Transcript

Julia: Hello, and welcome to StreetsTalksToo. My name is Julia Streets. In this series, I’ll be interviewing CEOs from some of the most influential firms, industry bodies and initiatives. As every CEO will testify, one of the critical factors of success lies in the strength as a team. On each episode, we invite the leader to bring along one of their colleagues and together we’ll be looking at what’s at the very forefront of innovation of change. We’ll be thinking about the challenges and uncovering the opportunities that exist both today, and as we look ahead, particularly as we all navigate these extraordinary times.

Today, I’m delighted to be joined by Paul Humphrey, CEO and William L’Heveder, COO of BMLL Technologies. Let me just tell you a bit about the company. BMLL is a financial data and analytics company serving the world’s most sophisticated markets participants. They help clients understand how markets behave by giving them access to granular order book data from exchanges and trading venues worldwide, and also the tools with which to analyse it.

With BMLL, traders, quants, researchers, business analysts, and compliance staff have access to the analytics and the tools they need in order to unlock the predictive power embedded in historic pricing data, and ultimately to make better trading decisions. Paul Humphrey is the CEO, he joined beginning of this year, January 2020. He is a seasoned Board Director and Strategic Advisor. Paul brings extensive experience in market infrastructure, market data, fixed income, foreign exchange derivatives and commodities.

Prior to joining BMLL, Paul, has enjoyed a prestigious career in many banks and financial institutions even launching his own consultancy. Most recently he served as interim CEO of Euronext London. He’s been Global Head of fixed income, currencies, and commodities as Euronext NV prior, and was Chief Executive Officer of electronic broking and information at Tullett Prebon. Today Paul brings his colleague William L’Heveder. He’s the COO of BMLL and he joined in 2019 from the Boston consulting group where he advised capital markets clients in the fields of technology, data and the evolution of the regulatory landscape. Prior to BCG, William spent four years on the buy-side in trading and operational roles with a focus on equities and interest rate futures at Met Traders, Gartmore Investment Management and Neptune Investment Management. Gentlemen, welcome. It’s wonderful to have you on the show.

Paul: Thank you, Julia. It’s lovely to be here.

William: Thanks Julia, it’s really great to be here.

Julia: As you know, the objective of the show is to start by looking at the world at large. Think about the customers that you’re serving, some of those I explained in your introduction and what they’re thinking about at the moment. Paul, could I bring you in first of all, what do you think about, what keeps your client awake at night at the moment? What are they particularly thinking about?

Paul: Well, we’ve seen tremendous surges in volumes and spreads widen with immense volatility, certainly in March. We’ve seen more aggressive trading behaviour in the market as firms are certainly looking for certainty of execution of their orders. In times of volatility such as this, having a clear picture of what is happening in the markets is key. As a result, we’ve seen increased demand, I’m pleased to say for our data and analytics capabilities to help clients make more sense of these market moves and support their trading functions.

Julia: William, you look at this very much from an operational point of view when you’re talking to your clients from that lens, what are the big things that they are talking to you about?

William: One of the things that our clients have always done is maintain enormous data warehouses on-premise and in house. One of the things with working from home is all of that the latency trading is so dependent on is no longer there, because the decision makers are at home. Access to all of that granular data, the analytics, the systems that they need to operate at their best are all on premise, and there’s a dislocation between the decision makers having access to that data. That’s really where just to pick up on what Paul said, that surge in demand that we’ve seen is because we’re able to deliver that in a seamless cloud delivering records.

Julia: Paul, looking at the buy-side, thinking about the sell-side, are we seeing change in behaviours?

Paul: We’re starting to see new patterns of behaviour, certainly there actually seems to be a divergence if you like between the buy-side and the sell-side. The sell-side seemed to be operating in much more of a disaster recovery mode, split teams, working from the office, some of them even working from DR sites. And of course, when they’re doing that, they’re working with their existing infrastructure, so they’re not really having to think about their screen real estate.

On the other hand, the buy-side seems to have moved home and they seem to be able to operate far easier, therefore, they’re not going to be coming back necessarily anytime soon, certainly as fast as the sell-side. Now, whereas the buy-side typically operated with maybe 4-6 screens around them, now they could be working off a laptop or maybe a couple of screens, therefore screen real estate, which frankly was red hot to begin with, has now gone somewhat white hot. Getting your insights in front of your clients is more challenging than ever. This is where we see data and analytics play a real part in this, in getting your clients’ attention.

