Technology continues to transform the financial services industry, with recent innovations rendering obsolete things that were once considered essential. Take deposit slips, for instance. Bank of America Corp. customers no longer need them when transacting business at most of the bank's 17,000 ATMs; they merely enter their personal identification numbers, slide their endorsed checks into a feeder and receive a scanned image of the deposit for their records. BofA's new slipless deposit approach has been a hit with customers, says Sanjay Gupta, who oversees consumer and small-business e-commerce for BofA and is ranked third in this year's Online Finance 40, our eighth annual compilation of the most influential e-finance executives.
Even more dramatic is the extinction of exchange floor traders. That hasn't happened yet, but it seems inevitable. CME Group reports that 75 percent of its trades are executed electronically. CEO Craig Donohue, who tops this year's Online 40, expects that figure to go even higher. At NYSE Euronext 92 percent of trades are executed electronically, according to president and cochief operating officer Duncan Niederauer, ranked second. These established exchanges face fierce competition from newer firms led by executives who know how to leverage technology to attract investors, such as Seth Merrin of Liquidnet Holdings (No. 18) and Jeffrey Sprecher of IntercontinentalExchange (No. 20).
So long as technology continues to evolve, financial services firms will furnish customers with newer, better and faster offerings. "We want to continue to push the envelope on providing the best possible applications," says Peggy White (No. 8), the general manager of Yahoo! Finance. The other members of this year's Online Finance 40 undoubtedly share that view.
1. Craig Donohue
CEO, CME GROUP
Last year's rank: 10
LAST AUTUMN Chicago Mercantile Exchange Holdings chief executive Craig Donohue set out to create the world's biggest exchange, mounting what would ultimately become a $12 billion bid for crosstown competitor CBOT Holdings. Last month, after a grueling battle with surprise rival bidder InterContinental Exchange and lots of back-and-forth with federal antitrust officials, Donohue, 45, achieved his goal. He now sits atop a merged company, renamed CME Group, that dominates U.S. futures trading and boasts a market capitalization of $30 billion. The Chicago Mercantile Exchange and the Chicago Board of Trade, which together make up the new behemoth, each posted record volumes in 2006: The CME traded 1.3 billion contracts, up from 1 billion the year before, and the CBOT traded 805 million contracts, up from 675 million. In his 19 years with the CME, Donohue has helped to transform the exchange from a mostly face-to-face trading floor to a hyperefficient market center that executes 75 percent of its volume electronically. In addition to interest rate, stock index and agricultural futures, CME Group offers trading of the New York Mercantile Exchange's crude-oil and natural-gas futures on its Globex electronic trading platform. It also is pouring resources into a $100 million foreign exchange trading joint venture in London, known as FX MarketSpace, and a subsidiary called Swapstream that provides electronic trading of over-the-counter interest rate swaps. "It's a whole new frontier for us," says Donohue.
2. Duncan Niederauer
PRESIDENT AND CO-COO, NYSE EURONEXT
Not ranked last year
FLOOR TRADERS ARE here to stay, insists Duncan Niederauer. That's an unexpected stance from the president and cochief operating officer of NYSE Euronext, given the precipitous decline in floor-based trading at the exchange. In February the NYSE rolled out a hybrid system that integrates electronic execution with open-outcry auctions; since then roughly 82 percent of volume and nearly 92 percent of trades have been executed electronically, compared with a prehybrid average of only 19 percent and 28 percent, respectively. But Niederauer, 47 -- a 22-year Goldman Sachs Group veteran who joined the exchange in April when the NYSE merged with automated European derivatives exchange Euronext -- has been helping to create new opportunities for floor traders. In June he told analysts he is working with the Securities and Exchange Commission to change archaic rules and level the playing field for specialists, such as the recent modification that lets floor brokers who deal in NYSE-listed stocks also trade bonds, Nasdaq stocks and exchange-traded funds. "Customers do not want another superfast video game with no price improvement and high volatility," Niederauer says. "What they want is a market that's fast when they need it to be but also can discover prices for blocks when that's called for."
3. Sanjay Gupta
CONSUMER AND SMALL BUSINESS E-COMMERCE/ATM EXECUTIVE, BANK OF AMERICA CORP.
Last year's rank: 2
LAST YEAR Bank of America Corp. reaped the rewards of its $35 billion 2005 acquisition of credit card giant MBNA Corp. Charlotte, North Carolinabased BofA increased its online subscribers by 44.9 percent, to 21.3 million; its online bill payers by 52.1 percent, to 11.1 million; and the average number of bills it processes by 17.5 percent, to 41.6 million a month. Overseeing the bank's bustling Web site is Sanjay Gupta, who is quick to point out that BofA has made most of its online banking features available to cell phone users. "Pretty much anything you can do at your PC, you can now do on your phone," says Gupta, 38. He also extols the virtues of the new check-imaging capabilities at many of the bank's 17,000 ATMs. No deposit envelope is needed; customers just punch in their personal identification numbers and slide their checks into the feeder. The ATM prints a receipt with an image of the check on it. "We've seen a 50 percent increase in the deposits on those machines that have the feature," he says.
4. Steven Elterich
CHIEF INFORMATION OFFICER, FIDELITY INVESTMENTS
Last year's rank: 5
YOU MIGHT THINK Steven Elterich would have trouble getting excited about new technologies after 19 years at Fidelity Investments, but when discussing the topic, the 57-year-old CIO sounds more like a bright-eyed kid: "This is the most exciting time yet for online technology," he exclaims. Elterich is referring to the emergence of Web 2.0 technologies, the user-friendly add-ons that are making a huge difference in the way people interact with the Internet. Such technology enables the Boston-based mutual fund giant's online customers to view instructional videos without leaving the main Web page. The company has invested millions in developing Web content for all ages, especially for older people managing their retirement accounts. It has its own lab, the Fidelity Center for Applied Technology, which conducts in-depth studies on how people interact with the Web and uses one-way mirrors and retinal trackers to determine where to place different elements on Fidelity's site. The firm even employs doctors of behavioral economics to ensure that the phrasing of information is easily understood. The efforts appear to be paying off: Fidelity.com fields 2 million visits a day, up from 1.3 million last year, and 95 percent of customer trades are executed via its Web site.
