It was arguably one of the most exciting times in derivatives history when Dan Smalley took a job at the London Financial Futures Exchange (LIFFE). Threatened by the growth of electronic trading in nearby Germany, Smalley was part of a team that began working on LiffeConnect to prepare for the next phase of trading. Fast forward fourteen years and Smalley is living in New York leading efforts for a new chapter – this time in Fidessa’s story as they expand into futures. Smalley sat down with MarketsWiki’s Jessica Titlebaum to share his bird’s eye view of the global markets, the motivation behind the firm’s expansion and how his initiation into derivatives involved getting thrown into the Bund pit.
Q: How did you get into this industry?
When I was studying at the University of Liverpool, they used to have companies come by and talk about the different job opportunities. One of the professors at the school had a great relationship with one of the senior people at the London Financial Futures Exchange (LIFFE). The Exchange offered a graduate trainee scheme and I was one of the few people that participated in the program.
It was one of the most exciting times to be at the Exchange and I was very lucky to have worked there when I did. A vast majority of the trading was on the floor at the time but changes were on the horizon because Eurex DTB was gaining volume in the Bund contract.
When I first started working at the Exchange, they stuck me in the Bund pit as an initiation. I fell in love with the industry right then.
At LIFFE, I initially worked in product marketing but got involved in technology projects towards the end of that first year. Soon after I started it became clear that the Exchange had to invest in a technology platform, which led to the creation of LiffeConnect. I got involved in defining the platform specs and the design of the program around LiffeConnect.
Q: How long were you at LIFFE?
I worked at LIFFE for about six years before taking a position with GNI, which was acquired by MF Global. I was hired to implement new derivatives technology on the institutional side. I worked there for about two years before moving over to Crédit Lyonnais Rouse where I ran the front, middle and back office technology. I enjoyed that job because of the breadth of the role. We had markets in futures, equities, metals, energies, weather – it was a fantastic experience. I left the company before it was transformed into Newedge to work at Fidessa.
Q: What is your biggest challenge at Fidessa?
My biggest challenge is finding focus with so much opportunity. For example, I am responsible for growing Fidessa’s business among large scale clients in the Americas. Concurrently, we are expanding our presence in Latin America, formalizing our global futures and options offering, and expanding our high frequency trading offerings. Then, we still have our normal business of cash equities so we are always pulled in different directions.
Q: You recently moved from London to New York for business?
Yes, I have been in New York for about a year now. I had a similar role in Europe focused on European, Middle East and African markets. It worked out well because Fidessa recognized the opportunity in America to expand into derivatives. The firm needed someone who would drive them in the direction they wanted to go and I was open to the move.
Q: Do you see any differences in how the American markets are operated compared to the European markets?
Off the bat, the American markets probably feel more regulated. It’s interesting when you operate in different regions over multiple asset classes. You see the different stages of firm and market evolution. I think that the US equities market is probably the most evolved because it is so liquid and so extensively traded. High frequency trading and algorithms are very advanced in the equity markets.
As we expand into other markets we are seeing how cities have differentiating personalities. London and Chicago seem similar to me in terms of accessibility, people and looking at alternative ways to do things. New York has its benefits because people are confident, quick and decisive.
Q: How has regulation changed your technology offerings?
It’s a continuous source of input into our strategy. You can look across the pond to Europe and see how MiFID impacted the markets and all the fragmentation. We had to build connectivity to dozens of new markets and design smart order routers due to impending regulations and customer demand. It created an arms race of system technology.
I believe as regulation around competition within the US futures market grows, the market will eventually start to fragment – the big silos hanging over the exchanges will be broken down and you will be able to trade fungible instruments into common central clearing houses, similar to the US options or equity markets.
Q: You are moving into the futures markets, what has been the biggest driver?
Our biggest driver has been the customer. As they look across multiple asset classes, they don’t see a need for multiple trading platforms. We believe there is a gap in the global offerings for order management systems and we’d like to fill it.
We have spent a lot of time trying to figure out our strength, which we believe is connecting buy side firms with sell side firms on a global scale. From that we look at all the opportunities out there and figure out the best next steps. Again, it’s finding that focus.