Five Minutes With Nils-Robert Persson

Five Minutes with Nils-Robert Persson
float|left
While the industry waits for regulators to provide more
direction on clearing and high frequency trading, Cinnober Financial Technology is moving forward with a high-speed risk
calculating clearing solution.
MarketsWiki’s Jessica Titlebaum sat down with Nils-Robert Persson,
Cinnober’s executive chairman, to discuss the firm's clearing initiatives
as well as his favorite pastimes and what he likes to cook for
dinner.
Q. You have been at Cinnober for about 12 years now. Are there any business decisions that changed the course of direction for Cinnober?
The toughest decision Cinnober ever made was when we were an extremely
small company. We were asked by AMEX to help develop a prototype for
an options trading system. They were extremely happy with what we
provided them and wanted us to develop the system. It was one of the
largest systems we had to develop and we were only nine people at the
time. They were happy with the result but did not ask how big we
were. We needed to be 50 employees by the end of the year to meet the
exchange’s expectations. I don’t think they realized how small we
actually were. There were a lot of internal discussions at Cinnober
but I convinced my colleagues to say yes. We built the system and
were up to 50 employees by the end of the year. Four years later we
were awarded the fastest growing company and it was dependent on that
project.
We proved ourselves with AMEX and we were a key supplier for them for
ten years. We wouldn’t be where we are today without that project. I
use to say that the decision to dare to take onboard that assignment
is the single most important business direction we’ve taken – at least
until recent times when we decided to also enter the awakening niche
of innovative clearing technology.
Q. You have extensive experience with clearing systems. How did you get into this part of the industry?
I have an IT background and worked at the Swedish Investment Bank,
SEB, in the early 1980’s focused on FX trading systems. I worked on
the market data side for about 5 years before moving over to the
OMGroup, where I was deputy CEO for about 9 years.
I was involved with a few clearing initiatives back then. I was
managing a project in 1991 that looked to serve the OTC markets. At
the time, the bond futures market was very large based on huge
government debt. It was bilateral and unstable market. The bond
contracts were traded interbank and cleared physically at one of
the banks. Their clearing services took place in meetings the banks
held every day where they exchanged checks and physical pieces of
paper. While at OM, we introduced a clearing service that eliminated
the risk inherent in the bank’s process. A lot of the clearing houses
were very suspicious of our clearing solution and said that we were in
bed with our enemies! However, the clearing solution was a huge
business area for us in the 1990’s especially in the bond and Treasury
bill markets.
Q. You were a member of the European Association of Clearing Houses (EACH). What is that exactly?
I was a member of this organization in the 1990’s but you have to be a
member of a clearinghouse to be associated with EACH. When I left OM,
I lost my membership. Clearinghouses are dependent on each other.
They have to trust each other because if there is a failure in the
market, they need to inform one another immediately and strategize
around how the government will react. This organization is very good
at getting everyone to collaborate and if something happens, they can
immediately react.
Q. Can you tell me about Cinnober's clearing solution?
In the summer of 2008, Cinnober had a lot of internal discussions
about clearing. We were at a crossroads. We had sold our trading
system to a lot of exchanges and we had to split our business to find
another track. We investigated what that track should be.
A high frequency trading (HFT) firm approached us about risk
calculation. These calculations have to be done at an extremely fast
speed and they have to be done accurately. The HTF firm would like to
have figures to compare with in real time because their system can
destroy the whole company in a few seconds It was a huge investment
for us but it’s proved very successful. It can be used for pre-trade
risk calculation as well as at trade risk calculation in true
realtime.
Q. How does it work with the rest of your technology?
All of our technology is based on our TRADExpress platform. Our
customers don’t like buying something out of the box. They want their
own customizable solution so we decided to build a model that we can
always customize on top of our platform. The clearing system is built
on the same platform as the trading system.
Q. How fast can you calculate the risk?
We will release the figures early next year. We offer our customers a
way to enter an order, calculate that risk and find out how much the
risk will increase as well as check if they have collected enough
margin without delaying the order. It will all happen in less than one
millisecond.
Q. Where are your offices?
We only have one office in Stockholm and that is one of the secrets
behind Cinnober. We decided that the sales team has to work very
closely with the development team. This is to ensure that the sales
team is never selling something that the development team cannot
develop. The development team has to work extremely close with the
support team so the development team cannot develop something that is
hard to support. And the only way to do that is to say the
development team must support the new technology for the first six
months.
For most companies, signing and acceptance of their technology is most
important. For us, the production is so important and the only way to
do that is to have all our teams working together and closely. So we
are traveling a lot.
Q. Where is your favorite place to travel to?
I enjoy going to my cottage in the north part of Sweden. We have had
the cottage for many years and my family goes there in the winter. I
like to meet people, but I really don’t like traveling privately – I
traveled for more than 100 days a year for 25 years.
Q. If you weren’t in this industry, what would you be doing?
I would be a chef or a sports journalist. I cook a lot on weekends
and love Japanese cuisine. I also started to look at South American
recipes.
Also, I have always been interested in sports, specifically individual
sports. I used to run marathon and orienteering. I used to run every
day, maybe 150-200 kilometers per week. I might have been a little extreme
about running but you produce endorphins, which puts you in a good
mood. I was addicted to running, no doubt. It is the best time to
think and clear your mind. I think of new ideas and solve problems
while I am running. You can come up with new ways to approach
challenges during that time too.
I have been walking from the office to my home once a week since a
couple of years while I am not traveling. It usually takes about
three hours and is very relaxing.
Q. Throughout your career have you ever had any mentors or someone that you modeled your career after?
I think the answer is no because I was never thinking about the next
thing. I believe that everything is coincidence. You have to be in
the right place at the right time. I am very lucky to have been in
the right place at the right time.
Category:Five-Minute Interviews