the Boston-based enterprise in 2001 from Credit Suisse First Boston. Her goal is to combine the advantages of traditional custodial arrangements, such as comprehensive program administration, independent oversight of borrowers and indemnification insurance, with the premium returns and guaranteed revenues typical of principal-borrower structures. International expansion is on the way: “We’re looking at new markets all the time,” she says. In March, Boston-based private equity firm TA Associates said it would buy ESecLending and expand growth by “facilitating commercial introductions.”
34 - Steven McLaughlin
Technology Partners
Not ranked last year
“We’re good at getting high valuations for our clients.”
When early investors in Liquidnet Holdings were looking to cash out a portion of their investment in the buy-side block-trading network, its CEO, Seth Merrin (see No. 13), called on San Francisco–based Financial Technology Partners rather than Merrill Lynch & Co., even though Merrill had been Liquidnet’s placement agent on a previous financing. FTP founder and managing partner Steven McLaughlin arranged for Summit Partners and Technology Crossover Ventures to buy a minority stake in Liquidnet in February for $250 million. McLaughlin, 37, boasts that it is “the highest price that venture capital firms have ever paid for a minority stake in a technology company.” Just the month before, McLaughlin had advised New York–based equity trading company Investment Technology Group on its $230 million acquisition of Macgregor Group, a Boston-based provider of trade order management systems. The FTP founder, who has an MBA from the University of Pennsylvania’s Wharton School, recalls that when he joined Goldman, Sachs & Co.'s financial services mergers and acquisitions group in 1994, “there was no such thing as financial technology.” He went on to co-head a Goldman group created to focus on that very business but went out on his own in 2002. McLaughlin says his firm “prides itself on getting involved in complex situations.”
35 - Alfred Berkeley
Chairman and CEO, Pipeline Trading Systems
Not ranked last year
“We’ve constructed a different set of parameters, simplifying the rules of engagement.”
Pipeline Trading Systems CEO Alfred Berkeley describes today’s market environment as a war in which predatory traders game the system and cost investors about $45 billion a year. Berkeley, who was president of the Nasdaq Stock Market for seven years and joined Pipeline in September 2004 at the time it fully deployed its electronic block-trading system, says the platform prevents gaming by affording participants total anonymity. In contrast to competitor Liquidnet Holdings (see Seth Merrin, No. 13), which serves only the buy side, Berkeley, 61, says, “everyone is welcome in Pipeline,” noting that more than 300 brokerage firms and money managers use the system. In last year’s fourth quarter, daily trading volume averaged 13.1 million shares, five times the level of the year-earlier period; a record 26.6 million shares traded on a single day in March. Pipeline president Fred Federspiel, a nuclear physicist, developed the platform as a Nasdaq subsidiary and spun it off in 1999. Today investors Venrock Associates, Meritage Private Equity Funds and Global Internet Ventures as well as key employees control Pipeline, with Nasdaq retaining a minority stake. Berkeley says that although Pipeline is “almost impossible to game now, we’re making it even more tricky and expensive for people probing the market to tease out information.”
36 - Lance Boxer
CEO, IPC Information Systems
Last year’s rank: 39
“Traders still depend on human emotion and voice.”
If algorithmic trading is replacing people with processors, it’s news to IPC Information Systems CEO Lance Boxer, 51. Approaching his third anniversary as head of the company, which is the leading supplier of voice over Internet protocol trading-room consoles, the former chief information officer of telephone company MCI says IPC’s market share is growing by 2 percent a year. “Nearly 30 percent of our customers now use VoIP on the trading floor,” he says. This year IPC installed its 30,000th VoIP turret as part of a new trading floor for Wachovia Corp. in New York. Competing against U.K. phone giant BT and France TŽlŽcom’s Etrali around the world, IPC opened offices in Paris and Kuala Lumpur, Malaysia, last year. In March it introduced an ergonomically redesigned VoIP trading desktop that provides improved audio and video characteristics as well as a TiVo-style function allowing a trader to play back the last 30 seconds from any channel, yet is more compact than the model it replaces. In five years, predicts Boxer, IPC turrets will be even more integrated into the desktop, will be connected to more feeds and will offer more connectivity through Bluetooth and USB ports.
37 - Thomas Ricketts
CEO, Incapital
Last year’s rank: 37
“We are committed to creating products that empower individual investors.”
