Retirement failure

Kevin Milne

Kevin Milne, owner, Due Diligence Reports, has found retirement the least successful of his recent ventures

At the time of Big Bang in 1986, Kevin Milne was working for the London Stock Exchange (LSE). At the heart of one of the industry’s most profound changes, Milne was “working with member firms, jobbers and brokers, who were going through this transition of moving off of a floor-based system and onto an electronic system,” he recalls. The question of how to deal with fundamental change has been a driving force in his three-decade career in finance.

“Something I’ve discovered over the years in terms of financial markets infrastructure is that when you mend something, when you solve a problem, you create three others,” says Milne. With Big Bang, trading latency fell from around an hour to a few minutes, but “nothing happened in the back office.” The volume of trades spiked, yet the back office was still largely using manual processes. This proved a recipe for disaster.

Milne remembers Black Monday as “the week after a big storm in London.” With markets collapsing, “the processing just couldn’t keep up, and then trades were failing left, right and center.” Witnessing the spectacle of collapse first hand proved fascinating to Milne. “There had been huge amounts of investment, focus and change in front-office practices,” he says, “but the trade needs to be settled.”

An industry user group was assembled. “They said, ‘look, this is a problem. We’re trying to get out of these positions, we didn’t know what our holdings were, we couldn’t value our portfolios, we couldn’t communicate with our customers. Something needs to happen.’” Milne, who in the meantime had moved on from the LSE to Thomson Financial, was at the heart of the development of the industry group’s proposed solution: electronic trade confirmation (ETC).

Replacing “this flurry of faxes and Telexes bouncing backwards and forwards and being stapled together and passed on to somebody else to process,” ETC allowed the buy side to send an electronic order to their broker, who would execute the order and send back confirmation. Despite competition between three main vendors—Thomson, the LSE and what was then the AIBD – each ETC system was connected. “So if a buy-side firm was on service 1 and the broker was on service 2, it didn’t matter; they could choose whom they wanted to use and through an inter-vendor link those trades were connected with the other confirmation systems,” he explains.

Milne looks back fondly on his time working on ETC: “It was something genuinely new that was solving problems.” Running Thomson’s global non-U.S. ETC business, Milne spent seven years “taking that from a small London-based business to having offices pretty much all over the world. Tokyo, Hong Kong, Sydney, Singapore, Stockholm, Paris, Frankfurt, and now it’s probably in more.” The challenge, for Milne, was “working out how you can build a local business but around a global standard.”

If the ETC movement, built on the ashes of one financial crash, became one of Milne’s happiest memories, the two years after the global financial crisis of 2008 would prove to be a bleaker time. Back at the LSE running post-trade services, Milne found himself responsible for the Exchange’s assets in its Italian clearinghouse (Cassa di Compensazione e Garanzia (CC&G)) and depository, “working very closely with central banks and with authorities to make sure that orderliness continued.” The question, in late 2008, was “How do we get things back to normal?” Milne says, “but that was six years ago and things haven’t gotten back to normal. There’s probably a new normal.”

After leaving the Exchange for the second time, Milne resolved to retire, “slow down a bit, have a portfolio career and get some life back.” As he puts it, “That didn’t last very long.” When the Libor scandal broke in 2012, Milne found himself again thrust into the middle of the industry’s attempts to pick up the pieces, running Rate Validation Services (RVS), an Australian company who were “probably the only people on the planet who had a solution.” After working with the New York Stock Exchange (now Intercontinental Exchange) on their successful bid to run the new Libor, Milne served as CEO of RVS, seeing through the process of going live earlier this year. Milne stood down shortly thereafter, deciding to “go back to plan A again.”

His second stint of retirement looks set, however, to be as short-lived as the first. “I’ve decided—I didn’t decide, I was told—I’m too young to retire, and I should go back and get a proper job,” he says. He is currently working out which “big challenge” he wants “to get involved in.” Milne lists a multitude of “fundamental issues we have as an industry that need to be addressed,” from the supply chain of information, to continued problems with back-office operations, to the lack of transparency in trade repositories. “There’s no shortage of problems, but it’s trying to find the right constructs for those problems to be solved,” he says.

–Richard Schwartz