Julia: Clearly getting readily integrated on to, as you say, ever smaller screens and being able to get that functionality to work right the way across all of your trading applications really matters as well. William, from a structural, operational point of view, is there anything that you’re worried that people are putting key decisions on the back burner that they’re overlooking at the moment?

William: Yes. There’s been a natural trend towards cloud adoption. What we’ve always said is that the cloud is immensely secure, not only for market data, but also for proprietary data, providing it’s architecture and infrastructure is in the correct format. One of the things I think this pandemic will accelerate is the adoption of the cloud as people see it – distributed working model and operating model coming to the fall. By that, I mean, imagine if you’re operating a dual team system, so red team, blue team with 50% of the people in the office. As Paul mentioned, you’ve got 50% of people on traditional six screens, eight screens, and you’ve got the other half at home, making sure that there are no losses, there’s no downtime, that the data that both teams are seeing at the same time is the right one. I think we’ll see a kind of accelerated adoption of certain cloud solutions.

The flip side to that is with all the volatility that’s going on in the marketplace, we should have a very different approach to run the bank and change the bank balance. The capital expenditure element for the bank’s balance sheet is going to be put on hold. Simply because no new investments are going to be made.

That means that people halfway through programs are going to end up running the risk of taking shortcuts. What they’ll try and do is find a one-on-one solution fits all model, which may not actually work. What banks and clients have to be very conscious of, is making the right decisions when it comes to that cloud adoption, because when you’re going through these turbulent times, focus on costs is at the fore, and what you want to make sure is that you’re not spending your money stupidly.

Julia: Paul, is there anything you’d add to that? I saw you nodding on our podcast platform. You were nodding along to that, but I wonder if you’ve anything to add?

Paul: Certainly I think there’s going to be a change in attitude, I think, to working from home. And dare I say, I think some of this is rather correlated to generations. Maybe perhaps the older generation, the older you are, the more you need to change. Take my generation for example, one of the things we did to an industrial standard was turn up when we first started in the industry. We turned up no matter what, in many ways, perhaps, or on many occasions we’d have been more productive, if in that time, we’d have been able to work from home. But the technology wasn’t there and didn’t allow us to do so. I think we’ve learned a ton.

The other thing is financial services as a whole, we’ve been wildly behind other areas of industry. Zuckerberg announced 50% of the staff will return to the office. He will hire people from multiple 

locations, notably remote ones from where their offices are located and has been quite open about the levels of pay that those roles might attract. I think in financial services our thinking in terms of remote working and how we accommodate that, and with the technology that we have around us today, I think there’ll be a very different model when we go back. The expression of hybrid seems to come up a lot when I’m talking to people.

Julia: It’s interesting because obviously as you say, you’re out in the industry talking to the industry virtually if not physically all the time, and now I’m really keen to pivot more towards BMLL, and what are you doing to help clients through all this? How are your products and services adapting? Will, what are your thoughts on that?

William: If we think about the impact of remote working and the lead technology sector has had, especially over the financial services sector for the last 10 years, really the war for talent has been lost by the banks. Top graduates coming out of the top universities have a choice with companies like Google and Facebook and Twitter offering these much more affordable packages. The pay is on a par, Google’s 80/20 enables this kind of enormous creativity, and what we’re going to find is as Facebook and Twitter are offering this ability to work from home and offering packages just to support those who want to work from home, our clients are going to end up having to compete for the same talent. What we’ve always been saying at BMLL is that the speed race is over, and the data race is only just beginning.

When you start thinking about that, you realize you’re no longer competing for a niche subset of technologists who always want to try and cut the processing time down. You’re competing with every other analytics provider in the world for that talent. Data scientists can go and run advertising data science with Facebook and make a meaningful impact. There’s an increased war for talent, so  banks and asset managers and traders and hedge funds are going to have to start finding non-financial incentives to recruit that talent. People are looking at that broader, full benefit package as a result.

Julia: Paul?

