After four and a half
years, Gil Mandelzis has stepped down as CEO of EBS BrokerTec. Colin Lambert
talks to him about his time in charge and the challenges facing the business
and the wider industry.
Colin Lambert: It’s
been an interesting period to be in charge of one of the main platforms in the
FX industry, what would your headline reflections on your time at the helm be?
Gil Mandelzis: It has been an honour to run EBS BrokerTec and
I am proud of the many achievements over the past few years. One of the key
aspects has been the ability to regain the trust of the industry at the same
time as expanding the EBS client base.
Maintaining the right balance of service to the market and being
trusted by all participants was a monumental effort on the part of all
involved. It was important the firm upheld its integrity at the same time as it
helped the market cope with the many structural challenges it has faced over
the past five years.
EBS was a single product business but has now expanded into
multi-product offerings in addition to its traditional CLOB. EBS began
servicing for the first time true buy-side customers, such as corporates, hedge
funds and asset managers, and has done so without alienating the traditional
client base – it should not be underestimated how tricky that was.
Finally, EBS has grown to become a dominant company in the
Asian spot FX market, growing market share in CNH, electronic NDFs, and having
formed a strategic partnership with CFETS.
EBS is leading and partnering with the industry again, has
many growth engines, and is in excellent shape to further grow in the years to
CL: How were you able
to undertake that transformation at such a difficult time for the industry?
GM: It’s all about the people, from top to bottom. I was
lucky to be able to keep many great people at EBS when I took over and add
fantastic individuals as we built out the product set.
People can make a huge difference in this business. We assembled
an incredible leadership team as well as having exceptional professionals on support
desks, in engineering and on coverage teams. There is a cohesiveness among the
people in the regions and the quality of those teams is what makes EBS
BrokerTec stand out. I feel privileged to have led such an extraordinary team
It’s also a tribute to Michael Spencer and the board of Icap
that they have supported this transformation during a tricky time in the
overall markets. Their decisiveness and willingness to make significant
investments at such a time is testament to the entrepreneurial spirit of Icap and
the collective belief in EBS BrokerTec’s future.
The reality is that a significant proportion of EBS
BrokerTec revenues now come from products that didn’t exist five years ago, so
that investment has been crucial and will be rewarded.
CL: In July 2002, one
of your predecessors at EBS CEO, Jack Jeffery, told Profit & Loss that he wanted EBS to broaden its currency spread
– he referred to it as “credibility in all currency pairs” – but for the next
decade and beyond that goal remained hard to achieve. It strikes me that part
of your product expansion has helped deliver that?
GM: The team realised that to ensure it had meaningful
credibility in all currencies it needed a broader product set as it would be a
while before EBS could dominate the CLOB for all pairs. EBS Direct was very
important because it took us into all the other currencies, particularly growth
in the Commonwealth currencies, which had been talked about for so long.
But one of the highlights for me has been how EBS has been
able to create a successful emerging markets franchise and true market
leadership in the Asian FX markets. Asian NDFs along with Russia and the
success in China have been a particularly good story for EBS in both EBS Direct
as well as EBS Market, the traditional business. EBS is now truly active and
meaningful in all currency pairs.
CL: On the subject of
Asia, one of the bigger stories has been the deal with CFETS…
GM: Everyone at Icap is extremely proud of the partnership
with CFETS. The CFETS relationship will thrive and it’s very exciting. That
deal reflects and validates the tremendous progress and achievements enjoyed in
both EBS BrokerTec’s technological capabilities, as well as the success in
building a significant Asia business.
Before CFETS, EBS BrokerTec deployed new technologies and
capabilities like EBS Direct and BrokerTec Direct, added outrights and swaps,
launched a new front end and other projects, as well as upgraded legacy
technologies. All of these accomplishments were crucial for CFETS to gain the
confidence in EBS BrokerTec as their technology partner for their next
Again, one needs to note that Michael Spencer and Icap built
a partnership with CFETS a decade ago on the voice broking side, which was a
breakthrough and visionary deal. The trust and partnership that was built
during that time was immensely helpful. At the same time, without EBS Direct, BrokerTec
Direct, swaps and the other new products, EBS BrokerTec simply would not have
been able to win the CFETS partnership.
