For financial technologists the excitement is finally starting to come back. Statistical indicators -- the major stock indexes, IPO activity, corporate profits -- are all up. Market researchers expect securities industry technology spending to increase this year for the first time since 2001.
Such buoyancy may give pause to investors who worry that another bubble might be in the making. But the elite of e-finance are more sanguine. The executives selected for Institutional Investor's fifth annual Online Finance 30 -- and who are spotlighted in the following pages -- have survived the bust and now increasingly are running businesses that have matured into conventional, moneymaking enterprises. Others are entrepreneurs steering their start-ups into the mainstream. None has harnessed the Internet's ability to erase borders better than EuroMTS's Gianluca Garbi, who rises to No. 1 for successfully expanding his bond-trading platform throughout Europe. Next in line are Olivier Le Grand at Cortal Consors, Jean-François Théodore at Euronext and Hans Verkoren at ING Direct -- all are using technology to propel multinational ambitions.
Some are struggling. U.K. bank Egg is for sale, a defeat for CEO Paul Gratton (No. 11). But Comdirect Bank's Achim Kassow (No. 6) offers hope: He's turning a profit after years of losses.
1 Gianluca Garbi
Last year's rank: 4
"The key to our success is to be focused on our core business."
What do you do for an encore after you've established Europe's leading electronic wholesale market for government bonds? Simple: Expand the franchise along with Europe itself. Gianluca Garbi's London-based EuroMTS last year added Austria and Greece to its list of government issuers, so it now handles the securities of all 12 countries in the euro zone. Garbi, 33, also brought on Hungary and Poland, and he plans to keep adding territory, as ten new members join the European Union in May. "Our key priority is to have all the Eastern European countries on board for domestic and international debt," says Garbi, who launched EuroMTS in 1998 using technology that he had developed for Italy's Mercato dei Titoli di Stato. He's not limiting his sights to the EU -- Israel is scheduled to join the MTS consortium this spring -- or to bond trades alone. The firm's EuroMTS index inspired the launch of the exchange-traded EuroMTS Global Master Unit fund in January. Next up is an expansion of the BondVision institutional trading platform, which will add corporates to the menu of government and agency issues. Like other e-finance executives who learned to live with tight budgets in recent years, Garbi remains intent on controlling costs. This year he wants to shift low-volume users off direct-line connections and onto cheaper, Internet-based platforms.
2 Olivier Le Grand
CHAIRMAN AND CEO,Cortal Consors
Last year's rank: 1
"With the growing complexity of online financial offerings, we a see a rising demand for advice."
Since doubling his company's customer base in a 2002 merger, Cortal Consors' Olivier Le Grand has been piling up cost savings. They added up to E35.8 million ($44.8 million) in 2003, largely through a 38 percent cut in the workforce, to 1,110, and Le Grand is shooting for E17.2 million more in reductions this year. In January, Cortal Consors parent BNP Paribas rewarded the CEO of Europe's largest online seller of mutual funds and brokerage services by giving him the added title of chairman. Le Grand, 51, founded Cortal for BNP in 1986 and built it into a profitable seller of mutual funds over the telephone, through independent financial advisers and, later, on the Internet. Its April 2002 purchase of money-losing German online brokerage Consors from troubled SchmidtBank for E485 million made it one of the biggest and most efficient e-finance entities on the Continent. For 2003, Paris-based Cortal Consors earned E12.6 million on sales of E207 million as assets under management rose 24 percent, to E13.7 billion. Another factor improving the bottom line: The firm dropped 66,000 inactive, mostly unprofitable customers last year, ending up with 1.07 million. Le Grand is spending more on marketing this year, hoping to attract 80,000 new clients a month. "What is most important is our capacity to recruit active, high-net-worth investors," he says.
3 Jean-François Théodore
CHAIRMAN AND CEO,Euronext
Last year's rank: 2
"This is a work in progress."
Jean-François Théodore, the architect of the pan-European exchange Euronext, was supposed to step down as CEO this year. But with competition heating up from Deutsche Börse and the London Stock Exchange, "the board has decided that continuity is necessary," says Théodore, 56. Out the window went one of the concessions that had enticed the Amsterdam and Brussels exchanges to merge with Théodore's ParisBourse four years ago: that Amsterdam Exchanges chief George Möller would succeed Théodore in 2004. (Möller is resigning March 31 and has not announced his future plans.) Théodore, who brilliantly engineered not only that three-way merger but also the subsequent acquisitions of Portugal's Bolsa de Valores de Lisboa e Porto and the London International Financial Futures and Options Exchange, is now being pummeled on his Dutch flank: Deutsche Börse has undercut Euronext's fees on trades in the 25 stocks in Amsterdam's AEX index; this month the LSE will offer deeper discounts by placing most Dutch blue chips and midcaps on its Stock Exchange Electronic Trading System. Théodore hasn't yet cut prices at Euronext Amsterdam, but he has announced the launch of a new Eurodollar contract. That gives Liffe an important toehold in the U.S., but it comes at a development cost of E30 million ($38 million). "Achieving better scale than other exchanges costs money," says Théodore. "But the aim is to increase revenues, bring down costs and grow."