Paul: Yes, I think about this, we call this democratisation, if you like, of financial services. A bit of a perfect storm that we’re witnessing here, we’re seeing a pandemic accelerating the existing market trends towards the democratisation of these services. Over the past decade, we’ve seen this gradual breakdown of monolithic and siloed services across capital markets, and we’ve seen fintechs emerge to fulfill the technological requirements or indeed gaps, many of these firms have to help. This can be a regulatory compliance. With the adoption of cloud, and open source technologies, smaller, innovative, and highly specialist providers such as us can enter the stage to partner with the incumbents and help them. I think there’s certainly a move away, and there has been for many years now, in terms of developing in-house. The ability to work with third party providers is opening up a slew of conversations for us.

Julia: It’s interesting because I mean BMLL is not a startup, but it most certainly is a fintech, talk to us a bit about the corporate history. William, let me come to you first, how old is the organisation?

William: BMLL was founded in 2014 as a spin off from the Cambridge Signal Processing Labs, with the aim really of taking the research that our founder set out to achieve and creating a framework for analysing granular data. Since then, we’ve basically been building on that initial foundation and built a platform that collects data from 45 different exchanges globally, harmonises them into a unique format that captures all of the information that enables you to seamlessly transfer your analysis from different stocks to different venues without replicating your code base.

And then on top of that, a layer of analytics libraries, open source and proprietary, enable you to effectively shrink the size of that data set down, manipulate them more easily, and then on top of that apply complex statistical methods to derive the insight. That’s kind of the overarching platform and that took a long time to build and subsequently, in the last 12-18 months, what we’ve done is build modular products on top of that, that enable us to not only deliver that access or that granular data and analytics to a broader set of market players, it also delivers across different use cases.

So if you are a trader, and you care only about ingesting pure data, you don’t want to do the research, we offer you a data fee. If you are a human who wants to look at visualisations or see the insight in an impactful, interactive visualisation, we can do that too. That’s where we are now, and we’ve got these three distinct product lines.

Julia: Let’s bring some of this to life then. So here we are at a time of change. You’re out there talking to various players in the industry. Can you give us an example of the kinds of use cases that people are talking to you about?

Paul: We’ve taken sample sets from particular venues, if you like, over and above the data that we already collect. As William said before, we collect level three data, which is the most complex data available from 45 different venues, frankly in 45 different formats, and we pass that data into a usable library.

We then take that data and we can analyse the performance of a venue, for type of performance that they can put out to their clients, indeed as hooks to get to their client so that they notice the performance of their particular venue. Also, it can be provided to them in KPIs where they don’t perform so well actually vs their competitors. We agree with them a series of metrics that we monitor and we send to them on a daily, weekly, timely basis, so that they’re able to improve upon the areas where they may be weak.

Julia: That’s really interesting because if I think now with lockdown, presumably some people are looking at how it’s about going through a massive BCP transition. In some areas, you’ve got to work really hard or even harder to keep the lights on in a way. Now that people are moving back on track, what sort of things are they talking to you about? Why should listeners be coming to you and saying, “Actually, I think you can help us with something?”

Paul: There’s been a lot of talk around the predictive power of historic data. If you are about to send a trade to an exchange on a particular stock, let’s pick Vodafone, are you going to send it to the exchange that historically has had its price furthest away from the European best bid best offer? Probably not. Or the one that has the greatest market impact measurable over time, or indeed the one that has the largest amount of failed trades – all of these insights really come from historic data and they help demonstrate the performance of each venue. If you’re directing a trade towards those various exchanges, you’re only in possession of that insight. If you have indeed the type of analytics that we’re talking about here.

William: The reason being volatility, with everything that’s happened around COVID-19 and the instability of the financial market, has created a number of interesting views that you can only see if you start to analyse the deepest granularity of the data. What we’ve noticed on both sides of the pond with US and European datasets is what we call the move from a passive state to an aggressive state.

When we talk about passive state, or does it spend longer on the book before they’re executed, the amount of size that’s being done per day is smaller and spreads are tighter. Now, when markets are volatile, the natural evolution is the spreads widen, but what’s been interesting about COVID-19 is the amount of time and all the sets on the book has reduced dramatically. We’ve looked at how the average or the resting time has moved from six to eight seconds when passive to fractions of a second, and the size has increased 2X to 3X.

