Two mottos have stuck with Glenn Havlicek throughout his career.
The chief executive of repo platform GLMX credits Jamie Dimon with the first.
“I’ll never forget his phrase ‘fortress balance sheet,’” said Havlicek, who spent over two decades at JP Morgan.
“Those words and that ethos permeated the bank during the financial crisis.”
Havlicek picked up the other saying - “the iron fist of liquidity management” - from his days managing global liquidity at the firm.
As a managing director, he was ultimately responsible for JP Morgan’s liquidity worldwide and chaired the company’s liquidity risk committee.
He left in 2005 after twenty two years of service and spent a few years working for a hedge fund in London.
Liquidity and balance sheet, rather improving access to both, led to the birth of GLMX in 2010 and has largely been the focus for Havlicek ever since.
Although GLMX, he admits, has already gone through a couple of cycles since its launch in the US.
“We set out trying to improve money-markets trading, liquidity management and reporting with our technology,” the executive explains.
“If I’m honest, we were too small and new to bite off gigantic chunks of business. It didn’t really work.
“We spent some time in the wilderness figuring out where to go and what to do next.”
Things changed in 2013 when GLMX turned its focus and eventually found its home in the repo markets.
“It became clear that the repo market was in need of an electronic platform giving traders, particularly on the buy-side, access to funding when they need it,” Havlicek explains.
Repos are vital funding sources for banks as well as non-bank entities such as broker-dealers, asset managers and hedge funds.
Havlicek describes the market as “oxygen” for the financial institutions that use it. That oxygen, however, is sometimes in thin supply.
Activity is reduced around the calendar year-end, meaning markets tend to be thin and more volatile. At the end of 2016, conditions were extreme.
Capital requirements and leverage ratios reduced the ability of banks to conduct repo market activity, and thereby cut the supply of collateral.
Meanwhile asset-purchases by the European Central Bank have escalated stress across the market and increased the premium paid for High Quality Liquid Assets (HQLA).
“At the end of 2016, in a similar way to the financial crisis, some big firms failed to access the repo market when they needed it most,” Havlicek says.
“This is an ecosystem with enormous volumes but a select group of participants. Through our technology, GLMX is upgrading the way the buy and sell-side interact.”
GLMX's chief technology officer, Ilia Mirkin, has a double-masters (Computer Science and Physics) from MIT.
The firm also employs an ex-Goldman Sachs engineer who subsequently worked on blockchain development.
Its chief operating officer, Sal Giglio, has worked for major Wall Street sell-side firms including JP Morgan, Bank of America Merrill Lynch and most recently, BNP Paribas.
Lance Wargo, an agency securities lending veteran, was, until recently, GLMX’s director of sales and product. The firm is in the process of lining up his replacement.
It has used part of the proceeds to revamp its tech, adding multiple new features and improving client experience.
“We’ve got a faster engine. One upgrade, for example, allows broker-dealers to have more than one set of eyes on a trade before it’s executed,” Havlicek explains. “Both the trader and the broker-dealer sales person can see what’s happening.”
Europe is next on the agenda for the US company which saw its client base double last year and weekly trading volumes exceed $68 billion.
"In the UK and Europe, Mifid II and Securities Financing Transaction Regulation (SFTR) pre- and post-trade reporting demand a new level of data capture which, if available at all, currently relies on expensive and time-consuming manual intervention," Havlicek wrote when he announced the funding deal with Sutter Hill.
“We’ve rolled out a fully redesigned, state-of-the-art solution that is specifically intended to streamline workflows between the buy and sell sides and to automate their trade reporting obligations.”
Speaking to Global Investor, he said SFTR will be a major focus for the firm as it ventures into Europe and partnerships with other vendors around the rules are a strong possibility.
Global Investor understands the final SFTR technical standards will be published by the European Securities and Markets Authority in April.
Looking ahead, with volumes and clients on the up, Havlicek is confident that, aside from the electronic trading efficiency GLMX brings, the platform will prove popular on the continent by easing the burdens on Europe’s vast but regulatory-heavy repo market.