5. Kevin Kessinger
CHIEF OPERATIONS & TECHNOLOGY OFFICER, CITIGROUP
Last year's rank: 6
DURING THE PAST year Citigroup's chief operations and technology officer, Kevin Kessinger, has been focusing on reducing the complexity and scope of the firm's IT operations as part of a companywide cost-cutting initiative (which includes the layoff of 17,000 employees, announced in April). Citi initially earmarked four data centers for closure, but Kessinger decided to shutter ten, resulting in a 19 percent reduction in data center usage. At the same time, the bank developed a new IT global framework to eliminate redundancies and replace legacy systems. Kessinger predicts the new system will lower Citi's operating costs by $2 billion annually by 2009. But the 53-year-old isn't just cutting. Last year he oversaw the launch of CitiDirect, an online bank that allows customers to open an account in less than ten minutes; the service attracted almost $10 billion in deposits in its first nine months. Total online Citi accounts rose 466 percent in 2006, the dollar amount of online home equity loans surged 577 percent, online transactions
rose 28 percent, and paperless-statement enrollments increased 103 percent.
6. Clyde Ostler
GROUP EXECUTIVE VICE PRESIDENT AND HEAD OF INTERNET SERVICES, WELLS FARGO & CO.
Last year's rank: 4
CLYDE OSTLER, head of Internet services for San Franciscobased Wells Fargo & Co., believes that the best way to entice customers to online banking is by making the bank's Web site as user-friendly as possible. "If we can make the site easy, that will result in more sales," says Ostler, 60. One of his recent innovations has been to position the bank as a personal online-data repository for all things financial; Wells's Web site, for instance, will store a customer's check images for seven years. And while other banks have worked hard to educate clients on the risks of identity theft, Wells Fargo has put the onus on itself. "Our approach is to do all of the necessary security behind the scenes and take responsibility ourselves for that," says Ostler. "We give a 100 percent guarantee to the customer if anyone should move their money." The strategy seems to be working. Last year Wells Fargo increased its online customers by 29.2 percent, to 9.3 million users, who logged on to an average of 65 million online sessions a month.
7. Mitchell Caplan
CEO, E*TRADE FINANCIAL CORP.
Last year's rank: 9
FOR A COMPANY that was supposed to be focused on integrating the acquisitions of Harrisdirect from BMO Financial Group and BrownCo from JPMorgan Chase & Co. in late 2005, E*Trade Financial Corp. sure did a lot of growing last year. The company increased revenues to $2.4 billion, up from $1.7 billion in 2005, and it tacked on an additional 700,000 investing and trading accounts, for a total of 4.3 million. Apparently, E*Trade's message to the market -- that it's not just about trading anymore -- is starting to resonate. "The model has evolved, and we have changed who we are going after," explains Mitchell Caplan, 49, who became CEO in 2003. "We are now offering a variety of products and services, from cash management to lending." E*Trade also has been working to turn its international business around, having suffered dismal losses as recently as five years ago. Foreign revenues grew 42 percent last year and now make up 8 percent of the firm's total, up from 5 percent one year earlier. The company has retail offices in nine countries and conducts online business in 15. The key has been creating a seamless operation across borders. "We had a big technology consolidation," says Caplan. "Now we are on one platform that is multiproduct, multicurrency and multilingual, and that creates massive operational efficiency."
8. Peggy White
GENERAL MANAGER, YAHOO! FINANCE
Last year's rank: 3
IF THERE WERE ever any fear of Yahoo! Finance giving up its pole position as the world's leading provider of financial data on the Web, Peggy White has put it to rest. White, 50, a former general manager at Business Week Online, has been at Yahoo! Finance for almost two years and in that time has managed to put even more distance between her Web site and its competitors. In June, Yahoo! Finance drew some 29 million unique visitors who stayed for an average of 42.1 minutes each, according to ComScore Media Metrix, a Reston, Virginiabased company that tracks Web site usage. That's 45 percent more than its closest competitor, MSN Money, which drew about 20 million users for an average 11 minutes each. The site has become more popular since it added new charting applications, which use Web 2.0 technology to provide more interactivity and new chart views without the need to refresh the page. The old versions are still available, but as White points out, "Once you try the new charts, they're so powerful you'll never want to go back." Another innovation: White struck deals with Fox Business News, ABC News, Forbes.com and TheStreet.com to put more video on the site.
9. Dan Mathisson
MANAGING DIRECTOR AND HEAD OF ADVANCED EXECUTION SERVICES, CREDIT SUISSE
Not ranked last year
THE EXPLOSION OF algorithmic trading is often compared to an arms race among Wall Street firms, and algo pioneer Dan Mathisson doesn't shy away from military metaphors. As managing director and head of advanced execution services at Credit Suisse in New York, Mathisson calls his flagship product Guerrilla and likens the bygone era of block trading to trench warfare: Traders tried to conceal their positions but ultimately had to show themselves to shoot. "Now it's more like submarine warfare, where everyone's sliding around under the surface without revealing anything," he says. Mathisson, 36, ran equity trading for statistical-arbitrage hedge fund DE Shaw & Co. before creating Credit Suisse's AES unit in 2001. Since then it has grown from just a handful of people to more than 160 full-time employees who serve some 1,500 clients from offices in Hong Kong, London, Singapore, Sydney and Tokyo. Driven by the fragmentation of market liquidity among several crossing networks (see Seth Merrin, No. 18, and Alfred Berkeley, No. 35) and other electronic upstarts that are challenging established markets like the New York Stock Exchange (see Duncan Niederauer, No. 2), Mathisson and his team are continuously refining their products, aiming to enable clients to efficiently access available shares wherever they reside. "We think we're approaching that Holy Grail of being able to trade large block sizes without causing significant price impact -- and to do it quickly," he says.