Sometimes with the more volatile stocks we’ve seen logarithmic changes in the value trade. What does that mean? That means that you can start to get an idea of how the market as a whole is behaving by looking at the most granular telltale signs, like a tracker hunting down prey, everything leaves footprints. By looking at the most granular level of the order book, you can start to see these intentions in these footprints. You can understand if you’re a venue where your market makers are positioning themselves, and how that changes during times of stress.

Therefore, how are you going to compensate them to ensure that during those times of stress, your venue has true liquidity. Rather than saying you’ve got liquidity and the moment you try and put a sizable order through, you actually end up going through four or five price levels and getting a trade that’s not in your client’s interest. That’s a really important decision. Those are the kinds of analysis that we can do on our platform. If you have the quantum resource, or if you’re interested in knowing that, you can come to us, you can tell us what you’re looking for and we deliver it for you on a data fee. That historic view, you can either use to make a decision or to prove why your venue or your algorithm or your execution desk, is better than the others.

Julia: Of course, everybody’s looking for that at the moment, in terms of not only getting back into new working normal, or they’re coming through the lockdown, but also looking ahead and trying to gain an edge; it’s the essence of the insights that they’re going to give them. I talk about navigating the lockdown a lot, and I’m really keen to hear from you as business leaders about how you’ve been navigating lockdown or what you’ve learned along the way. Will, let me come back to you on this question, because obviously the operational side of the business is where you focus. What have you learnt on the way, Paul?

Paul: We’re a young company in scale up mode. Clearly we moved to new offices at the beginning of March. 10 days later, we moved down the entire team home, so it wasn’t particularly ideal. What we did learn was that we performed very well. We are a cloud native business. We didn’t have a second of downtime for our clients, which I’m very, very proud of. The team themselves performed admirably. Now, having put ourselves in this environment, along with everybody else, actually the quality time we’ve been able to get with clients to talk over various mediums, our favorite being Zoom, it has been of high quality I would say. We’ve had really quality interactions. When you think of the time dedicated travelling to and from work, travelling to and from multiple meetings, leaving the office, it’s been an eye opener to me, just how much time we’ve been able to dedicate directly to the client. That’s been fantastic.

Of course, the negative side of that is some clients have had to concentrate on business as usual. So unlike us where we’re a growing a scale up company, if you are a large incumbent, business as usual is the first order of the day. Is everything working, can the clients log in, and if it’s all working, don’t touch anything, don’t break anything. Now that’s hard enough. Doing that under these circumstances during times of extreme volume and volatility makes it even harder again.

Whilst we’ve had fantastic engagement with clients, getting them to change or on board new data sets, in our case, or new technologies can be a little bit drawn out because they’re just so frightened about breaking the underlying infrastructure. I have to say, I think we’re coming out of that now. I think we’re starting to see the light and dare I say people have got used to the new normal. Growth is back on the table. People are talking about that. I think we’re all learning. I think we’re learning as we’re going along. I’ve learned the resilience of our company has been amazing during this period. We’ve been nimble enough and agile enough to cope with that. It has some challenges, but on the whole I think we’ve come through very well.

Julia: I know that having spoken to you about this is that you take the kind of the conversation with your team, the communication, and then also the mental health of your team very, very seriously. This is what I ask all our guests: what have you been focused on as human beings as Will and Paul, during this time to keep yourselves motivated, healthy, fit, interested, etc. Will, I’ll come to you first of all, what have you focused on?

William: I’ve always had a bit of a passion for wine and I’m using my inability to go anywhere to actually start taking a much more academic approach to it. Reading a lot about the science behind growing wine, about the topology and the science around what makes wine wine, and at the same time drinking a fair amount of it.

Julia: It’s a tough job, but someone has to do it. Paul, how about you? Have you been reaching for the wine bottle as well?

Paul: Certainly I’ve been no stranger to wine during this time either, but I have to say it’s been a fantastic time without travelling to work, to get fit. I’m as fit as a butcher’s dog right now. It’s been absolutely fantastic. From that perspective, lockdown has been enjoyable. Certainly we’ve had some nice weather and I have enough space here to exercise. I’m very fortunate in that respect.

Julia: That is incredibly important, isn’t it? But now back to the serious questions in hand, because one other question I’m also asking all our guests, which is when we look at the swathe of regulation that is out there, what is the particular piece of regulation that you’re looking at the moment that you particularly favour, and you think this is something that people should be paying a lot more attention to? Paul, let me come to you first.

