CEO Chat: Frank Troise, ITG
Markets Media sat down with Frank Troise, who joined ITG as chief executive officer in January. What follows is a lightly edited transcript of the June 29 interview.
You stepped into the top job at ITG about five months ago, coming from J.P. Morgan. You had been with ITG previously, from 1997-2005. What are your impressions since returning?
From seeing over 150 accounts since I’ve been back at the firm, it’s clear that the firm is very relevant in the industry, as a technology-driven, independent, agency-oriented, global execution broker and partner. Clients value the capabilities that the firm brings to market — liquidity and execution services, analytics and workflow tools.
Clients are increasingly challenged to find liquidity that has fragmented electronically. We have tools, including Posit, that help clients find liquidity. With our suite of execution services, we can capture our in-house liquidity and also take clients out to the Street to capture liquidity that we can’t fulfill with our own crossing system and Alert product.
Best execution and transparency are two themes that the firm has been a part of for a couple decades. The firm continues to play a big part in the industry and it will continue to focus on these themes into the future. ITG has a rich set of capabilities, and the breadth of these capabilities is second to none. The product spans liquidity and execution services, which is single-stock, program trading and electronic execution; analytics in the form of pre-trade, post-trade, fair value modeling, and optimization, and workflow tools, which are execution management systems and networking. That is an incredible breadth of product, and it is delivered globally across Canada, the U.S. and Latin America, and Europe and Asia-Pacific.
So my biggest observations are one, our relevance in the client community and two, the geographic scope and end-to-end breadth of our product offering.
How have you communicated your message to employees, clients and investors?
In my first week I conducted a series of town halls in each of the regions — U.S., Canada, Europe, and Asia. It’s great to be back at ITG. This is not a return to yesteryear. It’s about moving forward and about how we make ITG the best it’s ever been. We’ll focus on our historical brand identity related to transparency and best execution, and being a trusted global advisor and a high-quality liquidity provider. The focus will be on four key synergistic business engines: liquidity, execution, analytics, and workflow tools.
After kicking off with an in-house tour, I did an earnings announcement. My objective was to message to the investor community a focus on the core engines of the firm and clarity around the notions of business simplification and commitment to outcomes. After that, attention was turned to an intensive road show to see clients and discuss governance changes we had made and collect their input on our relationship and capabilities. I wanted to hear what clients thought about ITG, good, bad or ugly. Some clients were very positive on ITG’s set of capabilities, while others were still lukewarm on the back of the issues that we had with the SEC.
Overwhelmingly, the key take-away is the relevance of ITG. What really resonated with clients was our re-focus on our four competencies. I communicated this to clients, took in a lot of feedback on our capabilities, on where we’ve been over the past few years, where we are headed, and where they’d like to see us go and invest in the future. We are sitting on about $100 million of investor capital. With the team I saw about 150 accounts across all regions and took-in their valuable input on where they’d like to see us go.
We have a July 28 investor call where we’ll share results of our end-to-end business review and investment plans.
What is your perspective on the SEC issues (for which ITG paid a $20.3 million fine last year for rule violations related to its dark pool)?
It’s in the past. What was clear to me is that it was not a pervasive cultural issue. ITG held itself accountable and confronted the issues. Our SEC issue is done. That is not who we are as a firm. It was very important to get out and see clients and let them know that it’s not going to happen again. We hold ourselves accountable for that and will work extremely hard to prove our value and regain a reputation for the utmost level of integrity. Our brand voice has always been about integrity and being a trusted global client advisor, and that’s what we are focused on going forward.
ITG recently sold its investment research unit and closed its Canadian inter-listed proprietary arbitrage trading desk. What was the rationale for these transactions?
These moves are all about clarity and focus — clarity and focus and putting our money where our mouth is and moving along with the game plan. Not just talking the talk but walking the talk. We are completely out of the research business as of the last Friday in May. Our focus is liquidity, execution, analytics and workflow — it’s not interlisted Canadian arbitrage trading, although that was a profitable business and I am the last person to turn my nose up to profits. But it’s not our core business. Our business is around solving clients’ problems and challenges related to execution and liquidity access.
