Partners, not providers: the vendor relationship as a two-way street
Pershing’s John Vrettos discusses his approach to vendor selection, relationships management and resource allocation.
Whether a firm integrates third-party service providers into its trade processing technology was commonly a question of price. This focus on commoditised products and services has evolved to now include areas of specialisation and expertise. With a greater emphasis on the broader strategic relationship, the “technology provider as consultant” has access to more of the client’s infrastructure and wallet in exchange for providing greater efficiency across the entire trade process.
On the trading side, our focus has been on technologies and services where we find a) there is more specialised knowledge and expertise, or the potential therein for greater specialized services, and b) where the technology is commoditised. We find that there is generally more competitiveness in pricing and service levels when the services are more commoditised.
The common theme we hear from prospective clients time and again is, “We are looking at where we can get specialised knowledge and get it better and cheaper than developing in-house.” As the relationship with providers has changed, the discussion is no longer solely focused on delivering solutions at the most economic price point. For example, we look to integrate third-party solutions into our technology ecosystem from firms that will invest time to understand our business and our business needs. It is not just who is the cheapest, but who provides quality service and functionality at a competitive price.
As trading has evolved at Pershing, we trade for multiple types of clients, and each business type has their own needs. Pershing has built a very sophisticated risk management control system to service its retail business, but different solutions are needed to trade for institutional clients through high-speed DMA or algorithmic capabilities. To meet the institutional clients’ requirements for speed in trade processing and market access, as well different types of risk controls and parameters, we enhance our solutions by integrating specialised service providers.
We have a strong development culture and control focus on our core processing engines. As a clearing firm, our services, solutions and information processing is critically important. The trade processing engine is internally controlled as well as most of the core platform tools we offer our advisors. We prefer to control the advisor interface and where we can, we want to provide an optimized client experience and manage it in a way that lets us support our clients in the best possible manner.
Pershing is committed to developing and providing our clients with solutions that meet their evolving needs. At the same time we recognize the value of integrating third-party services into our technology ecosystem to enhance the solutions we offer clients. We balance the use of internal resources and integrated solutions to offer our clients more choices and with solutions that deliver the greatest strategic impact.
For example, we currently use Convergex’s Connex in our connectivity to market places and liquidity pools and to manage some client connectivity, both inbound and outbound. . We have also leveraged Connex for risk management tools, utilizing their complementary expertise to enhance the array of client solutions Pershing offers clients.
When considering a third-party solution there are a number of considerations that must be made. We look at credit risk and other regulatory requirements before bringing that into vendor discussions to ensure we address both the business and the credit risk needs. We also have to consider the inbound and outbound processing needs of the interfaces between our internal systems and the external provider. Often, these strategic relationships lead to applications in other areas of our business-which enhances the solutions we bring to market and benefits both our clients as well as the vendors we work with. In the end, it all comes down to creating and maintaining strong relationships. Our relationships with third-party vendors have yielded mutually beneficial outcomes- whereby their solutions have helped our clients, and Pershing, in turn, has helped the vendors to improve their offerings- which they can then bring to market elsewhere. By working with our clients and providers to arrive at the best possible solutions, everyone has an opportunity to benefit.