GC Friday Interview: Jeff Conway, Head of State Street Global Exchange

State Street this week launched its Global Exchange business, which combines capabilities in research and advisory, portfolio performance and risk analytics, electronic trading and clearing, information and data management. Jeff Conway, head of State Street Global Exchange, talks to Global Custodian about how the business has been developing its data surveys to further understand institutional investors’ challenges in these areas.
By Janet Du Chenne(59204)
State Street this week launched its Global Exchange business, which combines capabilities in research and advisory, portfolio performance and risk analytics, electronic trading and clearing, information and data management to help asset owners and managers gain new insights and execute investment decisions efficiently. To mark the launch, the custodian bank released the results of the survey whereby it was revealed that the accuracy of data is the highest strategic priority for 37% of institutional investors. Jeff Conway, head of State Street Global Exchange, talks to Global Custodian about how the business has been developing its data surveys to further understand institutional investors’ challenges in this area.

What is the background to the launch of the Global Exchange business?

JC: We put the business together in April of this year on the premise that our customers were dealing with a heightened level of data and analytic challenges and they’re asking us to play more deeply in a space of solutioning for and with them. At the time we said we have a view of what our customer base is looking for, we have a view of what capabilities we need to be able to solve those challenges but we’ve got to get deeper in specifically understanding what our customer base of institutional investors is looking for not only today but in the future. So the April launch brought together smart people with good capabilities that began to get in this space. At the same time we needed to get deeper into understanding those specific needs of the institutional investor base. That’s the survey work we did with the Economist. The ability of the Economist to drive this survey, to reach out to 400 plus institutional investors across different segments, across different geographies and give it the insight that they give has been incredibly valuable. The reasons I say valuable are that there is a lot of data and analytics in the industry and they are really big words. What we needed to do was to get much more specific, get the context and get the translation in a way that would inform our strategies. What has happened here is that our survey has done that. We looked at the survey as a means to get much more aligned in the future through Global Exchange.

How did the surveys drive the business?

JC: Over the last three to six months we have advanced the survey to equities distributed across asset owners across different geographies. Some of the highlights that resonate for me are that when you go out to this group of institutional investors, nine out of ten say that data analytics is a strategic priority for them, 37% say it’s the highest priority and 86% say that they’re going to increase their investment over the next three years in this space. So when you interpret that you come up with a view of who are the data leaders and the data laggards. It’s a matter of who feels comfortable in the area of their data position and who doesn’t. The important thing is even the leaders, 29% of the total surveyed, are still spending significantly more in that space over the next three years and that to me emphasizes the pace of change we’re seeing that those customers and institutional investors are dealing with. You’ve got to work hard to keep pace because of new technology and the general theme that we’re all overrun by amounts of data. New regulation is driving greater concern and focus around risk, around transparency and some of that new regulation is changing markets. A good example of changing markets is what we’re seeing in the derivatives space with the introduction of clearing, swap execution facilities and electronic trading.

Has the rush to market by institutional investors to embrace big data in the last year being caused by the onset of regulation?

JC: Some of the feedback is getting more pronounced. The survey talks about key areas where investments are required in the future and the first is risk management standards. Certainly one or two years ago risk management standards have become more pronounced given what we know today versus two years ago. The electronification and the growth of trading is another one that is high on the list and that has become more pronounced over the last two years with the growth that’s happening in the derivatives space. And I think increased demands from regulators has become much better understood in the past two years with respect to what the requirements are of the regulations. In the next few years, regulation is not going away and you’ve go to be able to create an ability to meet that regulation with the right flexibility and pace of infrastructure.

What hires have you made to drive this business foreword?

JC: As we look at the challenges our customers have been dealing with we’ve been learning to anticipate their needs and so we put together Global Exchange, which is made up of about 850 folks. It’s construct is that by taking different capabilities we have across State Street and pulling them into a new organization that gives them more focus and purpose in solving the data and analytic challenges within the front office of our clients. That is the framework of what we’ve done. Since that, we’ve been able to attract very good talent that has been able to support and deepen our talent base and capabilities in certain areas e.g. deepening our risk capabilities has been a strategic priority for us. We’ve been able to hire a number of people in London and the U.S. but also we’ve been able to hire people like Roger Stein and folks that I would call more entrepreneurial and more development oriented in terms of the next generation analytic models and capabilities. So while we continue to deepen the current services we have in the risk space at the same time we are looking for breakthrough opportunities and exploring next generation potential in that analytics space. So we’ve been able to attract the full set of talent.

One other area I get excited about is electronic trading. If you think about the market moving, regulations are requiring greater transparency and greater standardization. So there are emerging asset classes that are moving more towards the electronic space e.g. in derivatives and fixed income, and quite frankly FX has been electronic for a while but probably moving at a faster rate toward the electronic space. We’ve been able to attract a significant group on the sell side to be able to support that electronic shift.

Where do you see those breakthrough opportunities coming from?

JC: I could see the risk space moving to an evolving next generation model of risk analytics. I think a more robust integrated set of risk and performance capabilities are required in the market. And as we digitize our operations the ability for us to gain broader solutions and data-driven solutions for our customers around data aggregation and offering a greater ability to provide insight into that data aggregation. Those are the three key areas we are focusing on internally.

We looked at what the customer base required in terms of solutions and we pulled different capabilities and therefore people into this organization. So we have electronic trading capabilities, we pulled them into global exchange as a unit, we pulled in some of our software capabilities, some of our risk services and we advanced the business model innovation. We harnessed our talent and capabilities to create more focus, purpose and impact and solutioning for the future. So this 850-person unit has a set of capabilities that allows us to engage and provide a set of services today. It also allows us to create the focus and the purpose for us as an organization in State Street to invest more directly in the future through global exchange. Its part of what we have today but even more importantly it’s creating more focus and purpose around future investment in the space that I described.

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