4 Hans Verkoren
GLOBAL HEAD,ING Direct
Last year's rank: 6
"The direct banking concept is built on the idea that managing financial affairs should be as convenient for the customer as having a cup of coffee."
"I do not believe in virtual banks," declares ING Direct's Hans Verkoren. That sounds strange coming from the executive presiding over what is arguably the most successful multinational experiment in branchless banking, ning eight countries and earning E151 million ($193 million) pretax in 2003. Verkoren believes, however, that even in the most streamlined electronic banking operation, "some sort of presence is necessary to establish trust with the customers and continue to acquire new ones." ING Direct achieves this with both telephone call centers and 11 ING Cafes, orange-hued branch officescum coffee bars. Since Verkoren launched ING Direct in 1997 as a telephone bank and in 1998 on the Internet, the unit of Amsterdam-based ING Group has attracted 8.1 million clients (up from 5.3 million in January 2003) with funds totaling E96.1 billion in Australia, Canada, France, Germany, Italy, Spain, the U.K. and the U.S. Verkoren, 56, has instituted a set formula in each country that the direct bank enters: Lure customers with higher-than-average savings account rates, then cross-sell other, more profitable products. He says the results are pretty uniform, too: "Of the eight countries, we're making very good profits in five, having passed the three-year hurdle for return on investment."
5 Bo Harald
EXECUTIVE VICE PRESIDENT,Nordea Bank
Last year's rank: 3
"Drawing up bills in paper and receiving payments by cash or check constitutes a vicious circle that we are replacing with a virtuous, electronic one."
Bo Harald, the dean of European electronic banking, keeps the dream alive. "The demise of cash is around the corner," insists Harald, the 55-year-old creator of Europe's biggest and arguably most innovative online banking operation. Of Stockholm-based Nordea's nearly 11 million customers in Denmark, Finland, Norway and Sweden, 3.7 million use the Internet. The E261 billion-in-assets ($327 billion) bank expects its Internet rolls to top 4 million this year as it gives customers more reasons to go online. Two years ago Harald launched Solo, an e-commerce network that now has 2,000 participating merchants; last year he added an electronic invoicing feature. About 500 companies use the bank's online billing system. "Slowly but surely, we are building a more efficient electronic world," says Harald, who has joined with executives from IBM Corp. and Microsoft Corp. in pushing for Europe-wide standards for electronic payments and commerce.
6 Achim Kassow
Last year's rank: 9
"We want to be the one-to-one bank for the modern investor."
In 2001, when Comdirect Bank, the biggest Internet brokerage in Germany, lost a staggering E151 million ($190 million) pretax, the slowdown in stock trading was only part of the reason. The 600,000-customer spin-off of Commerzbank had spent lavishly on people and technology and couldn't cut its fixed costs fast enough. Achim Kassow, who joined Quickborn, Germany-based Comdirect in June 2002, tackled the problems head-on. Overhauling management, consolidating back-office operations and slashing the head count from 1,300 to 900, Kassow cut losses to E19 million in 2002. After earning E32 million in the first nine months of 2003, Comdirect was poised to post its biggest annual profit since it opened in 1994. The 37-year-old Kassow, who previously worked at Deutsche Bank as a protégé of former head of retail banking (now Dresdner Bank chief executive) Herbert Walter, is turning his attention from costs to growth, and not just online. He describes his strategy as three-pronged: "online investment plus direct banking plus financial advisory." The objective, he says, is a "one-to-one bank" with a broad range of services enhancing the core brokerage. That's exemplified by the launch late last year of Comdirect Private Finance, with offices in Düsseldorf, Hamburg and Munich. Kassow expects to add 27 new offices and to break even in private client services by 2006.
7 Michio Matsui
PRESIDENT,Matsui Securities Co.
Last year's rank: 11
"Only about 5 percent of Japanese investors trade online, but they trade more than ten times as often."
Two years ago, when his major online brokerage rivals were slashing commissions in a price war, Michio Matsui, the president of Matsui Securities Co., steered clear of the fray. Though competitors like E*Trade Japan, with 325,000 accounts, and Monex, with 241,000, surpass Matsui Securities' 125,000, the latter remains the most profitable. Its profit margin for the nine months through December -- 53 percent, based on pretax profits of ¥8.9 billion ($84.4 million) -- was more than double that of Japan's largest brokerage firm, Nomura Securities Co. In trading volume, Matsui ranks second only to E*Trade, which through price-cutting has attracted more of the active, day-trading crowd. Now Matsui vows to fight back -- with price reductions, no less. Effective next month, commissions will be halved for traders who buy and sell on the same day. And for six months there will be no commissions on trades valued at less than ¥10 million. "It's a way to bring back the day traders," explains the 51-year-old chief executive. The firm can withstand some price pressure, thanks to interest income on margin accounts: Last summer Matsui became Japan's first online brokerage to offer margin loans without a settlement deadline (instead of the standard six months). That's an appealing product in a nation where more than 60 percent of individual investors buy on margin.
