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Foreign Exchange

The Ivan Ritossa story: the man who built Barclays FX

Ivan Ritossa, who recently announced he is leaving Barclays after 10 years, has been one of the most influential figures in foreign exchange during the past decade. Hamish Risk profiles the man and charts the extraordinary rise of Barclays as a leading FX player.

In 2002, when Ivan Ritossa joined the fledgling investment bank Barclays Capital to run foreign exchange, the business was stuck in the dark ages. For an institution that had been one of the UK's biggest clearing banks for generations, its FX business was small, annual revenues were in the double digits and it languished outside the top-10 banks in the Euromoney FX survey. It presented an irresistible challenge for Ritossa, who had made his name in FX at Bankers Trust but wanted to make his mark in banking as a business builder.

What he proceeded to do during the next eight years was transform an old-school FX business into an FX machine, which in less than six years would be delivering annual revenues in excess of £1 billion. In doing so, he created one of the great success stories of modern FX - one that has few peers and which, as banking enters a new era, is unlikely to be repeated.

 

"Ivan put Barclays on the map and was a genuine competitor. He was a business builder who made some very astute hires."

By harnessing cutting-edge quantitative analysis and computer science with an instinct for identifying untapped potential in the people he hired, Ritossa rebuilt the business within a new FX paradigm - a place where technology enabled market makers to create their own liquidity, in greater amounts and at cheaper rates, while driving continuous revenue growth.

For FX, the first decade of the 21st century was transformational. The increasing adoption of electronic trading and the introduction of prime brokerage saw average daily volumes traded double in the space of 10 years. The creation of CLS Group also helped streamline the FX-settlement process and reduce counterparty risk, further enhancing that growth. By the end of the decade, it was a $4 trillion-a-day market.

Barclays Capital and its great rival Deutsche Bank were at the vanguard of many of the advances in electronic spot FX trading that led to this growth, which has since been replicated by many of their main rivals. However, in 2002, it was not obvious that Barclays would be the bank that would lead that transformation.

In speaking to many of the people that worked with Ritossa during that period, the conclusion is that without his vision and his ability to sell that idea to senior management - who funnelled hundreds of millions of pounds of investment into the development of Barx, the FX platform - the emergence of Barclays as a force in FX might never have happened.

"Ivan had the foresight to see how big the electronic business was going to be and how the market was going to change," says Tim Cartledge, who was one of Ritossa's early recruits and also a key architect of Barx. "He also had an incredible ability to corral the resources we needed to achieve that." Cartledge is now head of Barx FX and spot trading, based in Singapore.

Earlier this month, Barclays announced that Ritossa will be leaving at the end of the year. For the past year, he has been head of Barclays' investment bank for Latin America, Central and Eastern Europe, and the Middle East and Africa, and deputy head of the bank's FICC division. He has served on the bank's executive committee since 2007. His departure comes as the bank announces a reshuffling of senior positions within the investment bank.

Ritossa officially left the FX business two years ago, and since 2005 has filled a string of other senior management roles, but it is what he achieved in building the Barclays FX franchise that he is most widely known. An approach in 2001 from former BT colleague Jerry del Missier, then head of derivatives at Barclays, would lead to a fruitful partnership, where they would help build the firm into one of the most successful global flow monsters and make Barx one of the leading execution engines of choice in the financial markets.

Del Missier, who would rise to be co-head of the investment bank, quit Barclays in July amid the Libor scandal, which had already cost his boss, Bob Diamond, his job.

The birth of Barx

Electronic trading technology was a nascent business in 2002, and although investment banks were staffed with large IT departments, systems and trading platforms were disparate, bespoke and lacked any sense of brand. And even though FX was considered the next market "to go E" after equities began migrating on to electronic execution platforms in the late 1990s, few banks had developed anything that was fit for purpose.

In Ritossa's mind, making electronic FX a core strategy seemed the quickest way to create a point of difference for a firm that sat on the periphery of the bulge-bracket FX firms, where chasing market share using the traditional voice model would take more time than management was prepared to wait. It also meant that he could narrow the field of competitors from about a dozen to a handful. In 2002, UBS, Credit Suisse, Dresdner Bank and Deutsche Bank were on that shortlist of electronic rivals.

