When Jane Gladstone of Evercore (EVR:US) Partners Inc. first attended the Futures Industry Association annual meeting in Boca Raton in 2002 she was the only investment banker there. To capitalize on the opportunity, she threw a dinner for about 20 people.
In the 11 years since, her Florida soiree has grown into the hottest ticket at the conference. In March, 30 leaders of the derivatives and trading world were invited to the Boca Museum of Art, where Gladstone, 44, sat between Jeffrey Sprecher, chief executive officer of IntercontinentalExchange Inc. (ICE:US) who initiated the $8.2 billion acquisition of NYSE Euronext, and Magnus Bocker, CEO of Singapore Exchange Ltd.
“People were practically climbing down the chimney to go to that dinner,” Roger Altman, the founder and chairman of Evercore, said by telephone in March. Gladstone ran out of room about four hours after sending out the invitations, he said.
While enjoying chicken satay and 2007 Domaine du Pégau Châteauneuf-du-Pape, Cuvée Reservée amid the museum’s paintings by Degas and Picasso, Gladstone and her guests were confronting the biggest changes in the over-the-counter derivatives industry in its 30-year history. New rules for trading, clearing and business conduct in the $633 trillion market are being created under the 2010 Dodd-Frank Act, leading to more restructuring in the industry.
The rules are accelerating the transformation caused by the financial crisis that began six years ago as well as the mergers and acquisitions among national stock and futures exchanges, most of them member-owned, into publicly held international companies.
Those M&A deals have placed a premium on bankers like Gladstone, the senior managing director for Evercore’s financial services corporate advisory business in New York, Caroline Silver of Moelis & Co., William Cruger of JPMorgan Chase & Co. and Christian Lown of Morgan Stanley. They’ve made their careers by knowing details of how swaps trade or what the requirement to clear transactions means for the industry as well as how to answer the needs of exchange CEOs.
“We’re entering a new era for market structure,” Gladstone said in a series of interviews in March. “Some of the most important changes involve the central clearing that’s mandated for most over-the-counter trades.”
Gladstone, who graduated Phi Beta Kappa from the University of Virginia with a degree in art history, has advised on about $150 billion of M&A and capital raising. Since starting the financial institutions group in July 2005, Gladstone, who grew up in New York and Los Angeles, has pulled in more than $200 million in revenue.
“It’s not uncommon for Jane to be the single most productive partner in the firm for the year,” said Altman, 66, a U.S. deputy Treasury secretary from 1993 to 1995.
Regulators around the world are overhauling the over-the-counter derivatives market, which had a notional value of $633 trillion at the end of 2012, according to the Bank for International Settlements in Basel, Switzerland. Before the worst financial collapse since the Great Depression, the unregulated trading made it hard to see how interconnected and vulnerable banks had become to each other.
Most swap trades will be processed by a clearinghouse and traded on regulated exchanges or similar systems. All trades are being reported to transaction warehouses and banks will for the first time have to put up cash at the beginning of trades.
The rules may cost JPMorgan (JPM:US)$1 billion to $2 billion in revenue, the biggest U.S. derivatives dealer said in February. As much as $6.7 trillion in additional collateral may be needed to satisfy capital rules and swaps-clearing mandates, according to securities-industry consultant Finadium LLC.
Reforms under Dodd-Frank pose a new challenge and opportunity for investment bankers, marking what Gladstone called the biggest change to markets in her career.
Gladstone’s counsel to derivatives executives helped Evercore, founded in 1996, rise to second place in deal volume last year among publicly traded investment banks that specialize in advising companies and governments, but don’t underwrite securities or provide loans. Its global deal volume of $119.7 billion was behind only Lazard Ltd.’s $174.6 billion, according to data compiled by Bloomberg.
Since the beginning of 2003, Evercore ranks 15th in M&A deals worldwide on a list dominated by Goldman Sachs Group Inc. (GS:US), Morgan Stanley and JPMorgan, Bloomberg data show.
