With his approaching retirement, DTCC Connection sat down with President and CEO Mike Bodson to reflect on his distinguished tenure and discuss highlights from his past decade of leadership.
DC: Do you remember what you thought about on the morning of your first day as CEO, as you headed into the office but before you arrived?
MB: I had been at the firm for five years serving as Chief Operating Officer so I had a solid working knowledge of DTCC, but I was also aware that being CEO meant that I was now responsible for every aspect of the firm. We’d been through the 2008 financial crisis together, calmed the industry after the Lehman Brothers bankruptcy and I had spent a lot of time with Don Donahue, my predecessor, and the management team, as well as Bob Druskin and the Board of Directors. I was really excited that day to hit the ground running.
DC: But things didn’t go exactly as you had planned.
MB: Not at all. The morning started fairly routine, but chaos erupted when a computer glitch led to the Knight Capital market event, which created a systemic shock in the global markets. DTCC is recognized globally for executing flawlessly every day, but our organization really shines during a crisis – and we proved it again with Knight Capital. Fortunately, we were able to close out the firm with no impact to our clients or the industry. That experience also taught me a lesson about trusting our people to do their jobs, which would be invaluable just a few months later as we dealt with Superstorm Sandy and its aftermath.
DC: As CEO, you’ve had to manage an almost dizzying array issues over the past decade. Which did you find most challenging?
MB: Some issues come with a long runway – risk management requirements, legislation, industry and regulatory changes, or shifts in government policy – so you have time to plan and prepare. They may not be easy to solve, but they don’t catch you by surprise. The toughest issues are the “unknowns,” such as the COVID-19 pandemic, the meme stock event and the current geopolitical and economic situations. There was no time to plan for any of those events. We had to react and move quickly to deal with record volume and volatility, dramatic changes in the way we work and economic factors that continue to impact our business and employees.
"Every CEO wants to leave a place better than they found it and to provide a solid foundation for the next generation of leaders. I like to think I’ve done that, and I’m very proud that DTCC has continued to thrive into its sixth decade and remains the global leader in post-trade. "
DC: What do you attribute the firm’s success to in navigating these issues?
MB: Like I said earlier, DTCC always rises to the occasion during a crisis. To a large extent, I believe that’s a reflection of our culture. We’re a mission-driven organization, and our employees embrace our critical role in safeguarding the global markets. When a crisis occurs, teams gather across functions and are singularly focused on ensuring the financial system remains stable and secure. We’re also very fortunate to have deep expertise in the organization so, while no two crises are the same, our employees are battle-tested and have hands-on experience based on real-world situations that they’ve managed in the past.
DC: When you became CEO, DTCC was just celebrating its 40th anniversary. Now, it’s almost 50 years. What is the biggest difference between 2012 and 2022, and what is most similar?
MB: Our fundamental mission has remained consistent over the past half-century. We protect the safety and stability of the financial system and seamlessly process more than a quadrillion dollars in financial transactions annually so the markets can operate efficiently. In terms of the differences, the short answer is just about everything else. In 2021, we handled a record $2.37 quadrillion in securities transactions, up from about $1.6 quadrillion in 2012. Our three subsidiaries – NSCC, FICC and DTC – were designated Systematically Important Financial Market Utilities (or SIFMUs) in 2012 under the U.S. Dodd-Frank Act. We’ve shortened the settlement cycle in the US to T+2 – and by 2024, to T+1 – launched new businesses, undertaken a modernization of our systems, strengthened our financial position and completely transformed virtually every part of the organization. That’s why this job has been the most challenging and rewarding of my career.
DC: Looking back, can you point to one action or event that significantly altered the direction of the firm?
MB: The Omgeo acquisition was a game changer in that it allowed us to completely reimagine DTCC and develop a unified strategy to broaden our support for clients across the full post-trade lifecycle. It also gave us scale globally, opened up new client segments, including the buy-side and increased our internal expertise to drive product innovation and the development of new solutions to help the industry navigate a more rigorous regulatory environment.
DC: Another area of focus for you was strengthening DTCC’s financial position. Why did you establish that as a top priority?
MB: When I became CEO, our financial standing had become an area of vulnerability, and it was clear we had to change course if we were going to compete over the long term. We also knew we had to approach this issue with a very different strategy than what had worked in the past. Our initial actions included a successfully two-part capital raise that began in 2015, which netted us $800 million, as well as an organizational-wide effort to reduce our expense base by more than $100 million over a two-year period ending in 2017.
At the same time, we placed greater emphasis on launching revenue-generating businesses so that our annual budget would be less dependent on market activity. Since then, we’ve implemented a new pricing strategy and also issued two debt offerings virtually – both of which were firsts for us. Today, we’re stronger financially than we’ve ever been: $2.7 billion in cash, $2.7 billion in capital, 10%-plus margins and no debt of any meaningful levels on the balance sheet.