Of that list, Barclays had a formidable benchmark to chase - Deutsche Bank. The German bank had in the 1990s set out to aggressively build an investment bank and global markets business, and FX was a market they coveted. In the space of five years, it had risen from obscurity - ranked 22nd in the 1995 Euromoney survey - to become the number-one FX bank by 2000.

The following year, it launched its electronic platform, Autobahn, which with Barx would become the two dominant spot FX trading platforms during the next decade.

"Ivan put Barclays on the map and was a genuine competitor," says Zar Amrolia, Deutsche's global head of FX and markets electronic trading. "He was a business builder who made some very astute hires."

Getting things built at Barclays in early 2003 was challenging because systems were still being designed by committee, and priorities were fluid. Frustrated, Ritossa persuaded senior management to give him his own resources to form a team and create his own project, which would become Barx, the SDP. The fixed-income platform was built in parallel by another team.

The early versions of Barx FX were clunky and riddled with latency problems, anathema to his trading desk at the time, which often found it was losing money as trades from the platform fell into the trading book. There was increased scepticism that e-trading was a business with any viable future, and so Ritossa spent a lot of time managing that conflict between the two desks.

Recruitment drive

It would be almost two years before the spot desk fully bought into the idea that Barx was the best way forward. By that stage, many of the old-school traders had departed and Ritossa began to assemble his own team.

This was not any ordinary recruitment drive either. Rather than outsourcing the search for talent to headhunters, Ritossa chose to do the hard yards himself. He would meet potential candidates in one-hour time slots, sometimes four nights a week for almost three years, alternating between the Langham Hotel and Halkin Hotel in London's Mayfair district. During one of those meetings in 2003, he came across two young options traders who would transform his Barx vision into a reality.

One was Cartledge, the other David Cooney. At the time, they were running the options desk at Dresdner Bank, another second-tier bank, that ranked 15th in the Euromoney survey that year. The two were developing an option model that mapped the smooth interpolation of the option volatility surface, and Ritossa wanted to hire them to run his options desk, which had suffered large losses the previous two years.

While Cooney and Cartledge were keen on the move, they wanted to take their entire desk. They also offered up their own ideas on how electronic trading and risk management could be taken to a new level in the spot trading. While Dresdner had developed its own SDP, called Piranha, the pair were frustrated their ideas were not being noticed.

Ritossa saw their potential and agreed to a trade. If they came and fixed his options business, they could have a shot at Barx. He also agreed to take the whole options team from Dresdner, which included Chris Purves, Ed Falinski, Farouk Juma and Dan Mutch. This group would form the nucleus of the innovation that would follow. In all, Ritossa had personally hired as many as 100 people by the end of 2005.

"He had a lot of hiring to do and his great success, with the presence and gravitas that he has got, he convinced an awful lot of people that it was a fantastic move," says Cartledge. "He sold us all the dream."

As well as the Dresdner crew, Ritossa recruited several members for the core of his team from his previous employers, Lehman Brothers and BT. Danny Wise and Jan Smorczewski came from Lehman to run the spot and forwards, and John Caccavale, a legendary spot trader in the 1990s and also from Lehman, was hired to run the Americas. When he retired, he was replaced by a former BT colleague, Bill Hirschberg.

Gyan Newman, a former chief operating officer at BT, became an integral part of the e-commerce sales team. Rob Bogucki, another Lehman trader, who now runs FX for the Americas at Barclays, joined later to run options trading.

In London, Ritossa swooped on Citi to hire David Woo to run research, Sean Comer as his chief operating officer and Jerry Urwin to join the spot desk.

George Athanasopoulos, an exotic options specialist, was hired to run global sales as part of Ritossa's strategy to upskill the sales force to sell more derivative hedging and investment products. His first hire had been Lutfey Siddiqui, a young and ambitious derivatives specialist from Deutsche Bank, to run FX structuring.

In addition to running options trading, Cooney and Cartledge began developing a portfolio-based risk engine on Barx, while others within the team worked on building what became known as Bats (Barclays Analytical Trading System), which was designed to analyse client trading behaviour and pinpoint which trades the platform was making or losing money on. Deutsche also introduced automated risk management around this time.

It turned out it was more than just an analytical tool because, as Cooney explains, it formed the basis of a much more effective way to price foreign exchange and manage the risk.

"We realized the technology we had developed to analyse events in the past could be evolved to process events coming in the future," says Cooney. "So what had started as an analytics engine became a pricing engine, responding to input prices and trades, automating the entire process."