8 Vincent Taupin
Last year's rank: 8
"Our marketing costs have been cut to almost nothing in our principal market."
Société Générale subsidiary Boursorama, based in Paris, saw its base of online brokerage customers grow by 2 percent in 2003, to 264,484, even as France's overall number of Internet brokerage customers fell slightly. CEO Vincent Taupin credits the marketing muscle of Boursorama, France's most popular Internet financial portal, which SocGen acquired in 2002 and merged with its Fimatex brokerage unit. Now the brokerage uses the Boursorama name and advertises primarily to the portal's 2.1 million monthly visitors. "It's the best place to market our services, and it's free," says Taupin. "It has completely transformed our business model." The company cut its marketing budget by 90 percent last year and enjoyed a 20 percent increase in revenue, to E88.9 million ($112 million). Boursorama leads the French online brokerage market, with a 38.5 percent share, bolstered by the January 2003 purchase of 55,400 Self Trade accounts from Germany's DAB Bank for E63.6 million. Says the 44-year-old Taupin, who had managed Fimatex since 1995, "Consolidation isn't over in this market, which is why we've got E65 million in cash and no debt."
9 Rainer Neske
GLOBAL HEAD, PRIVATE AND BUSINESS CLIENTS,Deutsche Bank
Not ranked last year
"We are improving both efficiency and profitability."
It's getting harder to tell Deutsche Bank's online business apart from its general banking activities. The integration of the two has been the Frankfurt-based giant's goal for five years, and Rainer Neske has only accelerated the pace of "bricks-and-clicks" assimilation in the 11 months since he succeeded Herbert Walter, now CEO of Dresdner Bank, in Deutsche's top retail post. The bank boasts a solid base of 2.4 million Internet banking clients, but they perform mainly routine, low-margin current- and savings-account transactions. Neske, 39, who previously oversaw retail technology, has been furiously cutting costs; since 2002, Deutsche has reduced its 1,030 branches and 200 private banking offices to 770 investment and finance centers. They are more efficient, says Neske, because they serve all individual clients as well as small and midsize businesses. The bank has also been unifying its products, eliminating the distinctions between services available on the Internet and at branches. The strategy extends to Maxblue, Deutsche's 400,000-customer e-brokerage. Explains Neske, "Integrating product offerings online and off-line increases our ability to cross-sell and allows us to complement electronic services with advice."
10 Rudolf Ferscha
Not ranked last year
"We'll be the best platform by focusing on customers' needs and concerns. Our success will follow if we get that right."
Eurex has conquered Europe; now it's on to the New World. Even as the Frankfurt-based international derivatives exchange broke its volume record last year -- posting a 27 percent increase in contracts traded, to 1 billion -- CEO Rudolf Ferscha was methodically laying the groundwork for Eurex US in Chicago and in the process shaking the birthplace of futures trading to its foundations. Ferscha was, after all, preparing to launch a fully electronic trading platform with a global clearing infrastructure that was bound to give the less-automated incumbents -- the Chicago Board of Trade and the Chicago Mercantile Exchange -- a run for their contracts. "We're creating the most liquid market, with the least friction, with new opportunities for cross-product arbitrage and spread trading that will allow us to sustain a low-cost market for the benefit of all our partners," declares Ferscha, 43, a former Goldman, Sachs & Co. banker, who has headed Eurex since 2001 and who spent much of the past six months in the U.S. overseeing the launch and the regulatory approval process. Before heading home to Frankfurt, he took one last competitive swipe: In January he designated as Eurex US's first CEO Satish Nandapurkar -- a four-year veteran of the CME. Eurex US opened on February 8.
11 Paul Gratton
Last year's rank: 5
"Our future isn't just as a monoline."
A year ago London-based Egg was on a roll. With 2.5 million customers, the world's biggest online-only bank was nearing profitability; it had just expanded into France, and CEO Paul Gratton was hatching plans for an assault on the U.S. The £11.5 billion-in-assets ($21.4 billion) Egg has since passed the 3 million customer mark, but everything else has been downhill. Pretax losses worsened to £25 million through September 2003, from £4 million, mainly because the French business is in shambles. Egg's parent, U.K. insurer Prudential, put its 79 percent stake in the bank up for sale in January. Yet despite that cloud, "the U.K. business is growing strongly," the 44-year-old Gratton, who has headed Egg for three years, said in one of his last public statements before Prudential's announcement forced him into a "quiet period." Indeed, Egg's nine-month pretax income in the U.K. rose 170 percent, to £57 million, fueled by credit cards and other loan growth. But in France consumers were lukewarm toward Egg's flagship product, La Carte Egg. Analysts expect one of the major U.K. banks or U.S.-based credit card giant MBNA Corp. to pay up to £1.6 billion for Egg. That would be a 13 percent, £200 million premium over its mid-February market valuation, reflecting the attractiveness of the U.K. business.
