GH Financials chief Sharon Shi details global expansion plans

Sharon Shi was promoted to group chief executive of GH Financials in October after being nominated to the position in March last year. Speaking exclusively to Global Investor, Shi discusses the opportunities for the broker as it looks ahead to 2023

By Luke Jeffs

As the first and only Asian woman to run a London-based brokerage firm, Sharon Shi is rightly seen as a pioneer in a business dominated until now by white men.

GH Financials, the London-based futures commission merchant (FCM) with offices in Chicago and Hong Kong, surprised many by announcing in March last year that Shi, the head of the firm’s Asian business, would be its next chief executive.

Six months later, after her relocation to London from Hong Kong and a protracted visa process, Shi finally took over the role in October, replacing her predecessor Mark Phelps who left at the start of last year to run the European arm of RJ O’Brien, a rival to GHF.

Speaking to Global Investor at the end of last year, Shi was obviously relishing her chance to make an impression on GH Financials.

The new group chief executive said: “First and foremost, you are always going to need a good team, people are always the number one factor to determine whether you can run the business successfully.”

Shi added: “It took some time to re-engineer the management committee under me. I wanted to be sure we have the right people in place to enable growth in line with the long-term goal that we are trying to achieve at GH Financials. This was my number one task.”

Since Shi became CEO, Gemma Lloyd, who ran business development at GHF for almost five years, left that post to reconnect at the start of this year with Phelps at RJ O’Brien in London where she is now chief commercial officer.

GH Financials promoted in December Tony Butcher to run business relationships. Butcher, who joined GH Financials in 2010, was previously the firm’s global head of service delivery and global head of eSolutions.

Tracy Hetherington, who was GHF global head of regulatory risk, compliance and trade surveillance for over four years, left in November last year to become RJ O’Brien’s chief compliance officer for Europe, Middle East and Africa.

As the first and only Asian woman to run a London-based brokerage firm, Sharon Shi is rightly seen as a pioneer in a business dominated until now by white men

Since then, GHF has promoted Ben Allfree, formerly of Marex, to run risk, and hired Antonio Hernandez Laviades, formerly of Newedge and ADM Investor Services, as its new head of compliance.

The firm also hired in January 2023 Mark Millard, formerly of AMT and ETX Capital, as its group financial controller.

A constant throughout the transition has been Julian O’Leary, GH Financials’ long-standing chief operating officer, who is supporting Shi in the execution of the new company strategy.

Shi continued: “In parallel, together with my new team, I have been busy formulating the business strategy for GH Financials for the next 2-5 years which, in my opinion, needs to be jurisdiction or regionally specific.”

The chief executive is quick to stress that GH Financials is in a strong position and has the advantage of being able to draw on a huge pool of experi- ence. Shi herself has been with GH Financials for more than a decade, having worked previously at Futures First and the Shanghai Futures Exchange.

The firm’s chairman Mark Ibbotson was the GHF chief executive for almost five years before Phelps and previously spent more than 20 years at Liffe where he was co-chief executive.

Shi said: “GH Financials has been in the market for 30 years (we will celebrate our 30th anniversary this year), headquartered in London, which is our jurisdictional base, where we enjoy a good reputation as a reliable global clearer and a solid client base and sound clients’ and stakeholders’ relationships in this region.”

GH Financials has a solid base then, but Shi wants to go further by taking the business into new markets.

Shi said: “GH Financials has been generally dedicated to serving proprietary trading groups in London. There’s no doubt that we would continue trying our very best to provide professional services to this sector. But what about the other client segments we haven’t touched upon however could add value to? For example, asset managers, hedge funds, CTAs, or commercial end users – those socalled “inventory” clients? These could be one of the “New Client Segment” questions for us to start with.”

The chief executive sees huge opportunities for GH Financials in new regional markets, particularly those in Asia, and in new asset classes beyond GHF’s traditional focus on exchangetraded derivatives. GHF currently has its headquarters in London and two regional offices in Chicago and Hong Kong.

Shi said: “Other than London, what about the other cities in Europe? For example, we all know that there are considerable number of options traders and market-makers out there with few clearing firms serving that community. We clearly see some gaps between what is being demanded and what is being offered.

“We are not trying to compete with all the bank clearing firms serving the sector, but rather going niche by closing that gap and making lives easier for smaller options market-makers or traders.”

Given her experience and knowledge of the Asian market, it is no surprise that Shi wants to explore more closely the opportunities for GHF in that part of the world.