Decimalization

The pricing improved significantly thereafter, giving them the confidence to go even further. Within nine months of arriving at Barclays, Cooney and Cartledge put a new and bolder proposal to Ritossa, which had never been tried in the FX markets - to introduce decimalization (a fifth decimal point).

Called Precision Pricing, the idea was not universally popular within Barclays at the time. Some within the team feared that clients would not understand it and they might be turned off from trading with Barclays, but Cartledge and Cooney convinced Ritossa to go for it.

"To be honest, we didn't know what would happen when we turned it on," says Cooney. "But the key was that Ivan gave us the latitude and the time to try these things out."

It proved to be a game changer, because it meant the Barclays could now internalize more of the risk it was taking on as it could more efficiently skew the spot price in the direction of where risk was reduced, while still being able to be the best bid, or offer, in the market.

Moving to decimals was crucial to skewing a price because the technique worked less effectively on full pips, because the pricing engine typically skewed too far, says Cartledge.

Internalizing flow - Barclays was now internalizing 75% of its flow - was a departure from market convention, where most banks operated a quote-and-cover model, and therefore competitors could not see the point of decimalization, other than the fact it would compress spreads and erode profit.

"But we didn't do it because we wanted to compress spreads," says Cooney. "We did it to differentiate the rate."

Still, the market remained sceptical that such pricing was sustainable, and there were no followers until Deutsche Bank introduced decimalization in early 2008 - although it now says it was ready to roll it out in 2007, but given that it held a large market share, it did not feel under pressure to do so. EBS then introduced it to the interdealer market in 2011.

By the end of 2005, Barx had a formidable pricing engine, but it still lacked a footprint and market penetration. Given its rate of penetration at the time, it would have taken years for Barclays to catch the frontrunners, and so Ritossa came up with a plan to create an e-sales team that could fast track the on-boarding of Barx on to as many desktops in the shortest time possible.

However, instead of using FX people to sell an FX product, Ritossa took a different approach. In practical terms, selling Barx was not just about selling an FX rate - it was also about selling connectivity. That needed IT skills, and an ability to communicate this not just with the buy-side trader but with the client's own IT department. This, Ritossa believed, would speed up the process of on-boarding.

Within the space of two months Barclays had hired 30 people with technology backgrounds, embedded them in the organization and then let them loose on a long list of prospects.

"Hiring all these professionals from technology backgrounds at the time was unheard of," says a member of the FX team that helped recruit the e-sales team. "Other people at the firm were laughing at us when we started hiring people from IBM, the LSE and Reuters to try to sell Barx."

From that point, Barx began to proliferate, and by the end of 2006 the bank was signing up hundreds of new users every week. The move to decimals also made Barx much more relevant to the high-volume systematic traders.

In 2006, Barclays almost doubled its client volumes, according to Euromoney market data, trading $11 trillion with clients. And while all the top FX banks were increasing their volumes, Barclays, alongside Royal Bank of Scotland, was growing the fastest. The following year, client volumes grew by 46%. The volume growth has continued each year since. Indeed, Barclays has been the only bank within the top-five FX providers to grow volumes continuously year-on-year since 2005.

However, there was still a lot more to do. By the end of 2007, Barclays had increased its market share four-fold in five-years and was less than one percentage point behind traditional FX giant Citi, but it was still 10 percentage points of market share behind the frontrunner Deutsche Bank. Still, it was the momentum story of the day. Barclays was the one to watch.

The early days

Ritossa, now 50, began his career in his native Australia with BT in Sydney in 1983, the same year the Reserve Bank of Australia floated the Australian dollar - in the process creating a new breed of FX trader with an antipodean twist. Ritossa thrived in this new market and quickly rose through the ranks to be running BT's spot desk in Sydney by the age of 26.

From the beginning, he had a ferocious work ethic that few could match. At the end of each trading day, he would roll up his charts that he filled in throughout the day, carrying them home in the evening, take 15-to-20 phone calls throughout the night, actively trade, while continuing to fill out his charts, say former colleagues.

The working week began at 5am Sydney time on a Monday and did not finish until 5pm New York time on a Friday afternoon, or Saturday morning, Sydney time. If the markets were open, then there was an opportunity.

"You just knew this guy was going places because he was so focused," says Drew Bradford, who joined the Sydney spot desk as a graduate trainee in 1987, and is now global head FICC at National Australia Bank in Sydney.