12 Alexander von Uslar
GENERAL MANAGER,DAB Bank
Last year's rank: 17
"German retail investors are just now returning to the sidelines. In 2003 they weren't even in the stadium."
DAB Bank general manager Alexander von Uslar and his competitor, Comdirect Bank's Achim Kassow (No. 6) have much in common. Both executives are 37, took charge of their respective online brokerages in 2002 amid a tide of red ink and within a year had turned them around. Von Uslar's DAB earned E7.5 million ($9.4 million) through September 2003, reversing a year-earlier loss of E54 million and pointing to the first annual profit since parent HVB Group launched the unit in 1994. It now has 460,000 customers in Germany and Austria. "We made a profit against the worst backdrop for online trading in a decade," boasts von Uslar, a lawyer by training, who joined DAB (then Direkt Anlage Bank) in 1996. His big strategic moves: selling the loss-making French subsidiary Self Trade early last year to Boursorama (see Vincent Taupin, No. 8) and marketing DAB to independent financial advisers, whom he views as ideal partners in attracting profitable brokerage clients. Says von Uslar, "Advisers need a bank to run the accounts of their customers, and we offer them services they don't get from others, such as asset allocation and risk management tools."
13 Gert Engman
EXECUTIVE VICE PRESIDENT, CHIEF INFORMATION OFFICER,FöreningsSparbanken
Last year's rank: 13
"We've been saying for a long time that customers don't switch from one channel to another. They want them all."
At 1 trillion Swedish kronor ($135 billion) in assets, FöreningsSparbanken is the fourth-largest bank in Sweden. But it's No. 1 in online customers, with 1.6 million in its home country and 1.1 million more served by subsidiaries in the Baltic region. To Gert Engman, 54, the Stockholm-based savings bank's top technology executive for the past four years, the numbers alone have little value. What matters to him is how well the electronic services are integrated into the overall delivery system. The fact that more than half of FöreningsSparbanken's 5.1 million customers are enrolled -- among the best sign-up rates in the industry -- underscores how standard, if not old hat, online delivery has become. "We all have to have it," says Engman. Typical of most banks, FöreningsSparbanken does not disclose profit-and-loss figures for Internet banking, but transactions handled at bank teller stations, for example, have fallen by 20 percent during the past three years. Online plans for this year include a technology upgrade, a mobile banking service and a major push to attract corporate treasurers' business. "They want to do it all on the Web," Engman says. "And, unlike consumers, they are willing to pay."
14 Reto Francioni
CHAIRMAN,SWX Swiss Exchange
Last year's rank: 10
"It's another year of evolution, not revolution."
A decade ago Reto Francioni played a key role in consolidating three regional Swiss stock markets into what is now SWX Swiss Exchange. But today Zurich-based SWX plays on a bigger stage, and chairman Francioni is feeling squeezed by international consolidation. The exchange's trading volume declined by 10.8 percent in value last year, despite a 19 percent rise in the SMI stock index, as investors remained cautious in the wake of the long bear market. SWX is also getting less out of Eurex, its joint venture with Deutsche Börse. Last May, SWX agreed to cut its share of profits from the derivatives exchange to 15 percent from 20 percent. "We are the junior partner there," Francioni, 48, acknowledges. Still, he sees opportunities for growth. Taking control last year of London-based electronic exchange Virt-x, SWX recaptured volume in Swiss stocks that had leaked to other venues. Francioni believes he can drive down costs and remain competitive by wringing operational synergies from Virt-x and SWX, which share a technology platform. The future of Europe's markets "is not 'pan-European or nothing,'" he asserts. "It's pan-European and local. For mid- and small-cap stocks, you need local markets."
15 Stanley Shelton
EXECUTIVE VICE PRESIDENT,State Street Corp.
Last year's rank: 14
"Electronic trading is becoming the norm in all markets. We believe we are a natural provider of the services."
Stanley Shelton first came up with the idea for online foreign exchange trading a decade ago and launched State Street Corp.'s Global Link trading infrastructure in 1996. Today, besides overseeing all of the Boston-based company's trading activities, Shelton, 49, is chairman of broker-dealer State Street Global Markets and founding partner of its research arm, State Street Associates. All the while, Global Link's foreign exchange component, FX Connect, has steadily expanded. With 425 buy-side firms and 43 liquidity providers participating, FX Connect more than doubled its daily volume last year, to $20 billion. Global Link has moved into other products, with Futures Connect, Fund Connect, Money Market Connect and Equity Connect, which facilitates cross-border trading. "Sitting at the crossroads of 15 percent of the world's tradable securities, we're interested in connecting our clients to each other and their suppliers of liquidity," explains Shelton. Last fall he introduced a by-product, the State Street investor confidence index. "We're not sure, frankly, anyone else could do this," he says. "We have an extraordinary, 30-year history of trading data to calculate these measures."
