Merrin helps charity flow
Seth Merrin’s first attempts to land a job ended in dismal failures. But if one of the Manhattan restaurants the American walked into back in 1982 had taken him on as a waiter, the world of international equity trading might not look the same as it does today.
Merrin went on to become the founder and CEO of Liquidnet. Launched in 2001, this global network provides a marketplace in which institutions can buy and sell substantial blocks of shares. Liquidnet’s operations now extend to 41 equity markets across five continents, serving asset management firms who collectively manage US$12.4 trillion.
The company’s success has been based on using technology to smooth the international flow of capital, and Merrin is equally keen to employ similar principles to ensure charitable donations are deployed as efficiently as investment funds by not-for-profit organisations (NPOs).
How did you get started in the financial services industry?
I graduated from Tufts University with a political science degree in 1982. Being a graduate from a pretty decent college, I was clearly not qualified enough to be a waiter but I could get into a training programme on Wall Street.
I got into a risk arbitrage firm as a trader and because I was pretty much the only one who knew how to turn on a computer, I became a computer guru. There I got a little experience of what a trader could do, to put together with my little experience of what a computer could do, and started working with computer consultants to automate some of our work flow.
When and why did you strike out independently?
At the age of 24, I left to start my own firm – Merrin Financial – not because I was really passionate about it but because I really did not like my boss. It was there that I came up with the idea for something called an order-management system.
At that time Wall Street was incredibly manual and this was the first time anyone had thought of automating the process. It came out in 1987 – right when the market crashed. Firms were not sure they were going to stay in business, so it wasn’t a great time for selling anything – my timing has always been perfect.
But in 1990 we signed 18 clients and then all hell broke loose. I did that for about 10 years and today there’s not an asset-management firm in the world that does not use an order-management system – and we invented it.
What inspired the creation of Liquidnet?
There was a huge bull market that began in 1982 when the baby boomers started to have money to put into the market, and over the 30 years since then, institutionally managed assets have grown 40 times.
If you have a trading account and you want to buy or sell a hundred shares you have no problem, you can execute it in milliseconds. But when an asset manager needs to buy 20 million dollars of some stock it’s not that easy. Every time they buy and sell [in these large quantities] they move the market. Every intermediary on Wall Street that gets involved gets paid very handsomely. This is a tax on all our returns, on everybody who puts their money into pension funds or mutual funds.
So that’s the massive problem around the globe that Liquidnet was created to fix – by creating a B-to-B exchange putting buyer together with seller and using technology to do it.
How does your “Markets for Good” initiative let you apply Liquidnet’s expertise to the field of charitable giving?
The private not-for-profit sector in the United States alone has grown to about US$300 billion a year in charitable donations. However, there are 1.5 million NPOs in the US and over 80 per cent of those companies have budgets of less than US$500,000 a year – and there’s no feedback mechanism for telling you how effective they’ve been from the point of view of the end recipient.
We’ve been working with a few major foundations, like the Gates Foundation and the Hewlett Foundation, to bring greater transparency into this field. I believe because of this we can grow the US$300 billion to multiples of that over the next few years.
How did you come to establish the Agahozo-Shalom Youth Village for orphans in Rwanda?
After the Rwandan genocide in 1994, in a population of nine million people you had 1.2 million orphans. You had kids searching for their next meal and taking care of other kids.
We wanted to take people from the worst horror movie you could ever imagine and give them hope back again. In the Youth Village, they don’t have to worry about housing, they don’t have to worry about food, they don’t have to worry about schooling, they don’t have to worry about their medical needs.
My wife started the process in 1996. She went to Rwanda to check out the political environment and we – Liquidnet, us – built this village in about a year. We opened it up to 125 kids a year and in January there’s going to be the first graduating class.
How do you cope with the pressure of running a 24-hour-a-day business?
By having a sign on my desk that reads “Figurehead”.