10. Katie Jacobs Stanton
GROUP PRODUCT MANAGER, GOOGLE FINANCE
Not ranked last year
ALTHOUGH IT STILL carries the "beta" tag more than a year after an inauspicious launch in March 2006, Google's financial news and information Web site has started to come into its own. While traffic to Google Finance is paltry compared with that of Yahoo! Finance and Microsoft's MSN Money, product manager Katie Jacobs Stanton says she isn't as concerned with maximizing page views as she is with creating slick features that will attract and engage loyal investors. Key elements of Google Finance include the integration of blogs and videos, interactive price charts that plot news events and now include aftermarket trading, and historical prices for the stocks of every U.S. and Canadian company. Though the site had only 153,000 unique visitors in June, compared with more than 29 million for Yahoo! Finance and 20 million for MSN Money, according to ComScore Media Metrix, such comparisons aren't "apples to apples," says Stanton, 37. She should know, having spent more than three years as a senior producer at Yahoo! Finance. She joined Google four years ago and initially had no intention of launching a competitive finance site. "I really wanted to work on the search space," she says. "But I really missed finance."
11. David Krell
PRESIDENT AND CEO, INTERNATIONAL SECURITIES EXCHANGE
Last year's rank: 12
DAVID KRELL, 60, is a pioneer in the world of online finance. The former head of the New York Stock Exchange's options business left the Big Board when it sold that unit in 1997 and three years later co-founded the International Securities Exchange, the country's first all-electronic options market. In 2005 ISE's IPO made it the first of several U.S. securities exchanges to go public. Over the past year the New Yorkbased company has been living up to its name -- first by getting into the stock-trading business and more recently with its $2.8 billion agreement in April to be acquired by Deutsche Börse's derivatives arm, Eurex. Meanwhile, ISE's core business continues to post impressive results. Through the end of June, trading volume was topping 2.8 million contracts a day, an increase of 18 percent over the same period last year, and its year-to-date volume was 352 million shares, up 17 percent. Although the company is broadening its reach across oceans and asset classes, its No. 1 priority remains the same as when it was launched seven years ago: providing customers with top trading technology. "We want to have the best reliability and capacity in our systems," says Krell.
12. Robert Greifeld
PRESIDENT AND CEO, NASDAQ STOCK MARKET
Last year's rank: 11
ROBERT GREIFELD'S long-standing tit-for-tat with archrival NYSE Euronext continues. Last month the Nasdaq Stock Market CEO said second-quarter profits at the world's largest electronic exchange more than tripled over the same period one year earlier, to $56.1 million, largely on the strength of stock-trading market share wooed from the Big Board. Greifeld, 49 -- a former executive vice president at SunGard Data Systems who has been single-minded in his competitive pursuit of the NYSE in his four years at the helm of New Yorkbased Nasdaq -- also credited the introduction of new products such as exchange-traded funds and a sharp reduction in expenses related to Nasdaq's unsuccessful $4.5 billion bid to take over the London Stock Exchange last year. That failed attempt helped spur the NYSE-Euronext merger (see Duncan Niederauer, No. 2). Not to be outdone, Greifeld agreed in May to a $3.7 billion acquisition of Swedish exchange operator OMX, making Nasdaq the world's second trans-Atlantic stock market -- and giving it relationships with dozens of exchanges worldwide that buy trading technology from OMX. Speculation persists that Greifeld will hold on to Nasdaq's accumulated 30 percent stake in LSE and try to leverage credibility gained from the OMX deal to take another run at the London exchange. Such a move would certainly be in keeping with the mantra he pronounced when announcing the OMX agreement: "The future of exchanges is about technology, flexibility and scale."
13. David Cummings
CO-FOUNDER AND DIRECTOR, BATS TRADING
Not ranked last year
DAVID CUMMINGS has been fond of tweaking Nasdaq Stock Market chief Robert Greifeld (No. 12), referring to him in e-mails to clients as "Bob the Bully" and accusing him of attempting to quash competition by buying rival trade execution platforms. Cummings, 38, built automated market-making firm Tradebot Systems in 2005 after spending four years as a floor trader at the Kansas City Board of Trade. Joined by a handful of fellow Tradebot employees, Cummings launched BATS, the Better Alternative Trading System, two years ago in his native Kansas City to capitalize on Wall Street's fears that Nasdaq and the NYSE would hike prices and stifle innovation after becoming public companies and acquiring competing markets. By June, BATS was handling an average of 330 million shares per day. Among its customers are eight major brokerage firms, including Merrill Lynch & Co. and Morgan Stanley, each of which owns a minority stake. In June Cummings stepped down as CEO because BATS is seeking to become a registered securities exchange, a designation that will allow its quotes to go directly to the national consolidated tape instead of being routed through a vendor; Cummings's continued ownership of Tradebot, a brokerage firm whose orders may be routed through BATS, precludes him from serving in the market's senior management ranks. (He remains a director after handing the CEO reins to co-founder Joseph Ratterman.)
14. Joe Moglia
CEO, TD AMERITRADE HOLDING CORP.
Last year's rank: 8
TD AMERITRADE Holding Corp. is still in the process of digesting the U.S. retail and securities brokerage business of TD Waterhouse Group, which it acquired in 2005. "In 2007 we'll continue to focus on completing the integration," says Joe Moglia, CEO of the Omaha, Nebraska, firm. That said, TD Ameritrade was not without its successes last year. The company reported record revenues and income of $1.8 billion and $483 million, respectively, and its operating margin of 53 percent is among the best in the industry. Moglia, 57, introduced a new flat-rate fee of $9.99 for online equity trades, and the company plans to integrate the merger partners' Web sites this spring so that clients will have access via a single portal. Despite the integration efforts, the company has not lost sight of its primary goal. "We will deliver on our strategy to serve our three core segments: the active trader, the long-term investor and the independent registered investment adviser," says Moglia. "The key to the success of this deal will ultimately be what we look like in 2008."
15. Peter Axilrod and Janet Wynn
MANAGING DIRECTOR/BUSINESS DEVELOPMENT, MANAGING DIRECTOR AND GENERAL MANAGER, DERIV/SERV, DEPOSITORY TRUST & CLEARING CORP.