16 Paul Caplin
Last year's rank: 15
"No industry spends more than the financial industry does on real-time data or demands more in the way of resiliency and security."
In 2000, when many high-tech companies were crashing, Paul Caplin's Internet software house made money. Why? Privately held Caplin Systems, founded in London in 1985 by the mathematician and former rock musician, had something that financial institutions were willing to pay for. Investment banks (including J.P. Morgan Chase & Co. and UBS), securities exchanges (Chicago Mercantile Exchange, Nasdaq) and market data providers (Dow Jones & Co., Interactive Data Corp.) are using Caplin's Real Time Text Protocol to transmit news, quotes, trade orders and other messages at high speed over the Web. RTTP turns ordinary Web browsers into something approximating a Bloomberg or Reuters screen, but at lower cost, using the Internet. "Our main competition now is homegrown systems, which is not a bad position to be in," says Caplin, 49. "Big firms that are seeking to rationalize their data distribution inevitably conclude that it has gotten too complicated to build and maintain on their own, and we have a solution."
17 Jiang Jianqing
CHAIRMAN AND PRESIDENT,Industrial and Commercial Bank of China
Not ranked last year
"Banking@home will comprehensively elevate the quality of our services."
A decade ago Industrial and Commercial Bank of China employees were still using abacuses. But since Jiang Jianqing, 51, became chairman and president in early 2000, China's biggest commercial bank has computerized its operations and launched the country's most successful online banking service. Its Internet users -- 7.5 million individual customers and 69,000 businesses -- have doubled in the past year and rank on a par with the biggest U.S. and European online banking operations. With a customer base exceeding 100 million, Beijing-based ICBC is only getting started. Jiang hopes to get 20 million of them online within three years. In December, ICBC upgraded its consumer online platform under the brand name Banking@home, offering 58 functions that approximate the services of a physical branch, including loans, fund transfers, securities trades and foreign exchange. According to Jiang, the system has the capacity to carry at least half of the bank's transaction load, displacing the work of 4,000 traditional outlets (ICBC now has 22,000 offices) and saving an estimated $350 million annually. Jiang says Banking@home embodies his strategic vision: "a determination to embrace the combination of brainpower and the computer, a blend of technology and intelligence."
18 Laurent Mignon
Not ranked last year
"The bank is at the core of our focus on the overall wealth management of clients."
Laurent Mignon is bringing Paris-based Banque AGF in from the cold. Though it's the biggest online bank in France, with 265,000 clients and E650 million ($823 million) in deposits, until last year it was managed as a small, peripheral adjunct to the core insurance business of Assurances Générales de France, the French subsidiary of German insurer Allianz. Now Mignon, who became the bank's CEO in an October reorganization, is integrating it more closely with its parent. "The shake-up unifies financial services like consumer loans and mutual funds with life insurance products under one authority with a single marketing strategy," says Mignon, 40, who is also AGF's cochief operating officer. At Banque AGF, Mignon replaced Philippe Toussaint, a veteran French commercial banker whom AGF hired to open the online bank in 2000 and who now oversees securities brokerage. Mignon, a former investment banker at Schroders in London, who returned to his homeland to join AGF in 1997 as CFO, has been working to cut expenses and to weed out unprofitable customers. "Our aim now is to rekindle expansion of the client and deposit base," he says. "With Banque AGF now at the center of the cross-selling strategy, I don't think that will be too tough."
19 Magnus Böcker
Not ranked last year
"We've aligned our business to our core competencies."
It's trial by fire for Magnus Böcker. The longtime head of Swedish exchange operator OM's technology business became CEO last May -- simultaneously with the resignation of his former boss, Per Larsson, and the merger of OM with the Helsinki, Finland, exchange Hex. Larsson put Stockholm's OM on the global map with a long-shot takeover bid for the London Stock Exchange in 2000. But the attempt failed, and as global markets subsequently went into decline, so did OM's revenue. Böcker must now cut expenses and restore growth at the renamed OMHex; he's on target to achieve a 25 percent savings by the end of this year's first quarter. Though the company lost 431 million Swedish kronor ($59 million) in 2003, that reflected a Skr662 million charge for restructuring costs. "The synergies are coming through," declares Böcker, 42. As for growth, Stockholm-based OMHex is bidding to take over the National Stock Exchange of Lithuania, a move that would give it control of all three Baltic markets. There are also signs of life in technology sales: The Singapore Exchange in December placed an order for the OM Click trading platform. Böcker sees "room for optimism. [Exchanges] can postpone things for a while, but eventually, they need to utilize technology to have a lower cost structure."
20 K. V. Kamath
MANAGING DIRECTOR AND CEO,ICICI Bank
Not ranked last year
"We changed the game by using technology as a lever to grow."
