The May issue of Crane Data's flagship newsletter Money Fund Intelligence (monthly, $500/yr) recently discussed online money market trading developments with Jonathan Spirgel, Executive Vice President & Head of Liquidity Services for BNY Mellon. The company's Liquidity DIRECT platform was the first and is the largest player in the approximately $600 billion 'portal' marketplace. The following discussion is reprinted from the latest issue.
MFI: Tell us about the history of Liquidity DIRECT. Spirgel: Back in 1997, as we were sharpening our strategic focus on custodial safekeeping, we asked ourselves if helping clients invest their cash might be a new and different way to service their needs. We asked, 'How do we make it easy, simple, cost effective, and secure?' We'd always had a platform of money market funds and had relationships with all the name-brand money market providers at the time, so we came up with the idea of offering just the money market fund portfolio capabilities to large institutional clients around the world. Given our relationships with money fund providers, it became readily apparent to us at that time that we could come up with a product that would make their funds accessible to our client base in a very streamlined and efficient manner.
The merger of BNY and Mellon brought together Mellon's Liquidity Management Service and BNY's Money Funds DIRECT. We put the two of them together soon after the merger and came up with our Liquidity DIRECT portal.... Now our goal is much broader than just [being] a money fund portal, our goal is to be a short-term liquidity solution across many different currencies and many different locations. We're a global company, and the emergence of our product as a global offering has been especially helpful to our clients of late.
MFI: How big is the portal? Spirgel: The way we view it here is that we are one part of a one very large platform. Depending on the nature of their relationship with BNY Mellon -- e.g. asset servicing, corporate trust, treasury services, etc. -- clients have multiple points of connection with our platform. BNY Mellon is the largest custodian in the world with $25 plus trillion in assets under custody. The cash that we look after is quite large. We typically don't talk about portal assets in detail, but the platform assets are a multiple of hundreds of billions of dollars. We use multiple currencies as we handle diverse and different types of clients around the world. If there is a product out there that we feel is appropriate for our client's needs, we are happy to add it to our systems. That allows clients to invest their cash in that particular product via a transaction carried out in their time zone, through a local web-based product.
We have about 32 different funds families. It's driven by the client base and what they desire and what they are looking for in a product. Of course, we have prime funds. We have the government funds and Treasury funds with or without repo. Today, we are more focused on funds that have [things like] the QII distinction and the NAIC distinction for insurance companies. We now have more than 800 clients using the portal -- but that said, we still maintain personal relationships with many clients based upon their desire to interact with a live person vs. an electronic platform.
MFI: What's new in the money fund portal marketplace? Spirgel: We started looking at transparency a few years back. What it really comes down to is asking our clients the questions: 'What can we do to help you? What would make your life easier? What would answer the questions that you're getting from your treasurer, CFO or board of directors?' Back in 2008, clients were getting a lot of questions. We didn't want to provide investors with reams of paper that they would have to cull through.
Last summer, we started getting files from some of our providers and started building reports. But just getting the information wasn't good enough. We needed to be able to ask and filter information based upon some set of criteria that our client would need to respond to it internally. We look at transparency as not just providing a monthly list of holdings in a PDF, but being able to provide the clients with a variety of tools -- e.g. a reporting tool, a search tool, a filtering tool, and an analytical tool.
We are going to continue moving forward with transparency. We feel that our reporting has already reached a fairly sophisticated level and our clients have been happy with the information and analytical tools that we provide to them. But we're not resting on our laurels.... Clients want the ability to analyze the data in a coherent and a thoughtful matter, and that is what we are committed to delivering. Offshore is the next logical step for us. We are going to continue to build that out.... Transparency is a goal, and offshore is a goal -- we intend to keep rolling on both fronts as we find ways to provide more and more detailed analytical and helpful tools to our clients.
Look for more excerpts in coming days, or e-mail Kaio Barbosa to request the full article in the latest issue of Money Fund Intelligence.
