With Torben Munch, CEO, Itiviti
Itiviti, backed by Nordic Capital Fund VII, announced its intention on 28 November to combine with Ullink to build a full service technology and infrastructure provider for global and regional financial institutions. The deal is likely to be closed within the first half of 2018 after it has gained anti-trust approvals. GlobalTrading spoke with Itiviti’s CEO, Torben Munch
What is the business logic behind the merger?
It is a merger of equals, with each firm providing complimentary areas of expertise and commercial penetration. Basically, Itiviti and Ullink are approaching the financial trading community from two different angles, but with the same underling objective. It is a partnership that should create a one-stop shop for global market participants, and which will build on a subset of clients who are already using Itiviti and Ullink products and services.
Describe Itiviti’s key activities and core strategy.
Itiviti has developed its business activities substantially during the past five years, moving from an emphasis on futures and options trading to cash equities, then to foreign exchange. Its client base has evolved, shifting from a fairly exclusive focus on proprietary traders and market makers within banks to offering DMA and DEA services to the wider financial trading industry. It is becoming an increasingly electronic trading world, especially in cash equities, derivatives, foreign exchange and commodities. We aim to capture that growth.
The trading space is like a race track for Fintech software, but not everyone needs a race car. Some clients are, of course, less latency sensitive and we will continue to facilitate their order routing and trade execution.
More recently, the firm has also invested in the technology and skills that provide its clients with more efficient FIX messaging systems and, most significantly, connectivity. We have been expanding our focus, and that growth will be augmented by the merger.
How does the merger with Ullink enhance your strategic objectives?
Ullink is preeminent in high touch and low touch order management systems and supplies the world leading NYFIX network that provides clients with hub-and-spoke connectivity. Ullink has 1500 clients, of whom about 800 are buy-side firms largely using the company’s connectivity services. Itiviti’s 360 clients are mostly banks and brokerages, so there is huge potential for expansion for the company’s trade execution technologies among asset managers and trading platforms. The merger will be defined by its complementary synergies rather than any business duplication or overlap.
Do you see a rising trend among buy- and/or sell-side firms for outsourcing technology and systems?
Definitely – and there are four main aspects of this trend: First, tier one and tier two financial companies recognise the flexibility of outsourcing software to third parties; second, more and more institutions want to consolidate disparate trading platforms, both by functional and asset class, into fewer platforms; third, after implementation of MiFID II there will be an increasing demand to match technology capability with regulatory requirements – so called, RegTech; and fourth, the trajectory towards greater trade automation is undiminished. Underlying these four forces that are driving the move to greater outsourcing are the expectations of cost-savings.
What are the toughest challenges when working to meet a client’s technology goals?
Legacy systems, typically developed in the 1990s, are often cumbersome, sometimes expensive to maintain and usually inflexible. Financial firms increasingly need systems that are more lightweight and nimble. However, it can be a difficult process to dismantle them and transition should be gradual to prevent damaging disruption to commercial operations.
Both Ullink and Itiviti have large, well-trained customer services staff to help ease the migration of legacy systems to more efficient processes. Introducing new systems not only requires engineering expertise, it is also means consulting skills and offering the capacity to tackle difficulties as they arise.
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