ICICI Bank in Bombay, India, was a stodgy corporate lender when K.V. Kamath set out in 1996 to transform it into a high-tech, full-service consumer bank. Other bankers doubted that a population accustomed to using branches would bank primarily through automated teller machines, telephones and the Internet. But Kamath proved the skeptics wrong, supplementing a network of 450 branches with 1,760 ATMs, a back-office processing "factory" with a staff of 1,500 and two call centers with a total of 1,700 customer service representatives. Today ICICI is India's second-largest bank after 9,000-branch State Bank of India, controlling 30 percent of retail banking assets. Its customer base has grown from 600,000 four years ago to 7 million; of those, 5.4 million are enrolled to bank online. "Our customers have taken to our New Age technologies -- they're even a step ahead of us," says Kamath. The 56-year-old joined the bank in 1971 and left in 1988 to work for the Asian Development Bank and Indonesia's Bakrie Group, returning to ICICI as CEO in 1996. Competitors are trying to clone his strategy, but Kamath contends they'll have a hard time catching up or matching his economies of scale. "For so many years people laughed at us," he says. "Now they've stopped."
21 Michael Blomfield
GENERAL MANAGER,Commonwealth Securities
Not ranked last year
"One of our roles as market leader is to set the competitive agenda."
How's this for market penetration? Australia, with a population of 20 million, sports about 8 million adult Internet users, and 1.2 million are customers of Commonwealth Securities, by far the country's biggest online brokerage. Of those, 450,000 are active traders, estimates Michael Blomfield, head of the Sydney-based subsidiary of Commonwealth Bank of Australia. CommSec's e-brokerage market share is now roughly 50 percent. The firm's closest rivals, E*Trade Financial Corp. and Westpac Broking, each boast 12 percent, according to research firm ACNielsen.consult. CommSec has been building momentum since it opened as Australia's first discount-style, nonadvisory securities firm in 1995. "Our competitive advantage is that the value proposition is so simple," says Blomfield, 33, who became general manager in 2002 after four years as head of client services and technology operations. "We're a scale business," he adds, "and we can do it cheaper than anyone else." Even as trading volume has increased 250 percent since December 2002, Blomfield notes, "the competition is less in-your-face than it was." Indeed, CommSec is leading the industry's consolidation: Last April it acquired TD Waterhouse Group's Australian affiliate, which overnight added 8 points of market share. "We work really hard to leverage our scale," says Blomfield. Before joining CommSec in 1998, he helped run the back office of Bankers Trust Co.'s Australian asset management arm.
22 Philip Weisberg
Last year's rank: 24
"We finished the early adopter phase in 2003. Now we're in mainstream adoption."
When FXall, the leading multibank foreign exchange trading platform, turned its first profit in 2003's second quarter, it lifted a big weight off CEO Philip Weisberg's shoulders. "Up to that point I was in a survival mind-set," says Weisberg, 36, who incubated FXall at J.P. Morgan Chase & Co.'s LabMorgan development unit and has been the company's CEO since its launch four years ago. "Now the thought process is to try and capitalize on our leadership position." FXall has attained the critical mass that is any trading venue's most daunting challenge: The New Yorkbased network has 47 liquidity-supplying banks and 700 buy-side participants. However, its daily volume of $13 billion barely scratches the surface of the $1 trillionplus forex market. And it trails State Street Corp.'s FX Connect online marketplace (see Stanley Shelton, No. 15). But Weisberg naturally asserts that FXall has just begun to tap its potential. In September, FXall moved into the burgeoning hedge fund industry with a trading and settlement service geared for prime brokerages. And Weisberg is anticipating "a wave of growth" from corporations that, as part of their Sarbanes-Oxley Act compliance, will want to trade in secure, auditable, demonstrably efficient marketplaces.
23 Simon Nathanson
Not ranked last year
"With the single European currency, sector trading becomes easier -- but it can't be done well without an efficient cross-border platform."
Swedish exchange operator OM's multinational electronic stock market, Jiway, failed two years ago. This month a former OM executive, Simon Nathanson, embarks on a different route to cross-border trading. Most recently executive vice president of business development, sales, exchange and clearing operations and technology at the Stockholmsbörsen, Nathanson is taking the helm of agency brokerage NeoNet. A member of 15 exchanges, Stockholm-based NeoNet offers 180 institutional clients in 13 countries a virtual international stock market, accessing some 80 percent of global liquidity. "Many of us at OM were interested in NeoNet since it started up in 1996," says the 43-year-old Nathanson, who succeeds Torvald Bohlin, 53, who retired after three years as NeoNet's CEO. "The technology is extremely efficient, and NeoNet earns the trust of clients because it executes only on their behalf and does not take its own trading positions." The company's revenue has declined along with market volumes in recent years, but Nathanson says growth is returning -- and will accelerate as NeoNet completes the integration this year of Lexit Financial Group, an agency brokerage with U.S. and U.K. operations that it acquired for $9 million in November. "Exchange volumes in Europe have picked up over the past couple of months," he notes, "and we are in a strong position to leverage our efficiencies over a bigger customer base."