Paul: Certainly I don’t think it’s on BMLL to impart our thoughts on regulation to the market per se. However, there have been a number of conversations going on about consolidated tape. We’ve seen an excellent paper from Euronext on the subject. We’ve seen the World Federation of Exchanges opine on the subject, and they seem to be converging on the fact that they believe that a historic tape of record is the one that will give the market the greatest deal of insights that they seem to be pursuing. Now, that’s marvellous because that’s the tape that we’ve built. If it were designated by the regulators that this would be the optimum route to go, then we feel that we’re in a very good position for this.

Does regulation need to change to make that happen? Not necessarily. Customers themselves, venues, banks, traders can decide that actually they want to adopt that historic record now. Therefore, we have that and it is available. I’m certainly watching that with a keen eye. I don’t think it’s our position to influence the market one way or another, whether it should be mandated, however, should it be mandated, we feel that we’re in a good spot. And even if it’s not mandated and customers want to take advantage of the European best bid best offer as designated by the venues of what is the most optimum method of doing that, well, we’ve got it here today.

Julia: Will, same question to you, with your particular look at the moment, obviously I’d imagine you would chime with Paul. It will be very strange if you didn’t, but from an operational point of view what are you thinking?

William: Wouldn’t be the first time. I’ve never been accused of being a yes man before! I think from my point of view, what’s really interesting is any kind of revision to the existing method to framework in terms of venues, in terms of execution tools, anything that creates a dislocation to the status quo in terms of where people can come and find liquidity, what that price of that liquidity is, creates an opportunity for more insight to be drafted.

Fragmentation in a certain sense is our friend, that’s the core of why we exist. We exist to piece together the fragmentation of Europe, to compare the fragmentation across the pond. How would you compare the performance of a venue in Europe with a venue in the US if you are thinking as an exchange to make that move horizontally? Anything that changes the status quo for us is very interesting. And I know that there’s a lot of talk, again, as Paul said, there’s a lot of talk by people who have the right to apply. We are always happy to be a technology provider.

Paul: The regulator also has to adjust to this environment. You can’t designate that the only way you have regulatory compliance is therefore all piling into one office somewhere or into a lift to get to that office somewhere. The regulator is having to come up with ways where people are compliant when they’re working from home. Certainly for the banks, the buy-side and whatever, there’s going to be some interesting development and innovation as we go forward here in this new normal. Some would argue that Zoom and other such mediums are impersonal, but I would argue the complete opposite. I’ve been in this industry for more years than I care to mention having known people throughout my entire career. However, I’ve never been in their homes. They’ve never been in mine up until very recently, via a medium such as this – I’ve seen clients of mine in all different surroundings.

I would say actually there is a benefit to this, and I do believe that that hybrid way of working in the future will start to become the new normal. And we’ll see some amazing productivity out of it. We’ll see the ability to hire across a wider cross section of people in locations where we didn’t think of that. We had one of our lead developers based in Edinburgh, when I joined the firm, a man who leads over half my technology team. Well, he’s as close to the office as I am now, and it doesn’t make a jot of difference. Therefore it does change your thinking in terms of the staff base and your hiring and your plans going forward. I’m quite excited by it, and I’ve always liked change. Throughout my career, I’ve always been an advocate of change and from a strategic perspective, I’ve been asked to implement change. I’m excited to see what comes next.

Julia: Paul was mentioning earlier about new collateral, a new website. So tell the listeners how they can find you.

William: Sure – it is available on our website, bmlltech.com, go there, have a play, understand what we do and how we can solve your data analytics problems with our products.

Julia: Great way to end the show. Gentlemen, it’s been a joy to have you both on, Paul and to William from BMLL, thank you.

Paul: Thank you, Julia.

William: Thank you, Julia.

Kieron: This episode of StreetsTalksTo was produced by me, Kieron Yates, on behalf of Streets Consulting Limited. Streets Consulting is a business development, marketing, communications consultancy that’s focused on helping FinTechs from the smallest startup companies to some of the world’s largest global organisations. Everybody’s trying to innovate and everybody’s trying to grow. You can find this episode on Streetsconsulting.com and using the hashtag #StreetsTalksTo. We can be found on LinkedIn and on Twitter at @StreetsConsult. Thanks for listening.