DC: You’ve leveraged the firm’s improved financial performance to make investments in key areas, including digital transformation. Where did DTCC get it right in your opinion?
MB: We’ve been on the mark in many of the most important ways. Remember, initially, DLT was the disruptive technology that was going to change the world and disintermediate DTCC and others. The hype was out of control, and I’m proud that we took our time to investigate the technology. Based on our research and experience, we issued an authoritative white paper in 2016 that recognized the potential of DLT, but also stressed that it shouldn’t be viewed as a solution to every challenge facing the industry. It took some time, but that position is now widely accepted across the industry.
With that said, I was adamant that if anyone was going to disintermediate DTCC, it would be us. That mindset has guided us ever since, and it has helped reinforce the firm’s reputation as a leader on fintech and innovation, which is reflected in initiatives like Project Ion, our Digital Securities Management Platform (DSM) and Project Lithium, to name a few.
DC: You’ve placed a premium on DTCC operating with a commercial mindset and elevating the client experience. What prompted that decision?
MB: During the financial crisis, we proved how resilient and reliable our firm could be. But the world had changed, client demands evolved and we needed to operate differently than we had in the past. We had to eliminate silos, work as an integrated team across the businesses and functions and we had to change how we operated to bring solutions to market faster and deliver value along the product development lifecycle. The old way of thinking that ‘if we build it, they will come,’ had become irrelevant. Clients were demanding support immediately, and if we couldn’t provide it, they’d have no choice but to go somewhere else.
One of the most significant changes we made was to the way we worked. Even though the firm was well run, we embedded Enterprise Agile principles to enable us to become more responsive to meeting client needs. We also fostered culture change by emphasizing the importance of client service and client experience.
DC: Are you pleased with the results of those efforts?
MB: I’m proud of our progress in all these areas, but the fact is that meeting client expectations is a never-ending journey and the best companies are never satisfied when it comes to serving clients. That mentality exists across DTCC today, and I have no doubt it will continue to guide the firm’s activities in the future.
DC: Did the pandemic negatively impact DTCC’s ability to support clients or the industry?
MB: Just the opposite. Our colleagues rose to the challenge in every way imaginable. Faced with unprecedented personal and professional challenges, they continued to perform at the highest levels for two years before we returned to our sites earlier this year. I couldn’t be prouder of our team for how they responded to the pandemic.
“We’re a mission-driven organization, and our employees embrace our critical role in safeguarding the global markets. When a crisis occurs, teams gather across functions and are singularly focused on ensuring the financial system remains stable and secure.”
DC: Ironically, you started your tenure as CEO with a crisis and ended with another. Can you talk about how COVID impacted the firm over the past two years?
MB: First and most important, I want to acknowledge several colleagues who we lost during the early days of the pandemic. I also want to pay tribute to the 300 or so front line employees in Global Business Operations, Global Security Management, End User Support, Information Technology and Workplace Design and Services who continued to perform essential functions on site during this time. They’re DTCC’s front line heroes.
In the industry, the pandemic intensified market and external dynamics that had been building for several years: increased cost pressure, a dramatic shift in labor markets, the use of new technologies and the rise of new forms of risk, to cite just a few examples. Clients were very clear in calling for increased resilience, eliminating manual workflows through automation and lowering costs. We responded by launching new products and services or enhancing existing ones, prioritizing development across functions and adopting a “build it once and reuse it again and again” philosophy. To be honest, we can talk for days about this topic, but the reality is that we won’t fully understand the long-term impact of the pandemic for some time.
DC: As you look to the future, what are the most important issues that the industry will need to address?
MB: New technologies are driving the increased decentralization of the financial system, which will make peer-to-peer interactions routine. But with all the talk about DeFi and eliminating intermediaries, I also think FMIs will be even more critical to providing investor safety and certainty. The digital marketplace now is too unstable, and the growing retail investor base as well as institutional investors will insist on greater protection before digital markets can really grow. DTCC is perfectly positioned to lead those discussions.
DC: How about in the area of risk management?
MB: Operational resilience, as well as incident reporting and recovery time, will also continue to be major areas of focus for supervisory, regulatory and international standards-setting communities. That will only increase going forward. FMIs will need to work closely with regulators, industry peers and trade associations to develop realistic standards. Cybersecurity will also remain a major concern and likely the top risk for firms. We’re working closely with global industry groups, regulators and cybersecurity organizations to establish standards and common frameworks.
DC: Any final thoughts as you move into retirement?
MB: I spent 15 years at DTCC – 10 as CEO – and it’s been the best professional experience of my life. I’ll miss the camaraderie and collegiality. Every CEO wants to leave a place better than they found it and to provide a solid foundation for the next generation of leaders. I like to think I’ve done that, and I’m very proud that DTCC has continued to thrive into its sixth decade and remains the global leader in post-trade. It didn’t happen by accident; it required years of hard work by everyone at the firm. The credit for our success really belongs to all our colleagues. This a great company filled with amazing people, and I wish them continued success in the coming years.