Evercore shares (EVR:US) gained 59 percent in the past year through May 22, more than double the 28 percent rise in the 476-company Russell 2000 Financial Services Index.
Gladstone’s biggest deals include advising OptionsXpress Holdings Inc. on its 2011 sale for $1 billion to Charles Schwab Corp. (SCHW:US), the $10 billion leveraged buyout of SunGard Data Systems Inc. in 2005, and the $2.55 billion investment made by Citadel LLC in E*Trade Financial Corp. in 2007 as the financial crisis was mounting.
Ralph Schlosstein, CEO of Evercore, called the E*Trade financing “truly a wow transaction.” While he wasn’t with the firm at the time, he said colleagues were “incredibly impressed with what was accomplished in a very short period of time in an extraordinarily challenging environment.”
Not everything has gone according to plan. Gladstone advised Nasdaq OMX Group Inc. (NDAQ:US) on its joint unsolicited bid with Intercontinental for NYSE Euronext in 2011, which was killed by regulators over concern that combining the stock markets would be anti-competitive. Because of her work on that deal, Gladstone didn’t go after the Intercontinental purchase for NYSE Euronext.
“While it failed on Department of Justice grounds, I still maintain it would have been a great transaction for shareholders and for this country,” Gladstone said.
Gladstone began her career in London with J O Hambro Magan in 1991. With no work experience in finance, she landed a job at the bank for about 15,000 pounds ($22,666) a year, less than the janitor earned, she says.
In 1993 she moved to Morgan Stanley where she worked in the equity capital markets group with Vikram Pandit, who became the CEO of Citigroup Inc. and John Havens, Citigroup’s future president. She moved to Morgan Stanley’s financial institutions group, where she was involved with the initial public offerings of the Chicago Mercantile Exchange, International Securities Exchange Holdings Inc. and Intercontinental.
“She’s been involved in the most important transactions in the space,” said Sunil Hirani, 46, whom Gladstone advised on the $625 million sale of his company, Creditex Group Inc., to Intercontinental in 2008. Gladstone’s dedication is why he became her client, and why others hire her, said Hirani, now CEO of TrueEX Group LLC, an interest-rate swap exchange.
“The big critique with Jane is she’s aggressive, ruthless and has a can-do attitude,” said Hirani, who attended the Boca Raton dinner this year. “When people say that about her, I smile because that’s the kind of person I want on my side.”
Even with most of the Dodd-Frank reforms to the swaps market completed by the Commodity Futures Trading Commission, the need for Gladstone to pull together market structure leaders in Boca Raton will go on for years.
Gladstone tries to catch an overnight flight after a business trip each year to give her time to choreograph the evening, before she leaves for Florida.
“I spend hours doing the seating. It’s very stressful,” she said with a laugh. “For the capital markets, market structure brokerage universe it’s the equivalent of Davos,” said Gladstone, who has attended the annual meeting of the World Economic Forum in Switzerland on Evercore’s behalf three times.
Along with Sprecher and Bocker, this year’s guests included James McNulty, chairman of NYSE Liffe U.S. and the former CEO of the Chicago Mercantile Exchange; Sandy Frucher, the vice chairman of Nasdaq; and Peter Hiom, deputy-CEO of ASX Ltd., Australia’s main stock exchange.
Richard McVey, CEO of MarketAxess Holdings Inc., the electronic bond and derivative trading platform that said in April it would partner with BlackRock Inc. to allow the asset manager to route trades through its system, was there. So was Nicolas Breteau, CEO of Newedge Group SA, a derivatives brokerage that gives customers access to clearinghouses such as the one run by Michael Davie, CEO of LCH.Clearnet Group Ltd.’s SwapClear, another guest.
The executives are taken by bus from the Boca Raton Resort & Club, the site of the FIA conference, to the Boca Raton Museum of Art for a private tour before the meal.
“When we get on that bus from the resort to the dinner, I always tell the bus driver, ‘Drive carefully,’” Gladstone said. “You have the fate of the capital markets in your hands.”
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