Not ranked last year
WHEN DERIV/SERV was launched in November 2003, credit default swaps were still being confirmed via fax, e-mail and phone. By last year more than 80 percent of such trades had been moved onto New Yorkbased Depository Trust & Clearing Corp.'s electronic platform, which processed 2.6 million transactions for a customer base of 960 derivative dealers and buy-side firms. Leading the effort is the team of Peter Axilrod, who joined DTCC from Fidelity Investments in 2000, and Janet Wynn, who came on board in 2001 from JPMorgan Chase. In November, DTCC launched Trade Information Warehouse, which automates posttrade processes, including payments and settlement. Volume in the credit derivatives market has been doubling year-over-year since 2004 and totaled nearly $34.4 trillion at the end of last year. "There was general recognition that this was growing so fast, it was no longer acceptable to have it done on paper," says Axilrod. "Imagine trying to do 2.6 million transactions via fax." Axilrod and Wynn plan to add other products to the platform so that by year-end Deriv/SERV will support more than 60 over-the-counter equity, interest rate and credit derivatives products. "We keep emphasizing quick deliverables and quick response time," says Wynn. "That's the key to our success."
16. Paul Heller
CIO, VANGUARD GROUP
Not ranked last year
"THIS WHOLE WEB 2.0 thing is an enormous wind in Vanguard's sails, and I am totally psyched about it," says Paul Heller, 45, who took over the top tech spot
at the Valley Forge, Pennsylvaniabased mutual fund firm one year ago from Mortimer (Tim) Buckley, who is now head of the retail investor group. Indeed, for a company that relies solely on toll-free telephone numbers and a Web site (they have no storefronts), any advancement in Web technology is a huge plus. As of the end of June, Vanguard was getting about 600,000 Web log-ins a day, up from 550,000 one year earlier, and 60 percent of new accounts were coming through the Internet. Heller has been working to make the site more personalized. "If you are participating in a 401(k), we know a lot about you," he explains. "We know your age, how much you make, and we know your allocation preferences." When clients log on to the site, they are presented with information tailored to those preferences, including electronic statements that feature financial modeling and investment projections, "so they can make good investment decisions and retire early," Heller says.
17. Jeff Maggioncalda
PRESIDENT AND CEO, FINANCIAL ENGINES
Last year's rank: 14
LAST YEAR Financial Engines got an unexpected boost from two retirement-related pieces of legislation: The Pension Protection Act of 2006 and a new Department of Labor regulation governing qualified default investment alternatives. Both updated 1974's landmark ERISA and strongly encouraged employers to offer investment advice to their employees (among other initiatives). "It is fair to say that the fundamental assumption of the 401(k) plan was wrong -- people don't want to do it themselves," says Jeff Maggioncalda, 38, president and CEO of the Palo Alto, Californiabased advisory firm founded by Nobel Prizewinning economist William Sharpe. "This is the largest change to our retirement system since the advent of the 401(k) system 30 years ago." Financial Engines, whose sophisticated technology and high-tech analytics allow companies to provide personalized management of employee 401(k) plans, saw its number of participating sponsors jump to 200 last year, up from 86 the year before, and its assets under management surge to $8 billion, up from $3.7 billion.
18. Seth Merrin
CEO, LIQUIDNET HOLDINGS
Last year's rank: 13
ELECTRONIC BLOCK-TRADING network Liquidnet Holdings, like many of its competitors, has been busy trying to technologically integrate two disparate portions of the stock market: so-called dark liquidity pools, which help institutions anonymously find partners for giant block trades without posting price quotes, and public markets like the New York Stock Exchange, which require quotes to be displayed and are increasingly driven by computer algorithms that break big orders into tiny pieces executed over time. Last year, under the direction of CEO Seth Merrin, Liquidnet launched a service designed to bring the two worlds together. Dubbed H2O, it permits retail-size orders from various brokerage firms' algorithmic trading systems to pass through its block crossing network in hopes of maximizing the chance that shares available for purchase or sale will actually change hands. More recently, in January, Liquidnet acquired New Yorkbased algorithmic shop Miletus Trading, bringing its total work force to 210, and since then has been working to marry Miletus's technology with its own. Now Merrin, 46, is focusing on global expansion to fuel his company's continued growth. With an institutional liquidity pool totaling 3.5 billion shares, Liquidnet is the fifth-biggest brokerage on the London Stock Exchange and executes trades in 22 markets, up from 17 in 2005. The company plans to expand into six more markets -- Australia, Hong Kong, Japan, Singapore, South Africa and South Korea -- by the end of the year.
19. James Toffey
PRESIDENT, FIXED INCOME, EQUITY & RETAIL WEALTH MANAGEMENT
Last year's rank: 15
JAMES TOFFEY SAW the potential of the Web early on. In the mid-1990s, while heading up fixed-income trading at Credit Suisse First Boston, Toffey garnered the backing of eight investment banks to launch TradeWeb, a site originally designed to trade bonds. By 2004, with TradeWeb offering everything from fixed income to derivatives, Toffey sold the company to Thomson Corp. for a cool $385 million. Since then TradeWeb has been on a tear. Last year the company reached a record volume of $51 trillion, up from $42.8 trillion the year before (also a record). "We've cracked the code on creating a paperless trading environment," says Toffey, 46, who is still CEO of TradeWeb. In early March the company completed another step in its worldwide efforts with the addition of trading during Asian market hours, starting with U.S. Treasuries and European credit bonds; Japanese government bonds will be added in the future. "Our strategy is to be able to trade any security in the world, anywhere, with any bank, any time," says Toffey. "Every year we continue to build on that vision."