She said: “By region, Asia is probably the one that has the most potential to grow in terms of both inbound and outbound trading by FIA statistics. I spent November travelling on a world tour, from London to Chicago and then to the Far East. I do feel the buzz in Chicago, but, when I flew from Chicago to Asia, I said to myself: “Wow”.”

Shi, who chaired the FIA Asia Advisory Board until she moved to London and joined the FIA European Advisory Board, said the trade body’s event in Singapore late last year showcased the vibrancy of the Asian derivatives industry.

“After these three years where the crypto firms tried to grab our talents and some liquidity migrated away from exchange-traded derivatives to other asset classes including crypto currencies, I thought we were probably going to see a lot of new faces but it wasn’t like that.”

Shi added: “I really appreciate the fact that many of my old acquaintances were still around. They are still full of passion for our industry and even more! Everything seems to be quite dynamic and moves fast – you could feel the energy in Asia.”

The growth of the Asian derivatives market over recent years, which has far outstripped North America and Europe, has made that an attractive destination for international traders while increasingly active traders in Asia want to tap the most liquid markets in North America and Europe.

Shi said: “Regardless of whether it is “inbound trading”, where international traders trading into the Asia Pacific markets, or vice versa the “outbound trading”, where Asia-based traders trading into the international market, both numbers are growing nicely and taking the top rankings in each segment according to the FIA statistics. There is great potential to grow even further. That’s probably where we see most of the “new blood” comes from.”

The GHF chief is looking beyond the more mature Asian markets to the next wave of regional centres that are starting to trade into the international derivatives markets.”

“If we look at Asia, Hong Kong, Singapore and Tokyo are more advanced markets in terms of exchange-traded derivatives but there are other, second tier jurisdictions in Asia and I think we would see exponential growth from those markets in a few years.”

Shi continued: “There are obviously going to be challenges for those local FCMs in some emerging markets when they first expand their offering of outbound trading to local investors. For instance, do they have the sufficient knowledge about the rules,

“Both the Board of GH Financials and the owner Gedon Hertshten were delighted when Sharon agreed to relocate to London from Asia to lead the Group. In addition to Sharon’s proven leadership skills and deep domain experience internationally - having succeeded already in futures infrastructure (exchange/central counterparty), the buy side (futures trading company) and for the past 10 years in the FCM sell-side - she brings new ideas, new perspectives and boundless energy to power GH Financials to the next level” – Mark Ibbotson, non-executive chairman of GH Financials: Mark Ibbotson, non-executive chairman of GH Financials: regulations, norms and best practices governing the international derivatives markets, which could be vastly different from what they experienced in their local market? Do they have the proper trading front ends, back-office processing systems and pre-trade/ post-trade risk management systems for the international markets? Most of the answers I heard so far is “No”.”

Shi believes that GHF could draw on its 30 years’ experience to help some of these local clearing brokers offer their clients opportunities beyond their local markets.

The GHF chief added: “The Asia trip was valuable in helping me with ideas about how I want to grow GH Financials for the next several years. After this trip, I’ve got a much better understanding which direction to go.”

As well as new regional markets, Shi is also interested in new asset classes.

“GH Financials has spent the last

30 years focused on exchange-traded derivatives. There are occasions in the past that we were approached by some existing or prospective clients requesting cash bonds or cash equity services. Probably this is the time we have another consideration.”

And Shi believes this is the right time for GHF to look to expand as FCMs capitalise on higher interest rates. “This is a golden time where the FCM sector could enjoy the impact of the hiking interest rate environment. We have been waiting for this normalisation for too long, so we want to optimise the benefit from the hike in interest rates to the greater extent for the company and for all our customers. That’s why we are more inclined to bring onboard asset managers, CTAs or even small or medium-sized commercial end users.”

Of course, Shi is mindful that new regions, asset classes and client seg- ments require investment, in people, resources and technology.

She said: “Again, the most important pre-requisite are the people. If we are going to start cash bonds tomorrow, we have to make sure that we have the necessary knowledge base, expertise and skills within the team. Otherwise, we should be hiring to ensure that we are equipped with the necessary weapons before going into battle.”

The GHF chief said there are, of course, restrictions to what a nonbank FCM like GH Financials can do related to its balance sheet and new markets bring with them new regulatory requirements.

“As well as the expertise related to some particular asset class, there is the regulatory and compliance knowledge to understand how the new asset classes might affect GH Financials from a regulatory point of view.”