A precocious talent, former BT colleagues say even in his mid 20s, Ritossa was intensely interested in firm politics, building a thorough understanding of how the organization worked and machinations of management.

Promotions followed quickly. He was made managing director at 27, was appointed on to the BT Australia executive committee at 28, and by 34 was running FX trading for the Asian region. He was promoted to global head of FX at 36 in 1998.

It did not last long though. In the preceding years, BT had developed a thriving emerging markets business, which in the lead up to 1998 had built up a large exposure to Russian government debt. When the Russian government declared a debt moratorium on its foreign debt in September 1998, BT suffered a $488 million third-quarter loss. Its stock plummeted and Deutsche Bank acquired the firm three weeks later for $9 billion. However, the acquisition was seen as an entree into the US market, where its expansion efforts had until then been thwarted.

As the merging of the two firms took place, it was clear there was little room for Ritossa at top management level, given that Deutsche had a well-established FX team led by another Australian, Hal Herron. So, he left to join Lehman Brothers as global co-head of FX and emerging markets. He would join Barclays two years later.

The man manager

What often marks out any successful businessman is an unmatched work ethic, burning ambition, attention to detail and the ability to identify potential in people - and then a willingness to put one's faith in them and delegate.

These were all attributes that Ritossa possessed in spades, say former colleagues. And while he hired several brilliant technologists, and a highly competent sales and trading team, the confidence he gave them and the time to meet their targets were crucial to the success of Barclays FX.

Most of those who spoke to Euromoney for this article did not wish to go on record, largely because many now work for competing organizations, but they agreed about one thing - Ritossa was a remarkable individual; a statesman-like figure for the FX business, who, while probably not regarded as the most creative or most technical in an industry of talented individuals, was an outstanding strategist who knew how to manage up.

"What was rare about Ivan was that we got all the help that was needed in terms of technology, but equally we got all the help we needed in terms of political air cover," says Cartledge. "He just cleared the way so we could build what we thought was the right way of building the business."

At the same time, he expected results. His four-point mantra for the business which still hangs on the wall of his office, emphasized the importance of accountability (the other three were: E-trading, derivatize FX to create value and targeted research). In the context of Barx, that meant a constant appraisal of how the business was being developed and how these plans were being executed.

"His pure attention to detail and continually making people accountable, keeping them on the hook, were one of his key strengths," says another former member of his team. "It was one thing to come up with innovative ideas, but the real hard part was making sure it was executed. Ivan would constantly drum this point into us."

Attention to detail can sometimes be a euphemism for micro-management, but Ritossa did not fit that description.

"He was a tough man-manager but not a micro-manager," says a member of his management team. "For instance, if you circulated a 60-page presentation you had done before a meeting, you could bet that by the time it came to the meeting Ivan would have read all 60 pages and he would have a question related to page 56 that you really didn't want him to ask, but that would be his first question."

And he did not suffer fools gladly. "If you didn't  know what you were talking about, he would keep at the point until you were very educated about the point that you didn't know what you were talking about," says another former colleague. "If he wasn't getting sensible answers from someone, then the eye of Sauron would descend upon them."

However, like all great leaders, there were character flaws too. Ritossa was very opinionated, and if he decided he did not like an individual, that never changed. "That was his single biggest drawback," says a former member of his team. "He was never open-minded about people he didn't like, and sometimes he was wrong."

Balls in the air

Delegation was also an essential element in Ritossa's armoury, as he was handed additional roles and promoted. As early as 2005, Del Missier appointed him to oversee the investment banking operations of Absa, the South African retail bank that Barclays had just taken a 55% stake in that year.

Initially, Ritossa would spend two weeks a month in Johannesburg, which later became one week a month. Ritossa is attributed with turning the investment bank around. It has been awarded best investment bank in South Africa by Risk Magazine for the past three years.

In 2007, he was promoted to run global markets trading in Asia, an important role as the bank was seeking to build out its global operations and its Asian business, and where it was short on senior executives.

In 2008, he was then appointed global head of prime services, which had had problems with risk control the previous year. Ritossa's job was to streamline the process of the business, so that collateral management was reflecting the underlying risks of the assets. The collapse of Lehman and AIG the following year turned the screw on the demands of that job, which took a substantial toll on Ritossa.