20. Jeffrey Sprecher
CHAIRMAN AND CEO, INTERCONTINENTALEXCHANGE
Last year's rank: 29
JEFFREY SPRECHER ISN'T about to pronounce the death of open-outcry trading in energy futures or commodities, now that Atlanta-based IntercontinentalExchange is the proud owner and operator of the New York Board of Trade. ICE closed its $1 billion NYBOT acquisition in January and launched electronic trading on the exchange February 2. Within 60 days more than 50 percent of all NYBOT volume was electronic. In March, armed with a stock that had soared 400 percent since ICE's March 2005 initial public offering, Sprecher, 52, made his boldest move yet: an unsolicited $10 billion bid to merge ICE with the Chicago Board of Trade and break up the latter's $8 billion agreement to be acquired by CME Group (see Craig Donohue, No. 1). Sprecher's bid failed after CME sweetened its offer, but he says there's plenty of room for organic growth in the rapidly expanding international commodities markets. And ICE continues to post impressive results. Second-quarter earnings rose 73.4 percent, to $53.7 million, on record revenues of $136.7 million (up 85.7 percent), and average daily volume surged to 1.4 million contracts. "We're driving our screens into more and more countries," notes Sprecher, "and within those countries, onto more and more desktops."
21. Gideon Sasson
EXECUTIVE VICE PRESIDENT AND CIO, CHARLES SCHWAB CORP.
Last year's rank: 20
IN HIS FIRST two years as the top technology executive at Charles Schwab Corp., Gideon Sasson kept a laserlike focus on the bottom line. He managed to help decrease the San Franciscobased company's operational costs, even as the demand for more sophisticated technology increased. Now in his third year in the post, Sasson has a new agenda. "The focus is more on simplification and process," says the 51-year-old, who formerly ran Schwab's active-trader business. "We want to be the most productive and innovative solutions provider in the business." To that end, Sasson is reengineering the company's Web environment, moving to Microsoft's .NET platform to achieve greater flexibility. The platform will enable customer-service reps to view a client's entire relationship with Schwab on one screen, offering staff a so-called single view of the customer, and include personalization capabilities designed to help the company cross-sell products to customers on the Web, depending on their portfolio and demographics.
22. Tao Huang
CHIEF OPERATING OFFICER, MORNINGSTAR
Last year's rank: 19
THE PAST TWO decades have been good to Tao Huang, the 44-year-old former computer programmer who emigrated from China to the U.S. in 1987 and has steadily worked his way up the ranks at investment research company Morningstar. Huang joined the Chicago-based firm in 1990 as a software developer, became chief technology officer in 1996 and was named COO in 2000. As such, he runs the company's Web platforms for individual investors, financial advisers and institutions. Last year all three arms of the business saw substantial growth: Total revenue grew 39 percent, to $315 million; premium membership on Morningstar.com rose 13 percent, to 166,000; and the number of registered users on the site increased 33 percent, to 4.8 million. The company now has data on more than 190,000 investments, up from 125,000 a year ago, and 113 analysts covering 2,000 funds and 1,900 stocks. Much of its astounding growth came from acquisitions. In late 2005, Morningstar bought two research companies, Chicago-based Ibbotson Associates and Australia's Aspect Huntley. It also picked up the institutional hedge fund and separate-account database unit of Wayne, Pennsylvaniabased InvestorForce. "Last year was a very busy year for us," says Huang. And it has been more of the same in 2007: In March, Morningstar acquired Standard & Poor's global fund data business for $55 million.
23. David Gershon
Last year's rank: 31
IT TAKES A certain amount of chutzpah to believe you can one-up a time-tested, Nobel Prizewinning economic model. David Gershon, the effusive 42-year-old CEO of SuperDerivatives, has that kind of gumption. In 1997, Gershon, formerly the head of trading of exotic currency options at Barclays Capital, reinvented the decades-old Black-Scholes model for pricing options. "Tens of thousands of professionals work in this business, and only a fraction of them really know how to price options accurately," he says. "We tried to fix that problem by creating transparency." His main tool: the Internet, which he used to create a benchmark for pricing options by using real-time data from the over-the-counter interbank broker market -- the arena in which Wall Street banks trade via interdealer brokers. Gershon extended the model to create an OTC options market last summer and already has 100 institutions trading on the platform. SuperDerivatives also launched new services that enable institutions to value their derivatives portfolios and compare them with the market. More than 500 clients have signed up. "This is the beginning of a revolution," says Gershon.
24. Kenneth Schiciano and Jonathan Meeks
MANAGING DIRECTORS, TA ASSOCIATES
Not ranked last year
INVESTORS IN TA Associates, a Boston-based private equity firm that specializes in financial services and information technology companies, saw home-run returns last year. Many of those returns came from deals connecting TA to fellow professionals in the Online Finance 40, such as TD Ameritrade Holding Corp. (see Joe Moglia, No. 14) and Atlanta's IntercontinentalExchange (see Jeffrey Sprecher, No. 20). The dramatic 400 percent run-up in ICE's stock price since its 2005 IPO earned backers in TA's $10 billion portfolio "about a tenfold return," says Kenneth Schiciano, 44, a managing director and 19-year TA veteran. Last year also saw the firm's $100 million recapitalization of OpenLink Financial, a Uniondale, New Yorkbased provider of trading and risk management software to banks and energy companies, and its $3.5 billion buyout of Boston's ESecLending, a global electronic securities lending manager (see Susan Peters, No. 40). In 2006, TA completed its sale of Chicago-based Quantitative Analytics to Thomson Corp. and its buyout of SmartStream Technologies, a London-based provider of banking and back-office software to more than 1,000 financial institutions globally. Indeed, the firm generated at least half of its revenues last year from international investment, notes managing director Jonathan Meeks, 34, who spearheads the firm's financial technology investment. "We're looking much more globally in these markets."