24 Hwang Young Key
PRESIDENT AND CEO,Samsung Securities Co.
Not ranked last year
"Koreans are gadget-crazy."
For Samsung Securities Co.'s Hwang Young Key, online brokerage the old-fashioned way -- through personal computers -- doesn't hold the excitement that it used to. The president and CEO of South Korea's biggest brokerage wants to follow his society into a wireless future. "Koreans spend more money per capita on the latest 3G phones and personal digital assistants than do consumers in any other nation," notes Hwang, 54, a London School of Economics graduate who has been heading the Seoul-based brokerage affiliate of the Samsung industrial empire since 2001. Last year the firm began to gradually roll out systems to enable securities transactions on mobile phones and other portable devices. The country's equities industry is already quite wired -- 67 percent of stock exchange transactions are initiated online. Samsung has a market-leading 10 percent share of trading on the Korean bourse; 70 percent of that volume is online, driven by 1 million active clients. (The next-biggest Korean brokerages are Daewoo Securities Co. and LG Investment & Securities, each with about 8.5 percent of the market.) Hwang, who earlier in his career worked for Banque Nationale de Paris and New York's Bankers Trust Co., regards wireless enhancements as a key to attracting customers in a competitive, emerging economy. "As technology is upgraded we are trying to improve delivery of the highest quality content," he says.
25 Masayoshi Son
PRESIDENT AND CEO,Softbank Corp.
Last year's rank: 21
The luster is mostly gone from the e-finance portion of Internet mogul Masayoshi Son's technology portfolio, now worth a fraction of its peak $184 billion market valuation four years ago. Nasdaq Japan, a much-heralded joint venture of Tokyo-based Softbank Corp. and the U.S.'s Nasdaq Stock Market, closed in 2003. And CEO Son, 46, has continued his recent pattern of asset sales -- more than $2 billion over the past year, including the $845 million sale of Softbank's 49 percent stake in Aozora Bank to Cerberus Capital Management of the U.S. -- to concentrate his investments in broadband telecommunications and online entertainment. Yet Son's e-finance ambitions still flicker. Softbank's portfolio includes the Japanese offshoots of U.S.-based E-Loan, E*Trade Financial Corp. and Morningstar; E*Trade Japan is laying groundwork for a possible IPO later this year. Son's Softbank Investment Corp., a venture capital arm, late last year bought two brokerages: Nissho Iwai Securities Co. and World Nichiei Securities Co. Meanwhile, Son is talking to Shanghai-based Tianyi Securities Co. about setting up an online brokerage in China. Though burdened by debts of $3.1 billion, Softbank has apparently outlasted the long bear market: The company's shares are up 183 percent from their low last April, bringing the market cap to $11.75 billion.
26 Charles Giessen
Last year's rank: 28
"Cross-border trading is going to explode -- if we bring friction and processing costs down to the same extent that the U.S. domestic market has done."
In the late 1990s, Charles Giessen, then working at Salomon Brothers in London, concluded that cross-border stock trading was about to take off. He wasn't alone; the same idea prompted the creation of Euronext (see Jean-François Théodore, No. 3), as well as several upstart, pan-European electronic exchanges. Most of the latter, such as Easdaq and Jiway, are defunct. Giessen's trading platform, London-based Omiris Networks, survived by being different. Rather than build an exchange or e-brokerage that depends on spreads and commissions to make money, Giessen organized Omiris in 1999 as a utility that establishes connections among market centers and charges fees based on the cost of communications. "All of our assumptions about the economics of trading and the role of technology in lowering execution costs have been validated," says Giessen, 45, who won't disclose Omiris's results -- except to say that the trading operation turned profitable last year. Whatever the specifics, they've impressed New York software house Tradeware Systems Corp., which last month agreed to acquire Omiris for an undisclosed sum. Adds Giessen: "There's no question anymore whether electronic trading will happen. It's all determined by costs, and we're bringing them down dramatically."
27 Nigel Foster
Not ranked last year
"There is a growing desire among buy-side firms to act in consortia to drive down costs."
Nigel Foster sketched out a business plan for his start-up on a beer mat in a London pub in 1999. With a little refinement, that was good enough for Barclays Global Investors and Merrill Lynch Investment Managers. They became the founding investors in E-Crossnet, the institutional equities marketplace that Foster launched in March 2000. But his concept of electronically matching, or crossing, buy and sell orders at various intervals during the trading day met slow acceptance at first. Foster, a longtime head of dealing and transition management at Mercury Asset Management (now MLIM), says he overestimated investment firms' readiness to automate block trades. But money managers have grown increasingly insistent on low-cost execution. "Buy-side desks are taking charge of their order flow," observes Foster, 51. Charging a fixed 8 basis points for a successful match, and now with 12 buy-side owners and more than 100 participating firms, E-Crossnet's volume in 2003 was £4.3 billion ($7.6 billion). The platform has captured 2 percent of the U.K. daily market volume, still well short of Foster's goal of 5 percent. "I am more confident than ever that we will hit the mark in the next 12 to 15 months," he says.
