Nasdaq Names a Chief Risk Officer, SEC a Chief Data Officer

Nasdaq has reached around the world for a chief risk officer, while the U.S. Securities and Exchange Commission falls in line with peer agencies and firms that it regulates by appointing a chief data officer.

The New York-based exchange company, which is increasingly positioning itself as a technology and analytics enterprise, has hired as CRO Roland Chai, who had served as group risk officer and head of post-trade at Hong Kong Exchanges and Clearing. Chai will assume the new role on June 1 and be based in Stockholm, Nasdaq's Nordic outpost.

The SEC's choice for CDO, effective February 3, is Austin Gerig, promoted from assistant director in the Division of Economic and Risk Analysis (DERA), one of several of the agency's hubs of data-intensive research and analytics.

Gerig as CDO “will help develop the SEC's data management strategy and priorities; enable data analytics to support enforcement, examinations and policymaking; and ensure that the agency collects only the data it needs to fulfill its mission and can effectively secure,” said a January 16 announcement.

“I look forward to coordinating the efforts underway across the commission in data management and analytics while also enhancing data security,” Gerig said.

In other people moves in the early weeks of 2020, Mark Wetjen, who as a Commodity Futures Trading Commission member was sponsor of its Market Risk Advisory Committee, has left the Depository Trust & Clearing Corp. (DTCC) to take senior-level positions with Miami International Holdings, parent of MIAX Exchange Group; and David J. Perez was named CEO of Santa Fe Group, managing agent of the Shared Assessments third-party-risk membership and benchmarking organization, with founder Catherine A. Allen remaining as chairman.

Clearing and Risk Background

“Within the capital markets, Nasdaq has demonstrated its commitment to globalizing its business and building an advanced technology company,” Roland Chai said in a statement. “Nasdaq also is recognized as a leader in providing risk management solutions for its own markets, regulators and other industries. I'm thrilled to be joining the company to continue bolstering its global, enterprise-wide risk culture.”

Chai has more than two decades of financial market and IT experience, including eight years with clearinghouse LCH, where he was head of equities. He joined HKEx in June 2017 as chief operating officer of clearing and head of clearing risk solutions. He became group risk officer in June 2018, reporting to chief executive Charles Li, and the following April took the newly created position of head of post-trade, reporting to Li and COO Calvin Tai. The post-trade division includes clearing and risk management functions across equities and fixed income, currencies and commodities (FICC), both exchange-traded and over-the-counter, as well as surveillance and monitoring functions.

Trade surveillance is a key offering within Nasdaq's Market Technology business, and HKEx is a customer. Nasdaq in its most recent earnings report called attention to an artificial intelligence initiative that “enhances Nasdaq's market surveillance functionality to improve detection of malicious activity. Over time, our Market Technology business expects to offer these new detection capabilities for surveillance to its exchange and regulator customers as well as its banks and broker customers.”

The departure of Chai, who is an arts and law graduate of the University of Sydney in Australia, set off a series of changes at HKEx. Bipin Patel, who succeeded him last year as group risk officer, is now a strategic risk adviser reporting to chief executive Li. John Killian has moved from group chief financial officer to group risk officer; Vanessa Lau, Hong Kong CFO, becomes the group CFO; and Glenda So will join the company on February 25 from Allianz Global Investors as the new head of post-trade.

“Risk management is an essential part of Nasdaq's global business and operations,” said its president and CEO, Adena Friedman, to whom Chai will be reporting. “Nasdaq is committed to building and maintaining an industry leading culture of risk management that is able to support our long-term objectives. Roland brings extensive experience in establishing and implementing risk frameworks across functions as well as strong management capabilities that will further strengthen and enhance our decision-making and business operating processes.”

Growth Under Pressure

The SEC's Austin Gerig joins an already sizable community of chief data officers. They have been in demand at banks and other private-sector players coping with an explosion of data and accompanying management and technological complexity; and at regulatory agencies facing similar challenges as they try to keep pace with those that they regulate.

Financial industry overseers such as the Federal Reserve Board and Office of the Comptroller of the Currency have installed CDOs, often alongside chief risk, information, information security, and technology officers, also paralleling private industry.

Linda Avery, who in 2014 became CDO of the Federal Reserve Bank of New York, won a U.S. Chief Data Officer of the Year Award in May 2019 from the CDO Club, which has a membership of more than 5,000 CDOs, chief digital officers, chief analytics officers and other “C-suite digital and data leaders.” Avery was said to have “driven change in the bank's data management practices and cultivated capabilities in the areas of AI, data visualization and product strategy.”

Kara Stein, while serving as an SEC commissioner from August 2013 to January 2019, advocated establishment of a central office to bring order to the “ad hoc growth” in data usage. (See SEC's Stein Calls for Data Management Office)

With a BS in physics from the University of Notre Dame and graduate degrees from the University of Illinois at Urbana-Champaign - MS in physics, MS in finance and PhD in physics - Gerig was a senior research fellow at Said Business School, University of Oxford, before he joined DERA in 2014 as a financial economist. Since 2016 he was assistant director and head of DERA's Office of Data Science, managing a team of data scientists, data engineers, financial economists and research associates. He co-chairs the SEC's Data Management Working Group and has represented the agency on the Financial Stability Board's Analytical Group on Vulnerabilities and Financial Innovation Group.

SEC chairman Jay Clayton made note of Gerig's “broad experience in data strategy and management . . . He is well suited to further our efforts to ensure there is a coherence between the information we collect and the information we need to carry out our mission.”

