First New York Securities' Jean Hill’s Blank Slate

Jean Hill has attempted to break away from Wall Street three times … and three times she has failed. The Street kept drawing her back. She was first destined to become a hotel magnate—her family owned the Concord Resort Hotel in New York’s  Catskill Mountains—and she was raised as the heir apparent. She attended Cornell University to study hotel and restaurant management, but decided a general management degree would be more useful.

After a falling out with her grandfather—who ran the hotel—in 1983, Hill took her business degree and entered Merrill Lynch’s technology training program. A year-and-a-half later she found herself at Lehman Brothers, where she eventually moved to the bond trading desk. At night she studied for a law degree. Hill received her graduate’s degree from Fordham University and joined a law firm as an associate.

Yet, while she says studying law provides for a fantastic education, she soon realized that technology was a lot more fun than being a lawyer. So she walked away from law in the early 1990s and joined EJV Partners, which was designed to compete with Bloomberg. But her return to technology was short-lived.

Hill decided to leave the financial technology world once more, going into business for herself, by creating a mail-order kosher meat shop, Amara Kosher Meats, which she named after her two daughters: Amanda and Clara. Hill sold kosher delicacies throughout the US, but this was before the advent of PayPal or Yahoo! stores, and she realized she could make the same money with half the stress working back on Wall Street.

Once more, Hill came back to the world of financial technology, initially as a consultant helping First Boston with its merger into Credit Suisse, and then returning to Merrill Lynch after a 17-year hiatus.

It’s been more than a decade since Hill’s return to Wall Street and she insists that she’s here to stay for the foreseeable future. The reason she doesn’t intend to leave again is because of her new position—CTO of First New York Securities.

Blank Slate
First New York, a profitable prop-trading shop, was established in 1983. In 2009, there was a change at the top that culminated in the summer of 2010, and with that change came a revision in terms of the way the firm approached technology. In light of changing regulations and a desire to grow, the firm had to reevaluate its IT. That overhaul included the hiring of Hill in October 2010.

When she arrived, there wasn’t an IT roadmap in place, enterprise technology was all but nonexistent, the network was erratic, and its firm-wide view of risk was lacking. Hill was truly starting with a blank slate.

“To continue into the future we had to have these building blocks in place,” she says. “To run a firm of this size, in this regulatory environment, we needed to change the way we were doing things. Whether you want to position yourself for growth or for fewer traders trading larger amounts, you don’t want to be running it the way we did—this was something that had to be done, regardless. So I looked at it as if I was starting a firm from scratch.”

The firm was up and running, making money and was well-respected in the industry, but it realized that it had to adapt to changing markets and rebuild its entire infrastructure. First New York had started a number of worthwhile projects before scuttling them, Hill says, and there wasn’t an order-management system (OMS) or dynamic failover systems for the network in place.

Hill first brought in a consulting firm to conduct an overall assessment of what the firm had, and, more importantly, what it was lacking. Initially, they focused on the network. As an example of how disjointed things had become, the consultants found that one of the firm’s “low-latency” traders was actually accessing the internet as one of the hops to get to the server.

Through the assessment, Hill was able to develop a roadmap of where the firm needed to get to, and what risks needed to be mitigated. “I am very happy to say that we are finished with 90 percent of it, and the last 10 percent falls into the ‘nice-to-have’ and not the ‘need-to-have’ category,” she says.

Buy vs. Build
After the network study, Hill next looked at the firm’s staffing. What she found was that 95 percent of the team was working on running First New York, and only a couple of others were dedicated to building the shop. Hill wanted that ratio to be closer to 70:30.

What she found was that she had a lot of talented people on staff, but many were in the wrong roles. So she shuffled the staff and got people training, something they hadn’t had before.

While she had to reduce the headcount in some areas, she was able to quickly shift resources by turning to outsourcing firm IPsoft to run operations, something that Hill felt her staff shouldn’t be doing.

“The culture you want on Wall Street is to have heroes; you want to have that person who will stay up until two in the morning and be the hero, but that’s not the one who you want running your staff everyday because they’re not going to document and write a script for something—the vendor gets paid to write a script,” Hill says.