25. Howard Lutnick
CHAIRMAN AND CEO, ESPEED
Last year's rank: 26
HOWARD LUTNICK is back. For the past few years, the 45-year-old CEO of Cantor Fitzgerald has watched his spin-off ESpeed, an electronic fixed-income trading marketplace, come under attack from competitors such as ICAP Electronic Broking (see David Rutter, No. 31). Net income at ESpeed plummeted from $26 million in 2004 to just $2 million in 2005, but the legendary Wall Street figure is beginning to turn things around. Last year saw profits more than double, to $4.4 million, while overall volume growth increased about 41 percent. "Everywhere you look, the growth is good," says Lutnick. In May the CEO announced plans to merge ESpeed with another Cantor spin-off, hybrid voice-and-electronic interdealer broker BGC Partners, into a new entity to be called BGC; the deal is expected to be completed by the end of the year. By combining the companies, Lutnick hopes to achieve more streamlined product development pipelines, a larger capital base and the ability to attract and retain top brokers. "The volumes going through the ESpeed system from BGC grew dramatically," says Lutnick, who estimates that the number of trades have been growing by 140 percent a year.
26. Satish Nandapurkar
CEO, U.S. FUTURES EXCHANGE
Last year's rank: 28
WITHIN ONE WEEK of IntercontinentalExchange's attempt in March to derail the Chicago Mercantile Exchange's takeover of the Chicago Board of Trade by making a hostile bid for the latter (see Craig Donohue, No. 1, and Jeffrey Sprecher, No. 20), the fledgling U.S. Futures Exchange announced a new contract pegged to the outcome of the bidding war. "We saw the ICE announcement on Thursday," recalls Satish Nandapurkar, the 43-year-old CEO of the Chicago-based USFE (formerly Eurex U.S., before the Swiss-German derivatives exchange sold a 70 percent stake in its American unit to derivatives broker Man Group). "We created a contract on Friday and finalized the design on Monday." Though the devil was in the details -- legal, regulatory and technical, among others -- USFE was able to announce the futures contract the following Thursday and launched trading in it three weeks later, allowing investors to bet on who they thought would win the battle for the CBOT. Although the contract attracted only 41 takers and just $18,280, Nandapurkar remains optimistic about USFE's prospects for challenging the CME, which emerged victorious, as well as ICE and other, bigger futures markets. This month USFE plans to launch wind-power futures, the first of several renewable energy contracts, to be followed next month by currency and equity index futures. "We are creating some of the most innovative contracts in the exchange-traded derivatives space," says Nandapurkar.
27. Jane Wheeler
SENIOR MANAGING DIRECTOR, EVERCORE PARTNERS
Last year's rank: 27
THE BEVY OF financial technology deals that Jane Wheeler brought to Evercore Partners helped the New Yorkbased boutique advisory firm, which went public last August, report a banner year in 2006: Earnings grew by 70 percent on a 48 percent jump in revenue. "People recognize that we've done this longer and we know the participants inside and out," says Wheeler, 38, who joined Evercore from Morgan Stanley two years ago. "So when they go into battle to do their most important transactions, they like us by their side." Among her victories of the past year: In September she advised IntercontinentalExchange (see Jeffrey Sprecher, No. 20) on its acquisition of the New York Board of Trade for an estimated $1 billion; shares of the Atlanta-based electronic commodities market jumped more than 15 percent in the wake of the acquisition, adding more to its market capitalization than it paid for the NYBOT. In November she guided Silver Lake Partners through the sale of global agency broker Instinet, for which it had paid $207 million in 2005, to Japan's Nomura Holdings for approximately $1.2 billion. In March she counseled TA Associates (see Kenneth Schiciano and Jonathan Meeks, No. 24) on its acquisition of ESecLending (see Susan Peters, No. 40), and in April she advised credit card processing giant First Data Corp. on its $29 billion leveraged buyout by Kohlberg Kravis Roberts & Co.
28. Lance Uggla
CEO, MARKIT GROUP
Not ranked last year
OF THE HOST of firms cashing in on the explosive growth in over-the-counter derivatives, few have done as well as Markit Group, the London-based data, pricing and processing specialist. Founded in 2001 by Vancouver-born Lance Uggla and backed by 13 of the world's biggest investment banks, Markit Group has since grown from being a provider of daily pricing on credit derivatives to a service that covers all manner of OTC instruments. "Our goal is to bring greater efficiency to the global financial markets," says Uggla, 45. The company now employs about 330 staff around the world, serving roughly 1,000 institutions, including regulators, banks, hedge funds and other asset managers. Revenues doubled last year, to approximately $145 million, after Markit supplemented strong growth in loan and equity products with two acquisitions: White Plains, New Yorkbased Communicator, a real-time messaging and trade-processing platform, and Amsterdam's MarketXS, a market data and order-routing technology provider. The latter acquisition allows Markit to deliver pricing and valuations seamlessly across all asset classes. The firm began 2007 by breaking into cash equities, winning a contract to run the business side of Project Boat, an electronic trade reporting service being set up by a consortium of nine investment banks to take on the stock exchanges in Europe as a new European Union regulation, dubbed the Markets in Financial Instruments Directive, encourages new levels of competition. "If MiFID really takes hold," says Uggla, "other OTC asset classes will inevitably require proof of best execution."
29. Simon Wilson-Taylor
GLOBAL HEAD OF GLOBAL LINK, STATE STREET CORP.
Last year's rank: 21
With the completion of its $564 million acquisition of online foreign exchange platform Currenex in May, Boston's State Street Corp. supplemented its FX Connect platform for buy-and-hold institutional investors with a platform for active traders. The combined system will "serve the hedge fund industry and other leveraged funds traders, as well as banks, which require a much more active and dynamic trading environment," says Simon Wilson-Taylor, 50, global head of State Street's e-finance unit, Global Link. FX Connect has already captured an estimated 78 percent of the asset manager market, up from 70 percent one year ago, he says, and the Currenex platform should attract even more money managers. Last year FX Connect saw its total trading volume increase 51 percent from the year before, while Currenex boosted its number of trades by 75 percent over 2005.