Chief operating officer Kenneth Johnson said Gerig “is already an important leader in the SEC's data management initiatives. His demonstrated expertise and ability to collaborate make him the ideal choice to advance our data program, in service to America's investors.”

The Gerig announcement followed by about a month that of David Bottom as chief information officer, moving over from a U.S. Office of Management and Budget assignment and the Department of Homeland Security's Office of Intelligence and Analysis, where he was CIO and CDO. Charles Riddle, who had been the SEC's acting CIO, returned to being deputy CIO and chief technology officer.

Options and Other Asset Classes

Miami International Holdings, based in Princeton, New Jersey, is pursuing a multi-exchange strategy, having launched three fully electronic equity options markets between 2012 and 2019. Among other expansion plans, it is aiming to launch a cash equities exchange, MIAX PEARL Equities, in the third quarter of 2020, pending SEC approval.

A January 29 press release listed 2019 highlights including record volumes, introduction of volatility options trading on the proprietary SPIKES Volatility Index, acquisition of a controlling interest in the Bermuda Stock Exchange, a product-development partnership with beta index developer Advanced Fundamentals, and invalidation of patent infringement claims that Nasdaq had initiated against the group.

According to a January 27 announcement, Mark Wetjen has joined Miami International Holdings as executive vice president, futures and innovative products, and executive regulatory liaison officer; and subsidiary Miami International Futures Exchange as chief executive officer. He “will play a pivotal role in projects relating to the futures business as the MIAX Exchange Group expands from electronic trading of options into cash equities, futures and innovative products, including digital securities and crypto assets and derivatives,” the company said.

A Washington, D.C., office opening is planned for the first quarter.

A University of Iowa College of Law graduate, Wetjen brings a strong regulatory and policy background and familiarity with the capital. After serving as counsel and senior policy adviser to Senator Harry Reid, Democrat of Nevada, Wetjen was a CFTC commissioner from 2011 to 2015, during which he was closely involved in Dodd-Frank Act implementation as well as market risk, technology and infrastructure issues.

He joined DTCC in 2015 as managing director and head of global public policy, and in 2019 added the chairmanship of the Deriv/SERV derivatives post-trade services business.

“MIAX has a demonstrated commitment to offering disruptive investment products and providing the marketplace with choice and innovation,” Wetjen said. “I'm eager to join this team to help them continue to expand their offerings to better serve their clients and advance the industry.”

“We are very pleased to welcome such an experienced industry veteran to our executive team," said Miami International Holdings chairman and CEO Thomas P. Gallagher. “Mark is a proven leader, and his extensive background will be invaluable to MIH as we seek to establish our presence in the U.S. futures market and expand our product offerings.”

Executive vice president and general counsel Barbara J. Comly said that Wetjen's “strategic and visionary approach, as well as his wealth of knowledge in innovative investment products, will support our continued expansion of new asset class offerings.”

Spotlight on Third-Party

Catherine Allen, a one-time Citibank executive and founding CEO of the banking industry's BITS technology consortium (now part of Bank Policy Institute), who founded the Santa Fe Group in 1996, is handing the firm's CEO reins to David Perez, an entrepreneur with sales, marketing and branding expertise.

The group has built up advisory capabilities in cybersecurity, third-party risk, privacy and enterprise risk management programs. It is the managing agent of the Shared Assessments Program, which offers tools such as the Vendor Risk Management Maturity Model and will hold its annual Third Party Risk Summit in April in Arlington, Virginia.

Santa Fe Group noted in its CEO announcement that “third-party risk management (TPRM) is among the fastest growing segments of the hot cybersecurity market, projected to grow from $3.2 billion in 2019 to $6.8 billion by 2024 at a CAGR of 15.9% . . . The need to comply with various governance standards and adherence to different TPRM policies and regulations is anticipated to surge and increase the use of Shared Assessments' solutions across the globe in virtually every market segment.”

“Organizations increasingly understand that third-party operational and IT security risks can result in both irreparable reputational damage and millions of dollars in loss and penalties,” chairman Allen said. “Over 300 of the world's leading and most innovative corporations and public sector entities, including Campbell's, CVS and Ameritrade, rely on Shared Assessments. David's vision and his deep experience in growing organizations that address complex needs are perfectly aligned to the challenges ahead.”

Perez in 2011 founded Seamless Medical Systems, creating the leading iPad platform for improved patient experience and medical practice efficiency. The business was sold to a strategic buyer in 2017. He previously founded Latin Force, a pioneering Latinx consumer digital marketing agency, and while there led the acquisition of data analytics company GeoScape International, in a transaction financed by Goldman Sachs.

“The last two decades have ushered in levels of unprecedented risk and change,” Perez said. “The tools, guidance and collective intelligence of the Shared Assessments membership equips organizations to be proactive and resilient in the face of these rapidly evolving threats.

“The Santa Fe Group and Shared Assessments are well positioned to expand our leadership in the enterprise risk arena across a broad array of industries. It is my privilege to work with Shared Assessments' talented, creative and diligent team of professionals and its global member community to build on the accomplishments of the last 15 years under Cathy's visionary leadership.”

Santa Fe Group also announced that Joseph Prochaska Jr. and Charlotte Whitmore will join its board as independent directors, along with Perez and COO Robin Slade. Prochaska is former executive vice president and chief accounting officer of MetLife and chairs the audit committee of Synovus Financial Corp.'s board. Whitmore is an expert in data analytics and former CEO of Analytics Pros.