Rick McVey '81 talks fintech, risk, data science, and golf in Executive Speaker Series
Farmer School alum's company was on leading edge of fintech before fintech had a name
Rick McVey '81 talks fintech, risk, data science, and golf in Executive Speaker Series
You could say that ’s idea that would one day become , a firm that processes $1.5 trillion in annual trading volume, was born of two things: Necessity and opportunity.
“Technology was emerging in finance everywhere. So the CEO of JP Morgan said to all the senior managing directors, ‘We really need to get out in front of this. So if anybody has ideas on using technology to advance our business with our clients, we not only want to hear about them, but we're prepared to invest in them,” McVey said.
McVey, a 1981 Farmer School Finance alum, was in his mid-30s and a managing director who also knew well just how badly technological innovation was needed in the late 1990s.
“At that time, corporate bonds were all trading by phone. I was managing a group of about 150 institutional salespeople, and coming from the futures exchanges, which had finally started to embrace technology, it was kind of crazy to see five people involved in every bond trade with a client, and the work that went in front to back to get a trade done,” he said. “I thought we could get client extension through technology in a cost-effective way, and we can also drive down the cost of all these trades we do with clients that have low margins by doing them electronically.
“So I started working on seeing if we could we cover middle markets clients in a brand new way and in a low-cost way through technology. So I was incubating this idea that we would have a distribution extension through technology, through a market access.”
He told ºÚÁÏÉçÇøs at his Executive Speaker Series talk that when he shopped the idea around to others, he got a lot of support – and a rather big caveat.
“The common theme that I was getting back was, ‘We like that idea, but is there any way you can make this a marketplace and not a single bank offering? Because what we'd really like is you to try to get some other banks involved, so that we don't have to do this across 15 different bank portals?’” McVey said.
Thus, after reaching agreements with several other banks, MarketAxess was founded in 2000. “What we developed was a front-to-back solution. It was a way to get pricing out to clients electronically to compete for orders in an electronic marketplace. And once an order was run, it led to a straight through processing on market access directly to the client and the bank's back office,” McVey said. “So we radically reduced the manual effort in trading. And of course, it took off slowly because it was such a big change, but the cost benefits were pretty clear to people very early on, and that's what really, really caused the marketplace to start to develop.”
McVey also found himself a new job along the way – running the new company. “I was like, ‘I incubated this thing. I'll be damned if I'm going to watch somebody go off and make it successful,” he said. “It looked like a terrible mistake for the first three years, but I always saw enough adoption, and I saw the light going on in enough places to know that we had something meaningful and to stick with it.”
The new firm was one of the first handful that headlined a business classification that would one day be referred to as “fintech.” “Whether it's a new company or an existing company that's evolving and enhancing their services, Fintech is about using technology in a way to enhance the delivery of financial services or expand financial services,” McVey said.
He told ºÚÁÏÉçÇøs that knowing finance is key to their future in business, but that it wasn’t the only key. “The reason I was so excited about helping Miami with the building down the way (the McVey Data Science building) is you better be focusing on data science and computer science too,” McVey said. “If you really want to compete in New York with the large firms and be part of that, you need those skills. Fundamental finance is not going to get you to the big leagues any longer.”
“You need the passion, because don't anybody lose sight of how hard people work to compete at that level in New York. So you need the passion that you really care about the work, that you're going to wake up excited about what you're doing, because you will work hard to compete at that level,” he said.
McVey shared his thoughts on other topics with ºÚÁÏÉçÇøs:
On remote work: “I think there's a loss in collaboration, but certainly in my career, both the companies that I work for, the company I founded, and the clients I work with, the personal interaction still really matters in terms of building up a reputation that others can trust, and so I'm still a big fan of being in the office and working hand-to-hand in meetings with your clients is still the best way to go.”
On the importance of validation: “Anybody thinking about a business, I think client validation is absolutely the most important thing is don't get caught up in your own thinking. Go out and prove it with lots of clients, and make sure you talk to them and understand whether they think that idea is something that they could embrace.”
On golf (McVey was co-captain of Miami’s golf team): “I think golf for me was a big asset. It's another place where to compete, you have to work hard and be very persistent. If you've got that mindset, you're going to keep grinding it out until you get to the place where you want to be.”
On risk: “I would say that if there's one thing that defines my career, it was taking calculated risks, not crazy risks, but figuring out the opportunities where I really felt that I could be successful, and (MarketAxess) was one that I just couldn't turn down.”
McVey concluded his talk by emphasizing the importance of giving back. “One of the most gratifying things for me is coming back to Miami and being able to contribute to hopefully making this an even better place, because it was such an important part of my young adult life.”