CL: You mentioned
earlier the broader spread of revenue streams, how successful do you feel the
product expansion has been?
GM: Overall there are great success stories in terms of the
market’s reception to some of the new products. For others these are still
early days though the initial indications are very good. Also of importance,
EBS is no longer perceived as just a CLOB company – it’s a credible provider of
a full suite of products targeted at multiple client segments. EBS Direct,
eFix, CNH and NDFs are some of the products that were launched with great
success and have much more growth in them.
Other products like EBS Hedge, forwards/swaps, EBS Institutional,
BrokerTec Direct and others are in earlier stages but showing a lot of promise.
Different products will grow at different paces but the reality is that during
a very tough period for the entire industry, for clients and platforms alike,
EBS BrokerTec was able to create meaningful revenue and growth from new
products, more than any other platform.
Ultimately, in say five years’ time, I believe the business
will see meaningful flow in most of these products and meaningful participation
from buy side clients. The same goes for BrokerTec in fixed income with the
launch of BrokerTec Direct.
CL: We have spoken
before about the potential of FX swaps – do you remain optimistic about that
GM: Absolutely. The market very much likes EBS’ swaps
product and has been enjoying very positive take-up in terms of both users and
flow. Keep in mind the FX swaps roll-out is based on completely new underlying
technology with a newly redesigned front end.
EBS is also taking the product to a new client base, even within
the banks, and adding completely new connectivity to LPs. These processes take
time, but even though EBS is still in the early stages of on-boarding LPs,
there is a very healthy level of business and participation and a great
pipeline of participants looking to trade swaps on EBS. I truly believe this
could be one of the better growth stories of the next five years.
The second aspect of the swaps roll out is that it enables
penetration into the buy side for the first time in EBS’ history. Until the day
EBS was able to offer outrights and FX swaps as well as spot, it could not have
seriously approached asset managers, hedge funds and corporates, the bulk of
whom use these products widely. So yes, banking clients like the product but it
is also gaining traction with the traditional buy side.
The broader picture is that the product suite is now
available to service these client bases. It will take time and growth is never
just a straight line; there is tremendous future growth in this product and
these client segments for EBS.
CL: One of the bigger
challenges, it seems to me, has been with the original EBS model, the CLOB, as
volumes have dropped. Has the product expansion helped alleviate the situation?
GM: In general, the overall environment has not been very
friendly to the lit CLOBs. It is true in FX and also in other asset classes
like equities. EBS had only three currency pairs and when the market wanted
alternative trading models, such as Direct and mid-book, it had to go to other
EBS initially made some technology investments in EBS Market
that were targeted at positively affecting the ecology, like latency floor,
monitoring and surveillance, which were critical in rebuilding the trust with
the market as we have discussed before. I cannot overstate how important that
Further, the EBS BrokerTec team made some very significant
investments in refreshing the underlying technology of EBS Market, which
allowed for the introduction of real time data (EBS Live Ultra) and other
improvements which should help EBS Market in the years to come. These are
meaningful projects that take a long time. The good news is EBS started them
several years ago so they are now coming into fruition.
We then added currency pairs (CNH, NDFs) and additional
products on EBS Market (eFix and EBS Hedge), and then alternative trading
models in Direct and other products.
The greater spread of currency pairs and a comprehensive
product offering means it is harder and unnecessary for people to reduce their
relationship with EBS overall. A while ago some people were saying they no
longer needed to work with EBS if they did not need a CLOB. As new products
were added that helped clients better service their customers, EBS increased
its relevance and reversed what was in danger of becoming a trend where traders
stopped trading on EBS because they wanted access to multiple liquidity pools.
Clients now have a broader product set that they use and at
the same time they still have the benefits of access to a CLOB, which is
important as trading patterns around recent major events have shown.
Finally, we have also seen the reverse trends when people
started using EBS Direct for commonwealth currencies for instance, and they
started using the CLOB more for these currencies too. The full service offering
has certainly helped all products.
As I said, the revenue stream is broader now and if that
investment from Michael Spencer and the Icap board had not been forthcoming I
don’t think EBS would look as good as it does now.