And new products and geographic markets require technology investments which are expensive and timeconsuming.

Shi said: “On the systems side, from the front end to the back end, the systems need to be able to support the new product series or asset classes. This can be challenging because like all firms we will be third-party dependent. All the other areas, we could make them happen, but the last, system one, we are going to be dependent on a supplier which could add some uncertainty or another layer of complexity.”

She continued: “In futures and options, GH Financials is engaged with at least ten different ISVs in order to meet our global clients’ requests. It is difficult if not entirely impossible to locate one single ISV solution that can offer all asset classes including ETDs, OTC, cash bonds and cash equities. Some F&O traders might like one particular front-end which may not be that strong in terms of offering other products.”

Choosing vendor solutions is never easy but GH Financials’ decision is simplified because its clients will typically have a preference.

Shi said: “At the underlying customer level, they made the choice on behalf of us which ISV to engage. We couldn’t and shouldn’t make the choice on behalf of our customers.”

Sharon Shi’s plans for GH Financials are ambitious, and neither is she wasting any time.

“We have implemented some of the strategy mentioned above, so these are not just ideas. Where we would need to be a member of a new exchange for example, we have already kicked things off and now we just need to fine-tune wherever needed.”

She continued: “I have restructured the management team. We did things differently before because each generation of chief executive thinks different. But there is really no right or wrong answer. I’ll just do my own way. I have reorganised the responsibilities and created some new roles in my management committee team while some former roles may not be replaced.”

The GHF chief said Asia is the firm’s top business development priority and she plans to hire there a sales team and a marketing manager to promote the firm more widely across the region.

“When we recruit sales team, we would prefer people that have different experiences or backgrounds - not only futures and options because we have already had profound knowledge within the firm. New staff joining us ideally could have a diversified background or knowledge base complementary to what we already have.”

Shi also envisages opportunities arising from partnerships with tech firms and exchanges similarly keen to increase their exposure in Asia.

“Speaking of the road-shows with stakeholders such as exchanges and ISVs, FCMs are only one link in the chain. We need to work together with others to better serve the underlying customers. It is important that we develop strong strategic partnerships with other stakeholders in order to serve as a one-stop-shop clearer to the new jurisdictions in Asia.”

It is still early days for Sharon Shi. The new GHF chief executive has outlined a bold strategy based on expansion by products, regions and client types which will keep her busy for years to come.

She will likely enjoy success and disappointment but, whatever happens, her achievement of becoming the first Asian female to run a Londonbased brokerage should not be underestimated.

The future of FCMs in a dis-intermediated world

The second half of 2022 was dominated by a (sometimes heated) discussion about the future of the listed derivatives clearing model. Long before the crypto exchange collapsed, FTX angered the US futures market by applying to the Commodity Futures Trading Commission (CFTC) for permission to offer clearing of margined product direct to clients, that is cutting out the futures commission merchant (FCM).

CME and ICE attacked the proposal at a CFTC hearing in May, suggesting it would set a precedent that could undermine the US financial market.

Then CME Group filed in August a regulatory application to the CFTC to launch its own FCM, further blurring the lines between exchange and intermediary.

The FTX application was ultimately withdrawn after the crypto firm spectacularly collapsed in November but the debate continues about the respective roles of exchanges and FCMs.

As the chief executive of a global FCM, Sharon Shi sits at the heart of this discussion and these are her thoughts:

“The last couple of years have been very interesting. This whole idea of disintermediation has arisen and this has engaged a lot of the industry’s resources and energy. Now we have come to the point where it is the traditional intermediaries such as the FCMs versus the new disruptive disintermediation model.

The debate has been much more fierce in the US than in London but the impact is going to be to the global intermediaries.

The market dynamic is changing and that is why there is a lot of uneasiness and uncertainty, and we may see some FCMs say that disintermediation is actually a good thing because they were otherwise going to close down or do something different like crypto.

Nothing has really happened yet but just talking about it is already impacting us on a daily basis. This is not about GH Financials, this is about the whole industry changing.

The industry has been in this status quo for too long and something has to happen given the industry cycle, but no one is sure about what the changes are going to be. People have been talking about different ideas and when there is a trigger like FTX, people tend to start moving in different directions due to the lack of uncertainties.

This is a very interesting time to be running an FCM. I wish I had a crystal ball but unfortunately I don’t. That said, I know it will be exciting to be part of it. We may just be one of the non-bank FCMs in the market but I am confident that we can influence the industry in one way or another as it continues to evolve.”