28 Masakatsu Saito
CO-FOUNDER AND COO,Kabu.com Securities Co.
Not ranked last year
"What differentiates us from other online brokers is not price but investment style and results."
Has Internet brokerage technology become so commonplace that it no longer confers competitive advantage? Masakatsu Saito answers an emphatic "no," saying superior technology propelled Tokyo's Kabu.com Securities Co. to profitability within three years of its 2000 launch. The fourth-biggest Japanese e-brokerage, with 131,000 accounts as of January (just ahead of Matsui Securities Co. -- see No. 7), Kabu projects a 20-fold pretax profit increase in the fiscal year ending this month, to ¥3 billion ($28.5 million). It may do an IPO later this year. How does technology make Kabu stand out? One example is its stop-loss-order capability; no other Japanese online brokerage has it. "To do this takes a lot of system know-how," says Saito, noting that the service requires real-time price tracking of some 3,000 listed stocks. The 37-year-old Saito, who previously worked for a technology arm of Nomura Research Institute, engineered Kabu's corporate and back-office structures in tandem. He acquired state-of-the-art technology in part by offering ownership stakes to suppliers, including Fujitsu (3 percent) and Microsoft Corp. (2 percent). That gave Kabu the credibility it needed to raise more substantial amounts of capital from trading giant Itochu Corp. and UFJ Bank, which each own one third of Kabu. Asserting the firm's cost advantage, Saito plans to trim trading commissions by about 10 percent in April.
29 Oleg Mikhasenko
GENERAL DIRECTOR, BrokerCreditService
Not ranked last year
"To work on the Internet, you obviously need big volumes and low costs."
Oleg Mikhasenko has turned the Siberian city of Novosibirsk into Russia's brokerage technology capital. Mikhasenko, the head of nine-year-old BrokerCreditService, was born there, and when he needed programmers to put the business on the Internet in 2000, he recruited graduates of the Economic-Mathematical University -- a legacy of former Soviet premier Nikita Khrushchev's 1950s-era plan to establish Novosibirsk as an "academic town." Today, with about 10,000 clients and $1 billion in monthly transactions, BrokerCreditService is the biggest online brokerage in Russia's sizzling capital markets. The firm's numbers aren't likely to rival those of Mikhasenko's U.S. role model, Charles Schwab & Co., anytime soon. But noting that the business doubled in size last year, the 40-year-old proclaims, "We have reached critical mass." He believes the firm has bested competitors in Moscow, three time zones to the west, with such customer service features as a full portfolio accounting seven times a day and a blizzard of product offerings ranging from mutual funds to insurance. Still, the allure of Moscow money is irresistible; Mikhasenko now spends half his time there, one of several major cities where BrokerCreditService has offices. Mikhasenko is guarded when asked to describe his clientele, but as one former employee puts it, "Oleg serves people who like to play the market like a casino."
30 Karen Wendel
Not ranked last year
"There is demand for truly trusted IDs on the Internet, where somebody vouches for a customer's identity."
Barclays, Citigroup, Deutsche Bank and several other world-class institutions leaped to the forefront of e-commerce in 1999 by forming Identrus to develop and manage an authentication technology to secure business-to-business transactions. Then, the B2B buzz fizzled out, and Identrus struggled to establish an identity of its own. But the banks stuck with it -- 22 own equity and 40 more participate as Identrus certificate authorities -- and the New Yorkbased organization has been reenergized since Karen Wendel became CEO last May. "The technology was fine," says Wendel, 45, who had spent most of her career with consulting firms Gemini Consulting and Capco. "The big issue was that we lacked a rich portfolio of applications to deploy, and we're addressing that." One set of applications came with Wendel: EFinance Corp., a San Francisco company she had run for two years, was acquired by Identrus in January, and with it an automated credit analysis and decision-making tool used by Automatic Data Processing and Hertz Equipment Rental Corp. Identrus technology is also embedded in SimpleSign, a joint offering with Adobe Systems for electronically certifying corporate and government documents, and in e-commerce programs initiated by the U.K.'s Royal Bank of Scotland Group, Japan's UFJ Bank and other institutions. "Trusted identification will be a huge business," says Wendel, "and banks should own it."
The Online 30 profiles were compiled under the direction of Global Technology and Banking Editor Jeffrey Kutler and written by Kutler, European Editor Tom Buerkle, Hong Kong Bureau Chief Kevin Hamlin, Senior Editors Steven Brull and Andrew Capon, Staff Writer David Lanchner and Contributors Jane Adams, Naazneen Karmali, Craig Mellow, Prue Moodie and Assif Shameen.