Maverick mind, business brain

Howard Edelstein

Howard Edelstein has found repeated commercial success through not being a dedicated follower of fashion

In the securities services industry Howard Edelstein may be best known for bringing Omgeo into being through the merger of the trade confirmation businesses of Thomson and the Depository Trust and Clearing Corporation (DTCC), but his career has found him at the helm of a number of well-known businesses including Thomson ESG, Radianz, Nyfix, BondDesk, and most recently, as executive chairman, REDI Global Technologies.

A persistent thread throughout his career has been the attraction of building collaborative, community-based businesses, combined with a certain delight in challenging perceived wisdom. A few years ago, a profile of Edelstein by Global Custodian editor Dominic Hobson described him as always spurning the conventional approach “in favor of taking on the assignments that others regard as impossible.” It is fair to say that he has carved a career out of taking on challenges that others considered too daunting.

“When I started in the equities business, all the processing was done on paper,” Edelstein recalls. “It was absurd. I could see there was no way that 10 years out, they’d be delivering boxes of paper to counterparties every time they did a large block trade, but at the time it was like tilting at windmills. The big entrenched players liked things the way they were.”

One of the things that changed the industry mind-set was when a large fund’s trade allocation sent via the then-popular means of trade communication—secured faxes—somehow turned up at the Wall Street Journal. “All of a sudden people realized there was a risk management component to this,” Edelstein notes. “So changing the way people did things and doing it within a community structure was really cool. It was the social networking of its time.”

One of the arguments that emerged in the industry was whether the desired automation could be best accomplished by the private sector or in a utility. “People thought in terms of ‘utilities’ and ‘vendors’; there was nothing in between,” says Edelstein. “We created a hybrid. Omgeo was industry-governed, but it had real financial discipline and was operated as a business in its own right.”

Bringing the buy side and sell side together within a commercial framework was made possible by the culture that prevailed at Thomson at the time. “Thomson was unique in the way it created a safe place to innovate within the confines of a major corporation,” he recalls. “You either innovate or evaporate, we said at the time, and it is true even more so today.”

“I don’t see a lot of innovation in large financial services firms today. I just see a lot of energy going into compliance,” Edelstein observes. “But there are small start-up and early-stage players who are adapting technologies previously used in other industries for finance to deliver truly innovative solutions to emerging problems. This ‘technology for finance’ space is where I am spending a lot of my time these days.”

Edelstein is enthusiastic about his involvement with a number of start-ups, mostly out of Israel or New York, that “are doing unbelievably interesting things.” One is a company called BioCatch. “These guys have shown that your body and your synaptic cortex radiate patterns through your actions at your computer: how you use your mouse, how you type on a keyboard, how you perceive where the cursor is on the screen,” says Edelstein. “So by calibrating these different patterns for each individual you create a highly secure method of authentication.”

Another young company that Edelstein is enthusiastic about is Algomi, which is applying a proprietary information management system to the problem of sourcing liquidity for fixed income trading. “While all the banks are trying to solve the liquidity problem through building e-trading platforms for bonds, by focusing on the liquidity rather than the trade, these guys have come up with a counterintuitive solution.” Edelstein has an equity stake in Algomi and is a Strategic Advisor to the firm.

If it’s not quite on the scale of Y Combinator, Edelstein nonetheless is playing the role of an accelerator of sorts. “I’m trying to help young innovators turn really good ideas into really good businesses. I am focusing on helping companies that see the future first execute on getting us there,” he says. One challenge is to negotiate passage through the recently-enhanced vendor risk management programs at the banks—a challenge upon which Edelstein can bring his previous experience to bear.

Edelstein still retains a number of board positions in more traditional financial technology businesses that focus on problems such as Know Your Customer (KYC) data, collateral management and trade management and execution. But, he says, “I’m still trying to figure out what to do when I grow up!”

Meanwhile, Edelstein is following what he considers his most important bit of advice. “I’m having fun,” he says.

–Richard Schwartz