The inversion of the U.S. yield curve in 2005 pummeled Incapital’s core product — small-denomination corporate bonds sold through retail brokers. Sales of the five-year-old Chicago-based firm’s electronically distributed InterNotes fell to $7 billion, from $11 billion in 2004. But CEO Thomas Ricketts, 40, addressed the challenge by concentrating on new products. One was the basic structured income certificate, or Basic, introduced in May, which allows investors to buy into an exchange-listed package of 11 investment-grade corporate bonds in increments of $1,000. Another, introduced in December, is the community investment note program created in conjunction with the Calvert Foundation, in which investments can be made in $1,000 increments in below-market-rate notes, the proceeds of which are lent to nonprofit groups and entrepreneurs around the world. The company’s EuroInterNote program expanded to Belgium, Dubai, France and Spain in 2005, but the biggest international initiative was January’s launch of a United Mexican States InterNote program, through which unsecured, triple-B-rated medium-term notes are sold to U.S. individual investors. “We now account for 52 percent of the corporate bonds distributed through the retail platform,” says Ricketts, who plans to broaden his structured note offerings until a more typical yield curve returns.
38 - David Eisner
President and CEO, TheMarkets.com
Last year’s rank: 40
“We start with the idea that clients know better.”
Start with the Web, apply two aphorisms — knowledge is power, and time is money — and you have TheMarkets.com’s business plan. The five-year-old venture gives buy-siders one-stop access to research and data from TheMarkets’ 11 owner-members — which include Citigroup, Goldman Sachs Group, Lehman Brothers and Merrill Lynch & Co. — plus research from more than 850 contributors covering 16,000 companies worldwide. “Users have told us that, on average, they save nearly three hours a week using TheMarkets.com, which is up from 2.5 hours a year ago,” says president and CEO David Eisner, 48, a former Jefferies Group executive. TheMarkets added 200 customers last year, bringing the total to 1,200 in 36 countries. Its client roster has 25 of the top 35 hedge funds, half of the top 50 asset managers in Europe and nearly two thirds of the top 100 asset managers in the U.S. Eisner says 2005 was the firm’s third consecutive year of triple-digit revenue growth. He attributes that to greater sales to existing clients. Last year TheMarkets added fixed-income and derivatives research, proprietary content from broker-members and a section dedicated solely to Securities and Exchange Commission filings. “At least one major research house” is considering becoming a member, Eisner confides.
39 - Chip Carver
CEO, SwapsWire
Not ranked last year
“We’ve helped the OTC market manage its rapid growth.”
As a result of an arrangement completed in March, clients of TradeWeb (see James Toffey, No. 15) can now seamlessly confirm their interest rate derivatives trades on SwapsWire. Coming after a similar deal with Bloomberg SwapTrader in December, the linkages further cement Chip Carver’s view of his company as a “funnel from increasingly important electronic platforms to market participants.” SwapsWire, which supports trade capture, broker confirmation and counterparty confirmation for multiple OTC derivatives and is backed by a consortium of 22 derivatives dealers, now boasts a network of 28 dealers, more than 30 brokerages and 40 buy-side clients. SwapsWire says it handled more than 50,000 transactions in February, almost double the level of a year ago. Carver, 46, says he plans to keep adding features to encourage system usage, such as the well-received assignment and confirmation functionality launched in October that supports the International Swaps and Derivatives Association’s protocol for processing novations, or arrangements to transfer derivatives positions before maturity.
40 - Tony Berkman
Co-founder and Director OF RESEARCH, Majestic Research
Not ranked last year
“Our goal is to enable clients to make more-informed investment decisions by making companies more transparent.”
On his way to starting a hedge fund three years ago, Majestic Research’s co-founder Tony Berkman decided “it would be better to sell shovels to the gold diggers” than dig for gold himself. Today the former chief risk officer at hedge fund manager Tower Capital and director of research at the Zweig Fund, who holds a master’s degree in computational finance from Carnegie Mellon University, works for gold-seeking clients, including many hedge funds, by gathering staggering loads of information and selling the distilled message. New York–based Majestic mines data gained through license agreements with firms that gather competitive intelligence and from terabytes of behavioral and transactional data posted on the Internet, based on the actions of millions of consumers and companies. Once crunched through Berkman’s models, the data can reveal a company’s performance in real time. “It’s like channel checks on steroids,” says Berkman, 39, whose findings generate accurate sales figures in the retail auto, casino and leisure, consumer technology, financial services, homebuilding, Internet and pharmaceuticals sectors. Majestic president and CEO Doug Atkin, who formerly led the electronic trading platform Instinet, says he intends the firm to have the impact on equity research that Instinet did in equity trading.