To illustrate the efficiency of First New York’s new system, Hill says that—for example—if there’s now a problem with a router, an automated script logs into the router automatically, identifies what’s wrong, and in some instances can even fix the problem. In this scenario, the issue is solved in less than 10 seconds, when it would take a human 30 seconds just to log in, she says.

The next step was to look at the entire application architecture: what the firm does and does not have; which core building blocks are needed; what the fastest way to improve is; what the firm does and does not have time to do; and what its “secret sauce” applications are, in terms of what is making the shop money.

Cleaner
It has been a year since she joined First New York Securities and Hill says the firm has cleaned the entire infrastructure: There are now dynamic failover switches in place, improved virtualization systems, the datacenter has been moved away from the traders, and they’ve implemented a standardized application process that includes “one-click” software distribution.

As for the firm’s OMS, First New York selected Eze Castle Software’s Eze OMS, and it tapped Citco Fund Services as its fund administrator. The firm has also put significant effort into getting its data strategy right and ensuring that its data is concentrated through two to three sources at the most, rather than 20.

“We spent 2011 streamlining and consolidating our trading data,” Hill says. “In making this transition, we began leveraging a fund administrator that will not only provide additional services but the technology infrastructure as well. We believe this will improve efficiencies as we will no longer need to go in and look at multiple systems to get a view of our risk.”

This year, according to Hill, First New York will be geared mainly toward better utilizing the data it has now gotten under control and further developing the infrastructure that it has now put in place.

“We transitioned the major portions of our business to new trading platforms in 2011 and we expect to migrate the [rest] early this year,” Hill says. “The main focus for this year will be on analyzing our data: Who are our top 10 brokers? Who are we spending the most in commissions with? Who are we doing the most voice trades with? What can I streamline and get more value from? Which traders are actually doing 200 trades a day versus 50? What time of day are they doing those trades? Basically, we’ll look to take all the data we have and use it to more efficiently run our business.”

Hill says the firm is working toward streamlining the on-boarding and off-boarding process so that in the future there is one major data platform that feeds ancillary systems. This will also be important from a risk management perspective, she says.

Bucket List
When Hill arrived at First New York after serving a short stint at the New York Fed as its deputy CTO, she had a gameplan whereby every project had to fall into at least one of three buckets: business value, efficiency, and/or risk mitigation. If a proposal didn’t fall into one or more of those categories, it did not get the green light. 

In 2011, Hill’s team spent its time stabilizing the firm. Cleaning up the network fell into the risk mitigation bucket, while getting an OMS in place met needs for efficiency and risk mitigation. Arguably, everything can fall into the “business value” bucket, but now the goal is to take that stabilized group of products and processes and add real business value—hence the desire to dig down into the data.

Unlike many CTOs, Hill is not overly concerned with the current regulatory environment—or at least if she is, she doesn’t show it. She was brought into the New York Fed to revamp its infrastructure, so she knows the regulators well. When the credit crunch and subsequent Troubled Asset Relief Program (TARP) swept through the US, the old way of doing things wasn’t going to cut it anymore—it had to leapfrog years ahead of where it was, Hill says.

This was similar to what Hill initially undertook at First New York. Her experience both at the Fed and at heavily regulated sell-side firms has given her vast experience into what the regulators are asking for and why.

“At the end of the day, anything that the regulators are asking you for is only going to help your business,” she says. “Regulation is not a four-letter word. If you have your information organized, it’s very easy to satisfy the regulators. If you have the information in a million spreadsheets, if you need an IT worker doing a search on emails and taking six hours to get the information, that’s not the proper use of time.”

When asked if she has the desire to leave Wall Street at some time in the future, Hill replies, simply, “No”—although she acknowledges that she could one day see herself as a teacher. But that wouldn’t come until after she retires and she has no plans to pack it in anytime soon.

Hill had her chance to run a major hotel, she spent a few years as a business owner, and the door to becoming a lawyer was wide open. But in each of those instances, technology drew her back.

And at First New York, the thrill of creating something from the ground up still gets her excited when she comes into the office each day. With Hill, you get the sense that she truly loves not only the technology, but the puzzle that, specifically, financial technology provides … or else she would have left the profession by now.

“My view is that a CIO or CTO is really a business-solutions provider: I don’t believe in technology for technology’s sake. If I did, I would go to Google or Microsoft,” she says. “On the Street, we’re one of the few disciplines that truly understands start-to-finish.”