After more than four decades in the capital markets, Lee Cutrone is retiring. He talks with Anthony about the highs, the lows, and what he’ll miss once he's out of the business—namely, T+2, or even T+1, settlement cycles.
Over the five years that I’ve been covering the financial services industry, Lee Cutrone has been one of my favorite people to talk to. The managing director for industry relations at Omgeo is knowledgeable and helpful as a source, and more than that, he's personable and engaging. He has certainly been through a lot in the more than 40 years he’s been working in the industry, and next year he will officially walk away from the workforce to take up golfing, play with his grandkids, and, he says, drive his wife crazy by being home every day.
So now that he’s in a position to reflect, what will he miss most? What were the defining moments that stand out to him?
"Part of me wants to be here because this is going to be tremendously exciting and Omgeo is in the middle of it. I'm going to watch this with interest from afar and it's a very, very exciting time for this industry." —Lee Cutrone
Cutrone, 64, was born and raised in Brooklyn, which often comes up in our conversations, as I currently live in the hipster Mecca that is Williamsburg. He cut his teeth in the industry at Merrill Lynch in 1971. He recalls that the firm didn't even have fax machines back then, much less word processors and the internet.
After serving a stint at Stone & Webster Securities, in 1975, Cutrone found himself at the American Stock Exchange, where he spent 16 years before bouncing over to Thomson Financial ESG. It was this role that led to his current title at Omgeo, after Thomson teamed with the Depository Trust & Clearing Corp. (DTCC) to form the post-trading processing provider.
He has spent 21 years at Thomson and Omgeo, and he points to several broad initiatives that took place during that time.
The first was the move from trade date plus five days (T+5) to T+3 settlement cycles, which took place in the mid-1990s. "When you're trying to build a community, and the industry comes out and says you have to do things faster and more efficiently, it was a blessing for a company like Thomson ESG at the time, now Omgeo," he recalls.
The second was the short-lived Global Straight-Through Processing Association (GSTPA) in the late-1990s, which saw the industry try to work toward a solution in the middle-office, trade-matching space. Ultimately, neither Thomson ESG nor the DTCC got on board with that solution.
The third initiative—rooted in the DTCC's decision not to join the GSTPA—was the formation of Omgeo after the DTCC partnered with Thomson ESG to form the utility. "That was a very exciting, stressful, energetic period," Cutrone says.
The Future of Settlement Cycles
"The fourth big event is the shortening of settlement cycles. I am sort of here for the beginning of it, but I won't be here for the final implementation,” he says. “We in the US are about the revisit the shorter settlement cycle debate. Back in the GSTPA days, people were thinking about T+1, and that's about to happen again."
I get the sense that Cutrone knows he will miss doing the rounds on the speaker circuit, talking with clients and regulators, and even chatting with the media about what shorter settlement cycles will mean for the industry. "Part of me wants to be here because this is going to be tremendously exciting and Omgeo is in the middle of it," he says. "I'm going to watch this with interest from afar and it's a very, very exciting time for this industry."
The difference between the push for shorter settlement cycles in the 1990s versus today is that there wasn't a need for a massive infrastructure overhaul back then to move to T+3; but without that overhaul T+1 wasn't possible, either. In the years since, there has been a major push to improve the industry's infrastructure to make T+1 more feasible.
"The move from five-day settlement to three-day settlement was very, very easy for the industry to do and there wasn't a lot of preparation involved and they didn't have to change behavior. There was a desire to become more automated. You could do it with more bodies, as opposed to technology," he says. "Fast forward to the late-1990s and T+1, and there was a consensus at that point that if we did this, there would be a lot that we would have to address and building blocks that would have to be put in place. When we were talking about T+1, we always said that T+2 would be a lot easier—we would still have to change some things, but it's not as much of a structural change as T1 would be.”
Those T+1 conversations were put on the backburner and instead they went with T+3, but the industry started to focus on the building blocks to make T+1 possible.
"Fast forward another 10 or 12 years, and most of those building blocks are either done or well on their way to being done. The biggest one that's not done—and that's probably the biggest obstacle if you want to get to T+1—is changing behavior for batch processing and moving to real-time processing," he says. "So I see what's happening now as a continuation of building what they call the ‘enablers' to that, and that's what our job will be—putting the enablers in place for whatever the industry decides. Whether it's T+2 or T+1, we'll have the infrastructure in place to accommodate that."
The Best of Luck
Cutrone’s official last day of work has yet to be decided, but will fall in late March or early April. Before that day comes, he'll continue working Tuesday through Thursday, and is helping to transition his work over to Jeff Kiley, who in early November was named director of industry relations for the Americas.
As for me, I'll miss our chats about Brooklyn and financial services as a whole. But maybe now that he'll have some extra time on his hands, we can go out, grab a drink and I can fill him in on the latest in the industry that has shaped and defined such a large part of his life.
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