A-Players and the World of OTC

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A-Players and the World of OTC

Shifts in Financial Market Infrastructure (FMI) over the last 10 years have changed the profile of person that FMI businesses want to hire. There used to be little competition for key hires between CCPs and Exchanges, mainly because there was little competition between the businesses themselves. Exchanges and CCPs were interconnected and at the time it was unusual to hire a partner’s staff.

Fast forward to today and that relationship has changed: There is undoubtedly more competition among CCPs and there is a higher, long-term revenue opportunity due to regulatory change (including mandatory OTC clearing). The focus has now shifted to cross-margining and collateral, and vertical clearing models for trading venues have changed the landscape of talent attraction immeasurably.

Huge shifts and commercial opportunities are happening right now and the businesses that win the current competition for OTC market share have the potential to enjoy dominance enjoyed by listed venues for the last few hundred years (LME was founded in 1877 and continues to dominate metals globally). Territories are being created right now which will shape the OTC business landscape for generations. At the frontline of the battle for market domination are the most skilled people working in FMI – the people I like to call A-Players.

To meet current challenges FMI businesses now require people who are skilled to support the rapidly changing commercial environment and to represent those businesses in the fierce competition for OTC market share.

Though various HR studies indicate A-Players deliver up to 400% output compared to an average performer1, the current rate of return in OTC markets can be expected to be a great deal higher due to the significant long-term revenue opportunities being carved out and the multitude of commercial opportunities available to major Exchange, CCP, Clients services and Prime Brokerage businesses.

I believe that the right Senior Manager in OTC FMI today could feasibly establish an income or revenue stream that continues to be highly profitable for many decades, meaning the current value derived from an A-Player could be at an all-time high for OTC & FMI businesses.

It’s well documented that businesses compete to hire A- Players, but in a market as small as European FMI there aren’t many experienced, relevant and available A-Players to compete for. It is not simply the case that a business will have access to A-Players and ultra-high performers every time that they hire. Businesses have to be smart and they have to get great at hiring specifically for A-Players if they want to hire only top-performers, every time.

But how and where can businesses find the A-Players that can write the future history of their firms?

  • Be Flexible: One option is to hire opportunistically. Though this sounds great on paper, in practice it is never really possible. It is rare to find businesses that can hire top performers when they become available, and before there is a specific need to hire. Given the circumstances, they most likely already have a steady stream of top-performing hires. If you’re lucky enough to work in this type of environment then congratulations, you’re part of a very brave business!
  • Hire A-Players You Already Know: This is the gold standard of recruitment, and I advise all of our clients to start with this method. This is the least risk, most likely path to deliver an A-Player and it’s very low cost. When Hiring an A-Player you already know, you have first-hand knowledge of their exceptional work output in a similar environment and you can be near certain of a very successful outcome.
  • Hire an A-Player through a Trusted Source: Use contacts, a trusted professional services firm and/or a trusted fee-based supply route who genuinely cares about the quality of your hire. Many suppliers or people are excellent at identifying talent, and poor at evaluation. I encourage you to measure your suppliers against their ability to evaluate talent for your purpose, as this is where you will achieve real return on investment from your relationship with them. A trusted source, capable of consistent evaluation will provide the most repeatable and reliable method of hiring A-Players, and though there is a higher risk than hiring people you already know, the risk of poor hire is acceptably low. Combined with a well-structured interview process you should be able to hire an A-Player every time.
  • Compete to Hire the Best: You want the best business in OTC Markets, and want to hire the best people, right? So does everyone else. Realise that you have to be decisive and focused if you want to hire the best people, and that the best people will be reassuringly in-demand.

Note – for the purpose of hiring A-Players I really don’t recommend job adverts, and other transactional recruitment methods. In my experience average recruitment methods result in average success rates and an average number of high performers in your team.

As a rule-of-thumb I categorise an A-Player as someone is in the top 10% of their function across all peers. Given a quick search of people working in London: the number of people currently working in exchanges, clearing houses and related FMI businesses stands at around 4,000, whilst those working in wider OTC market sits at circa 16,000. Given these figures we can expect only 400 A-Players working in London FMI businesses, and 1,600 A-Players in wider London OTC Markets.

Kite know 1263 A-Players who have worked in FMI or who are credible for a career in FMI, and that number that grows every day as our network expands. I recommend you put the same effort in to expanding your network of A-Players, if you want to hire top performers every time.

Though there is undoubtedly a scarcity of top performers, I believe that with the knowledge, the right evaluation method and a good book of contacts you can hire an A-Player every time. In my opinion the real challenge of hiring top-performers is the scarcity of general ability to identify and evaluate A-Players, rather than the literal scarcity of talent.

References

  1. “The Best & the Rest: Revisiting the Norm of Normality of Individual Performance” Ernest O’Boyle Jr., Herman Aguinis, Publisher: Personnel Psychology, 2012

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