As well as running Asian trading and FX, he was in effect working round the clock during the dark days of 2008, while also living away from his wife and four sons who had remained in London. Something had to give, and by 2009 all was not well within the global FX team, and several key members began to leave.

Athanasopoulos, his global head of sales, left in April 2009, Comer, his chief operating officer, was poached by Deutsche Bank four months later, and Cooney departed the following month to found his own FX business in New Zealand.

The following year, the exodus accelerated. Richard Longmore, Siddiqui and Purves, with his technology team, all left to work for UBS, rejoining Athanasopoulos there. Andy Kaufman, global head of FX structuring, also left that year. In all, as many as 30 people departed during a period of less than two years.

Even though Ritossa's responsibilities had gone beyond FX, he had remained an FX guy through and through - it was his spiritual home, in a Barclays context. However, his ability to impact the FX business the way he had done in the early years was now diminished. He took the departures personally.

"Ivan thrived when he knew the details, and when he had a big job as head of FICC in Asia, and prime services as well as Absa, he is managing 27 different things, one of which was FX," says a former manager of his team. "He would insist on things that didn't make sense, or he would collect three sound bites and come back and say, 'On the basis of these three opinions, that's what I think is going on.' "He wasn't always accurate."

The opposing argument for the staff exodus was that Barclays FX had merely become a victim of its own success.

"You had a complete reweighting of the business, it had gone from being outside the top 10 to being top three, and therefore people become a target for other banks because it's not just a case of how big you are, it's a case of how fast you're growing," says Cooney."All of a sudden those people became very desirable."

The legacy

Nonetheless, Barclays insists it had a deep bench, and while some of the departures were a loss, those people that came through the ranks to assume the positions left vacant picked up where they left off.

Indeed, it appears the business has not missed a beat under Ritossa's successor Mike Bagguley, a former rates trader, who had worked for Ritossa at Absa Capital, running the markets trading division there.

"When I took over from Ivan, the mandate was to continue to build on the idea of innovation and sophistication that he had started," says Bagguley. "We wanted to take what we had done in spot and move that across the whole product offering."

In the 2011 Euromoney survey, Barclays achieved its highest ranking of second place, behind Deutsche Bank, and in 2012 it won the Greenwich Associates survey for market share, but dropped one place to third in Euromoney as Citi leapfrogged Barclays and UBS from fourth.

However, the highlight was FX options, which showed vast improvement as it jumped two places to second in the survey. "One of the things that Ivan was most pleased about in last year's survey was our improved standing in options," adds Bagguley.

That is also being reflected in the improved revenues of the business, which continue to grow year-on-year, the bank says. According to analysis seen by EuromoneyFX, which was conducted by the consultancy firm Coalition, Barclays is now the second-biggest bank by revenue in G10 FX, up from fourth two years ago.

However, in terms of market share, it has not been able to catch the market leader Deutsche Bank, and it now faces more intense competition from UBS - whose team comprises several members of the Barclays alumni - and a resurgent Citi. One wonders, if Ritossa had stayed at the helm, might the momentum of 2006/2007 have continued? That might be splitting hairs, says Cooney.

"If Barclays had been worried about the impact of Ivan leaving, then they wouldn't have endorsed him going off to do something else two years ago," says Cooney. "Ultimately, if you've built a machine, you've got to test that by taking the individual off the top of it, and that machine continues to work pretty well."

Regardless, Ritossa has left a considerable legacy to Barclays. Regulation is about to change the revenue dynamics of banking's global markets businesses. Capital constraints will be a drag on their derivatives and rates trading franchises, while FX is becoming a greater share of FICC revenues - and that will only become more the case.

For those with scale - a select group of six-to-seven banks - in which Barclays sits comfortably, it is in a position to continue to deliver stable and sustainable revenues and a return on equity that no other business can match.

At the same time, the barriers to entry - for banks looking for those same low-cost returns - are on the rise. In the new world of banking, senior management are seemingly less willing to plunge large sums of capital into the building of technology that has become democratized. In that sense, the rags-to-riches success story that is Barclays FX is less likely to be repeated.

However, Barclays FX must continue to innovate. Many of those people that helped create the machine have now taken those skills elsewhere, and so it must keep pace with the condensed pack of Deutsche, Citi and UBS.

It is a position worth retaining, and it has Ivan Ritossa to thank for that.

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