Tony Dalton, Head of Global Foreign Exchange, R.J. O’Brien & Associates, talks with Profit & Loss about the importance of the entrepreneurial spirit.
Profit & Loss: What attracted you from a large bank to a boutique firm like RJ O’Brien?
Tony Dalton: The reason I considered and ultimately decided to join RJ O’Brien was based on a few key factors. RJO is the oldest and largest independent futures brokerage and clearing firm in the US, it’s one of the largest FCMs, it’s a full service futures firm, is a founding member of the CME, and has been around for over 100 years. And I’m personally enamored that the company was started by an Irish immigrant, John McCarthy, father in-law to Bob O’Brien Sr, and owned by that same family today. The O’Brien story very much captures the American entrepreneurial spirit.
P&L: What are RJO’s plans in the FX space?
TD: The firm has grown significantly over the last few years, mainly because senior management has a vision and commitment to the futures industry, a part of which is to grow in the OTC FX space. The FX business is growing largely through a focus on hedge funds and CTAs, although we are not limiting ourselves exclusively to these sectors, but because RJO is a full service brokerage and clearing house, this is very complementary to growing the FX business.
P&L: In what ways has the business been growing?
TD: Over the last two years, the firm has grown geographically, institutionally, and in terms of headcount. For example, the firm acquired the Kyte Group in London, and last year became a Category 2 clearing member of the London Metal Exchange (LME).
Since I arrived, we have shifted our 24-hour FX coverage to London and New York (from Chicago and New York), and have plans to hire in both locations. We are growing aggressively, but doing so in a methodical way to match our clients’ needs. We currently have 22 staff, including dedicated support, and new hires starting shortly.
P&L: How is RJO differentiating itself?
TD: With a smaller global markets FX business, it’s important to provide as many products as possible to our core client base. Within FX, we offer base and precious metals, FX spot and forwards, swaps, options, EFPs, blocks and a customisable e-FX product, which provides unique liquidity.
When I arrived, we focused our overall efforts in a bottom-up approach, providing liquidity based on direct feedback from clients. What really matters to our clients who are running significant businesses on the e-side is making sure they get very high fill ratios. So it is extremely important to manage your own liquidity.
P&L: You were one of the pioneers of FX prime brokerage, how are you finding your new role at RJO?
TD: I’ve always been in PB, but during the latter part of my career I was heavily involved in sales and was most recently a senior relationship manager across products. When I first started in PB, it was very entrepreneurial, but today, the dynamics have changed and the industry has become more standardised. I’m really enjoying working for a firm that has invested in and believes in the product. I report to our CEO, Gerry Corcoran, and I also spend a lot of my time working with my peers who are extremely supportive of our new business initiatives. This is something that has been somewhat lost in a lot of the big banks given their sheer size.
P&L: The banking world generally has changed a lot in recent years. Do you see this as beneficial to a firm like RJO?
TD: Regulation has forced banks to re-examine their product lines. This may have benefitted some of the larger clients in the industry, but has disenfranchised a lot of smaller and middle market clients, all of whom are considered valuable to the RJO franchise. We will consider all institutional prospects as long as the economics make sense to both parties.
P&L: Do you offer prime-of-prime services?
TD: We do. However, prime-of-prime is really a misnomer, because it’s not a downstream FXPB offering, it’s a watered down FXPB offering, in that it does not provide the full FXPB infrastructure or product suite in most cases. We do have plans to build a formal FXPB offering in the future. We’re never going to be the same size as the banks that are left, but we do believe we can help fill a niche.
P&L: What makes RJO well-suited to filling that niche?
TD: As regulations shrink the amount of credit the traditional PBs provide to the street, we can bridge the gap between the futures and OTC worlds. We have structured a broad product suite that converges all aspects of market access, which affords us a unique opportunity to build a full-service futures business, and our clearing and managed accounts background is going to be key.
P&L: What is your focus on now?
TD: Our focus is on providing quality execution and liquidity management. Before I joined RJO, the firm sourced liquidity from many venues, but we’ve since retrenched and focused specifically on our platform and the management of liquidity on that platform. So we are using the freed-up resources that were previously spent on managing recycled liquidity to focus our efforts on unique, quality liquidity.
I would add that this is all client driven. If you have strong, trustworthy relationships with quality clients who let you know exactly what they need, it’s our job to partner with our clients to help them be as successful as possible in building their own businesses.
My previous experience relates to this. When building a business, there are a lot of similarities. It helps that I know the product, but you have to be cognisant of how all the parts fit together – institutionally, geographically and from a people standpoint.
P&L: What do you see as the key to success?
TD: In this new world, you really have to go back to the roots of service, service, service. What worked before may no longer be the case. Technology is always important, but managing client relationships is how to build a business.
I love RJO’s motto: “Service is our trade since 1914”. It fits how I’ve built businesses my whole career.