30. Thomas Peterffy
CHAIRMAN, INTERACTIVE BROKERS
Last year's rank: 23
To call Interactive Brokers an online trading company is missing the point, says 62-year-old founder Thomas Peterffy. "We are computer programmers here. We make everything by writing computer software." Indeed, Peterffy's business, now in its 25th year, is entirely dependent on proprietary technology, which facilitates the Greenwich, Connecticutbased firm's own market-making activities and provides outside customers with a platform to execute trades on a host of stock, bond, foreign exchange and derivatives markets worldwide. It all adds up to an extraordinarily profitable enterprise -- 2006 revenues topped $291 million, with net income of $11.4 million, and revenues for the first half of 2007 exceeded $295 million. Interactive Brokers is so profitable that Peterffy, who came to the U.S. from Hungary in 1965 with little money and no English skills, was able to take the company public in a May IPO that raised $1.2 billion. But Peterffy isn't one to rest on his laurels. "We want to keep building new features that are difficult for others to copy," he says.
31. David Rutter
DEPUTY CEO, ICAP ELECTRONIC BROKING
Not ranked last year
LONDON-BASED ICAP Electronic Broking continues to run a viable voice-brokering business, but "for high-volume, short-term commoditized products, it's all electronic," says David Rutter, 44, who assumed his current position with the interdealer brokerage three years ago after a stint as a consultant in ICAP's Garban Capital Markets division. Last June ICAP acquired London-based EBS, the leading foreign exchange trading platform, for $775 million from a consortium of banks. In March, ICAP hit an all-time high for single-session trading volume: $1 trillion. It actually happened two days in a row; FX trading averaged $189 billion a day that month. In April, ICAP introduced i-Forwards, an electronic platform for short-dated currency forwards, and i-Sec, a system that enables European countries and Japan to borrow from and lend equities to one another. The firm's year-over-year figures show all boats rising in the first half of 2007: In the fixed-income arena, U.S. Treasuries' average daily volume is up 25 percent, mortgage-backed securities are up 44 percent, and agency securities are up 20 percent.
32. Craig Saint-Amour
INDUSTRY SOLUTIONS DIRECTOR FOR CAPITAL MARKETS, MICROSOFT CORP.
Not ranked last year
IT WASN'T LONG ago that Wall Street was the exclusive domain of Oracle databases running on servers from Sun Microsystems and IBM Corp., but times have changed. Over the past five years, Microsoft Corp. has been pushing like a weed through Wall Street's technology cracks, unleashing a raft of new products and beefier versions of existing products, including SQL Server, a database management system; SharePoint, a new portal to online publishing of standard file formats; Office, a suite of business applications; and, of course, Windows Vista, its new operating system. Even the ubiquitous Excel spreadsheet has gotten a face-lift. "These are all enterprise-ready, robust products for the largest of companies," says Craig Saint-Amour, 54. "We've spent almost $8 billion a year on product development, and now we're seeing the results of that investment." Saint-Amour has some pretty high-profile customer references: Nasdaq Stock Market, Citigroup and even the Society for Worldwide Interbank Financial Telecommunication, or Swift, the high-tech backbone of the global financial industry, are all Microsoft shops. Among Saint-Amour's priorities in the coming year for the Redmond, Washingtonbased computer services giant: make high-performance computing faster and cheaper and push the Web services architecture through .NET, Microsoft's premier development environment.
33. James Hale III and Robert Huret
MANAGING PARTNERS, FTVENTURES
Last year's rank: 24
FEW PRIVATE EQUITY firms can claim as unique a position in the market as that held by FTVentures. The San Franciscobased venture capital company, which closed its third fund in December, invests on behalf of 38 institutional partners -- including Bank of America Corp., Citigroup, Deutsche Bank, and JPMorgan Chase & Co. -- and invests in software and service companies that cater to financial institutions. Thus the banks and financial firms that advise FTVentures partners James Hale III, 55, and Robert Huret, 62, about up-and-coming tech companies can turn around and become those companies' customers. "Our limited partners spend more than $100 billion a year on IT and operations," notes Hale. Adds Huret, "It's kept us going." Indeed. FTVentures has been busy on both the technology and services sides of its portfolio. In the past year it invested in Israel's GigaSpaces Technologies, which develops software solutions to make data centers more efficient, and Palo Alto, Californiabased Financial Engines (see Jeff Maggioncalda, No. 17); it exited from PowerShares, a Wheaton, Illinoisbased asset management firm that specializes in developing exchange-traded funds, and ExlService Holdings, an outsourcing firm headquartered in New York that specializes in back-office operations for financial services companies.
34. Steven McLaughlin
MANAGING PARTNER, FINANCIAL TECHNOLOGY PARTNERS
Last year's rank: 34
AS AN INVESTMENT bank that's focused exclusively on financial technology, San Francisco's Financial Technology Partners finds it advantageous to not be a name-brand Wall Street firm. More often than not, a big bank or brokerage house is on the other side of the table negotiating the deals guided by Steven McLaughlin, founder and managing partner of FT Partners. In late 2005 the firm represented New Yorkbased Investment Technology Group when it acquired Plexus, a developer of transaction cost-analysis systems, from JPMorgan Chase & Co., and again in early 2006 when it acquired privately held Macgregor Group, a leading provider of order management technology, for $230 million. Last month McLaughlin, a 38-year-old former Goldman, Sachs & Co. banker, advised Automated Trading Desk, a Charleston, South Carolinabased provider of automated trading and order execution systems, on its $680 million acquisition by Citigroup. FT Partners broke into the European market last year when it advised on the sale of White Plains, New Yorkbased Communicator, operator of SecuritiesHub, to London's Markit Group (see Lance Uggla, No. 28). "The financial technology sector continues to be a hotbed for entrepreneurs and capital providers to meet and create new ways of doing business," says McLaughlin.