What is your sense of market conditions overall? There has been some decent volatility this year.
We think there is significant opportunity to work with our clients with a focus on best execution and operational efficiency. Clients need to implement investment ideas every day. We are here to work with them to minimize implementation slippage, to give them tools that allow them to measure transaction costs which will help them get even better at execution and to give them workflow tools to lower their costs and increase their operational efficiency. There is significant opportunity in the macro environment to deliver these capabilities as a solutions-oriented organization, to clients who are under pressure to deliver alpha and drive down their own operational costs.
How does ITG differentiate itself vis-a-vis other agency brokerage firms?
We have a heritage of innovation and delivering client solutions. We approach clients from the standpoint of what are your challenges and how are you trying to solve those challenges. We present what we can bring to the table and we will also give our view of industry challenges. When we talk about our products, we say here is our set of capabilities to face off with market challenges. We’ll provide a set of solutions across the entirety of the activity chain, from the moment the investment decision is made, starting with pre-trade analytics, to trade scheduling, intra-trade analytics, workflow tools to support single and multi-order routing and execution, and then post-trade analytics. We work with the client to evaluate the efficacy of that game plan, and then partner with them to improve the process. Our offering is complete across the trading activity chain. This is a differentiator relative to mono-line players.
IEX was recently approved to be a stock exchange. How might this new player affect market structure?
I’m a big fan of innovation. We are not the only innovators out there. IEX represents innovation for market structure which is very healthy for our clients. The end result is different liquidity pools with different characteristics — from there it’s on us to innovate for our clients to optimally access the liquidity pools and put them to work in the best fashion. Innovation is important for the industry and IEX is a good example of that.
What does Brexit mean for the markets and for ITG?
There are two parts to this. Short-term, when an event such as Brexit occurs, we need to ensure that we have the capacity and scale to ensure a stable, reliable execution experience for our clients. We didn’t expect the Brexit outcome but we had prepared for it to ensure stability and reliability. Belts and suspenders around operational risk management was priority one.
From there we took a look at what the implications would be strategically and into the future. We are well-positioned for Brexit — we don’t know what it really means for the U.K. to exit and what are all the implications, but we have optionality. We have a London office and also a Dublin office. The Dublin entity gives us a lot of optionality around addressing the different outcomes that may occur depending on how the cards break.
ITG has added quite a few folks this year.
My first day on the job was January 15. On that day, we elected a new chairman of the board, Minder Cheng. Minder comes from the industry and he’s known ITG for a couple decades — it’s a real luxury for the management team to have a board member who understands what clients are trying to do every day with respect to execution, sourcing liquidity, and measuring transaction costs. He also understands the complexity of what we deliver to clients and all of the moving parts.
Second, we added Brian Cartwright who was the general counsel at the SEC, not to mention a Ph.D in astrophysics before he became a lawyer. When we talk about STEM skills, he was way ahead of that curve.
Lee Shavel also joined the board, most recently he was the CFO of Nasdaq. And, Kevin Lynch brings the investor mentality to the table. With the other members of the board before I got here, it’s an exceptional board.
As far as key hires, technology is our middle name and it’s at the heart of everything we do. We hired Saro Jahani, who had been with Direct Edge. Posit Alert is one of our cornerstone products for providing unique liquidity, and for added focus we hired Andrew Larkin who’s a very senior experienced operator in the industry. He’s in charge of our Alert coverage desk. Another significant hire was Tom Shpetner as global chief compliance officer.
These are just some example of the moves we are making to focus and accelerate the franchise. We are also not waiting for an end-to-end review to be done. We have shed non-core businesses. We have moved along with hiring to bolster and fortify the aspects of the business that we felt were very important to our clients — specifically related to compliance, Alert liquidity, and technology.
You run into someone you haven’t seen in a while on the elevator for the short ride down from the 5th floor. That person says ‘Hey Frank, what’s going on?’
Our focus is on execution and innovation in key areas — liquidity, execution, single-stock, program, electronic trading, analytics and workflow tools. We are in this business to be a global best-in-class solution provider across the activity chain.
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