CL: Has anything
surprised you in your time in charge of EBS? What lessons will you take from
GM: One of the things that has impressed me and I am not
sure I fully appreciated at first was the tremendous power of the platform. EBS
BrokerTec, and Icap more broadly, represent an incredibly powerful franchise
thanks to the 30 years or more of solid relationships with the industry.
EBS has the global footprint and the technological scale; it
also has a reputation as a trusted partner and I know that was appreciated by
CFETS too. Therefore, EBS’ new direction and products allowed it to leverage
the strong relationships, connectivity, presence, and the team’s relationships
to roll out even more new products.
Further, I don’t think I quite grasped the passion that
exists in the foreign exchange market for EBS. I knew how important people
thought EBS was but the degree of passion was surprising. It helped me that
there is a lot of goodwill towards the platform and it’s been proven that if you
do the right thing people will appreciate it and that will cement your position
in the industry.
I again saw the same reverence the market holds for a
platform when I came in to run BrokerTec. There is great pride and passion
around BrokerTec in the fixed income market and the relationships and
partnerships the team has with the market is simply unparalleled.
The industry’s passion surrounding EBS encouraged me and
gave me confidence in what we were trying to do. People wanted a trusted
partner and EBS has long been that. This relationship is not something I
created – it is credit to the long history of EBS, BrokerTec, the teams in
place, my predecessors and Icap. The best way to describe it is how EBS is
still viewed as the industry’s platform, not just Icap’s – that was both
impressive and, for me, rather humbling.
CL: You mentioned the
difficult industry backdrop, are you optimistic for the future of the industry?
GM: I’m very optimistic about the future for the industry – platforms,
trading institutions, and yes – also the banks. Look at what has been thrown at
this industry over the last decade. We have had scandals, investigations,
fines, and challenges to the existing status quo and new entrants to challenge
Many very senior people have had to focus on rebuilding
trust and the framework of the industry overall but now best practices are
being finalised thanks to the great efforts of those people and the FX committees
of the central banks (where I and EBS BrokerTec have the honour of participating).
These people have been dedicated to helping shape its future and make the
market a better place. Thanks to this work, they and their successors can
better focus and understand how it can operate.
I am also starting to see a shift in focus in the industry
to more innovation and a generation of growth.
We will see interest rate divergence so volume growth will
return over the next few years. Take this and the fact that innovative people
have a framework within which they can work and I think creativity will return
and be encouraged.
There is also the natural, longer term trend at work. It
would not surprise me if in 10 years’ time the industry will be talking about
$10 trillion a day in FX volume. Look at the FX market, just 15 years ago it
was 1.4 yards a day so even though it has drifted lower over the last three
years it is still more than three times the size it was.
I am tremendously impressed by how the FX market has coped
with the significant changes in the market structure. This is a completely
different world in FX and fixed income from 10 years ago, but the market has
adjusted, it has innovated and adapted. There was a lot of pain involved but
the market found its way and will further shift gears to build and grow again.
CL: And EBS’ Future?
GM: EBS will do great. It has a broader DNA of participants
overall and has realigned its resources to meet this challenge and the changing
market structure generally, so I feel EBS is in top shape.
Towards the end of my tenure, we were receiving calls from
participants in the market with ideas about how to work with EBS and introduce
new products to the industry together. This shows the central place EBS
BrokerTec still has in the foreign exchange and fixed income industries.
The challenge everywhere is resources – the world is not
short of good ideas but there is a limit to the resources available to execute
them. This is where Icap is very good, so I feel the firm has an advantage.
EBS BrokerTec has an impressive and broad set of products
already showing growth and the next wave of products behind them to generate
further growth and expand the client base.
Finally, it has a phenomenal team and a very deep bench
across the board. We talked about the importance of people before – this is an
important advantage EBS BrokerTec has.
With this background and the broader macro-economic trends
that should improve over time I believe there is tremendous opportunity for EBS
to grow further and lead the global markets.
Gil Mandelzis has
since left EBS BrokerTec where he was previously CEO. This interview was
conducted towards the end of his tenure. In September, Icap announced Seth Johnson as the new CEO EBS