35. Alfred Berkeley
CHAIRMAN AND CEO, PIPELINE TRADING SYSTEMS
Last year's rank: 35
LAST YEAR a record 26.6 million shares traded on Pipeline Trading Systems' electronic block-trading system on a single day in March. Now its average daily volume exceeds that one-day peak, reaching 31 million shares during the second quarter of 2007. (Its new single-session record is 49.1 million shares, traded on July 18.) More than 500 brokerage firms and money managers use the system, and its software is on more than 4,000 individual block traders' desks in the U.S., says Alfred Berkeley, 62. The former Nasdaq Stock Market president likens using Pipeline's crossing network -- one of several dark liquidity pools helping traders anonymously find counterparties for block orders -- to fishing: "If you're sitting on a pier and the water is glassy smooth and you see little rings from a fish off in the distance, you cast your line over there," he says. "What we do is provide the little rings that say, 'There's a big fish here. Give it a try.'" In May the firm dropped bait in a bigger pond, seeking to expand by launching an algorithm-switching engine that helps clients choose which of a host of outside brokerage firms' computer programs will most efficiently execute block orders that are then sliced into smaller pieces and filled outside Pipeline's network.
36. David Eisner
PRESIDENT AND CEO, THEMARKETS.COM
Last year's rank: 38
IF INFORMATION is power, TheMarkets.com is beginning to flex its muscles in earnest. The New Yorkbased company, which aggregates research and data from 11 owner-members -- including Citigroup, Lehman Brothers and Merrill Lynch & Co. -- signed its 1,500th customer in 2006, up from 1,200 the year before, and now operates in 43 countries. The firm counts 42 of the 50 biggest U.S. asset managers among its clientele, plus half of the top 100 European asset managers, three quarters of the world's biggest hedge funds and 15 of the top 25 global private equity firms. Last year CEO David Eisner engineered a complete overhaul of the site, dramatically streamlining it and providing easier access to the content. "We did this with some trepidation because our users kept telling us they liked the old platform," says Eisner, 49. "But we launched it in September and saw zero reduction in use. In fact, within a couple of weeks, we were hitting all-time highs." Last month the company closed a $30 million fund, raised through an offering to its owner-members, which will be used for strategic investments and acquisitions.
37. Robert Slaymaker
CEO, BONDDESK GROUP
Last year's rank: 30
FIXED-INCOME securities will never be the sexiest assets to buy or sell, but BondDesk Group CEO Robert Slaymaker is determined to make them easier to trade. And judging from the volumes on the firm's alternative trading system for odd-lot bonds, he's succeeding. Average daily volume is approaching 25,000 trades, up from 20,000 one year ago, while bids and offers have topped 40,000 daily, an increase of 54 percent from last year's 26,000, Slaymaker says. The firm is expanding both its client base, with the introduction of BondDesk Institutional for buy-side traders, and its tool set, with the rollout of its new Decision Analytics portfolio reporting tool. "Fixed income is a very difficult product to sell, but the market is growing, and the acceptance of electronic trading is growing," says Slaymaker, 55. The company's 15 percent increase in revenue last year, combined with the long-term prospects for retail bond trading, attracted the interest of Advent International Corp., a $10 billion private equity firm headquartered in Boston that acquired a majority interest in BondDesk last June. "We have the demographics behind us," Slaymaker notes. "As the baby boomer generation begins to retire, they're looking for more-stable influences in their portfolios, and fixed income as an asset class is becoming more important."
38. Philip Weisberg
CEO, FX ALLIANCE
Not ranked last year
IN LATE FEBRUARY, New Yorkbased FX Alliance went live with Accelor, its new, anonymous order-matching system for foreign exchange. The launch of this electronic communication network, aimed at professional traders such as banks and hedge funds, is "the most exciting and significant development" since FXall unveiled its original, relationship-based (that is, nonanonymous) platform in 2001, says CEO Philip Weisberg, 39. FXall's two platforms function side by side, but investors who value anonymity (with trades posted publicly) now have the option of using Accelor. "I think we're a good provider of this technology because we're neutral," Weisberg says. Investors evidently agree. Last year trading at FXall hit $9.8 trillion, up 46 percent from the year before. This year average daily volumes had surged to $87 billion by July.
39. Lance Boxer
CEO, IPC INFORMATION SYSTEMS
Last year's rank: 36
IF THERE'S ANYONE who takes the term "wired Wall Street" literally, it's Lance Boxer, CEO of New Yorkbased IPC Information Systems, which has been wiring trading floors with its voice over Internet protocol (VoIP) consoles for years. As of June, IPC had deployed more than 47,000 VoIP desktops and more than 110,000 total desktops on trading floors around the world. "I think about unifying communications where the desktop becomes a portal, a purposeful centerpiece for traders doing their jobs," says Boxer, 52. The former CIO of telecommunications company MCI says IPC has become "incredibly profitable" since expanding the deployment of its VoIP-enabled desktops by 57 percent last year. Such success induced private equity giant Silver Lake Partners to acquire IPC from Goldman Sachs Capital Partners last September for $800 million. In March the company unveiled its next-generation desktop, IQ/MAX, and in June acquired New Yorkbased telecommunications company WestCom Corp. Now, with 14,000 employees operating in 30 countries, IPC is the leading provider of desktops and turrets, with a market share topping 50 percent, Boxer notes.
40. Susan Peters
CHAIRMAN AND CEO,
Last year's rank: 33
ANYONE WHO doubts that custodial securities lending is going the way of the buggy whip need only count the $1.3 trillion in global equity and fixed-income assets auctioned by ESecLending since its inception in 2000. Yet despite 100 percent growth last year in both assets on loan and cash collateral under management, ESecLending chairman and CEO Susan Peters announced in April that she would be leaving the company. The news came in the wake of private equity firm TA Associates' $3.5 billion acquisition of ESecLending in May 2006 (see Kenneth Schiciano and Jonathan Meeks, No. 24). "It's just been a kind of take-your-breath-away type of year," says Peters, 55, who has moved to Paris but will remain with ESecLending through the end of the year. Coincidentally, her move overseas mirrors the expansion of the company's business, more than half of which now comes from institutions headquartered outside the U.S., including its first Asia-Pacific client, the New Zealand Superannuation Fund. Peters's heir apparent is company president Christopher Jaynes.
The Online Finance 40 was compiled under the direction of Assistant Managing Editor Tom Johnson, Assistant Managing Editor Justin Schack, Articles Editor Lila MacLellan and contributor Jeffrey Kutler. Individual profiles were written by Dan Briody, Rob Garretson and Rosalyn Retkwa.