2017 FIA Expo — Day One

Originally published October 19, 2017 on the Maven Wave blog (www.mavenwave.com)

FIA Expo kicked off on Wednesday and while attendance was down, any decrease in numbers was more than offset by upbeat news, particularly from both regulators and technology providers. Regulators? Yes, regulators. When I was growing up, I couldn’t believe that grown-ups liked to do things like watch the evening news and read obituaries in the newspaper, finding those things to be tremendously boring myself. Now that I’m much older, I actually watch quite a bit of news and while I have yet to develop an interest in the obituaries, I do find myself looking forward to the appearance of the regulators at FIA events.

It all began with Chairman Gary Gensler, who ran roughshod over the industry for the first few years of the Obama administration, shifted to the enlightened commissioners Sommers, O’Malia, and Wetjen, started to really turn the corner under the leadership of Chairman Massad and culminated in a personal man-crush on current Chairman Giancarlo. So it was with great interest that I listened in as FIA President and CEO Walt Lukken sat down with the two new CFTC Commissioners, Brian Quintenz and Rostin Behnam. I wasn’t disappointed.

Both were recently approved, Quintenz after a nearly three year wait and a sixteen day wait for Benham, and both have hit the ground running with a refreshing, business-oriented approach to regulation. They are doing a good deal of listening to the community and have shown an early appreciation for strong regulation that encourages both innovation and security. Quintenz has declared the troubling over-reach of Reg AT to be dead as he looks to revive the work of the TAC (Technology Advisory Committee) while Benham is embracing issues related to risk. They are solid additions and should do well at leading the commission which, by the way, still needs two more commissioners and a bigger budget.

First Day Mainstay: Exchange Leaders Panel

Ed Pla of UBS reprised his role as moderator for the Exchange Leaders Panel again this year and was joined by Terry Duffy from the CME, Ed Tilly of CBOE, Eurex’ Thomas Book, Jeff Sprecher of ICE, and Adena Friedman from Nasdaq. There must have been a memo before the panel because all of the exchange leaders save Friedman wore purple ties — but, then again, Friedman was the only woman to appear on any of the panels that I sat in on today. Make what you will of that fact.

The bookends of Duffy and Friedman on the panel highlighted the contrasts in the industry, with Duffy espousing a transactional approach to business while Friedman highlighted an exchange that has both its roots and its future squarely in technology. Duffy, to his credit, was the strongest advocate for the industry, including a warning that with EMIR II Europe is trying to become the regulator to the world.

The answer to the final question of the session was in some ways the most interesting. Pla pointed out that we are close to the 30th anniversary of the 1987 market crash and he asked each of the panelists what they remembered about it. Duffy recalled being on the CME trading floor and described it as a surreal moment as he pointed out that the CME stayed open while other exchanges closed. Sprecher was in the New York office of Drexel Burnham trying to get a $50 million loan for a new venture and he didn’t quite understand how the unfolding events meant that he wasn’t going to get his money. Tilly, for his part, had recently started working on the floor at the CBOE and he just thought it was busy and exciting, not knowing any better from experience. Friedman was a freshman in college and she remembers the impact it had on her father, who was a portfolio manager at T. Rowe Price and had the misfortune of being on vacation in Egypt at the time of the crash (I half expected a joke about him being in “de-Nile”). Finally, Book said that he was in high school at the time and the last thing he was thinking about was financial markets!

Meet The Innovators

The FIA introduced the fintech focused “Innovators Pavilion” on the trade show floor three years ago and the quality of the participants seems to increase each year. Nineteen firms made the cut this year and the top five as selected by a team of judges got to face off in a “Shark Tank” like competition. The companies featured were:

• iguazio: A unified data platform for continuous analytics and event-driven applications.
• Peaksoil: A cutting-edge indexing boutique with a focus on farmland.
• Predata: Alternative data and machine learning for the investing world.
• TellusLabs: Satellite imagery with machine learning to answer critical, time-sensitive economic and environmental questions”
• TransFICC: One API for eTrading translates APIs from multiple Fixed Income and Derivatives venues.

The companies presented to and fielded questions from a panel that included Catherine Clay from CBOE, Geneva Trading’s Rob Creamer, Jan Bort de Boer of ABN Amro, Jared Delaney Smith from NEXT Investors, Gary Offner from Nasdaq Ventures, and Scott Rose of Hyde Park Angels. Unlike last year, when Money.net won with their simplistic “Bloomberg killer” message, it was hard to gauge which of the five companies might win. All faced tough questioning and none stood head and shoulders above the rest. An informal poll of those in the room found interest for igauzio, Predata, and TellusLabs. If I were a betting man, I’d put my money on TellusLabs because of their “wow” factor and a clear plan to expand to cover the globe in the next two years. The winner will be announced on Thursday so stay tuned for that report.

Post-Trade Technology and ML/AI in the Afternoon

Following a luncheon address from 2-time Pulitzer Prize winning journalist and author Bob Woodward (I’ll stay out of the politics, but Woodward was able to say that President Trump has narcissistic personality disorder while managing to stay assiduously non-partisan), the somewhat boring sounding “A New Era for Post-Trade Technology” managed to be anything but. The “Machine Learning & AI: The Trading of the Future?” managed to stay away from promises and platitudes and deliver real value.

Post-trade technology sounds like a recipe for a post-lunch nap but the panel was anything but that. Christopher Rigg of E&Y moderated and Erik Barry of Credit Suisse represented the customer side as Andres Choussy of NEX Optimisation, Arjun Jayaram from Baton Systems, Silvio Oliviero of ION, and Patrick Tessier from Cinnober took turns taking swipes at John Omahen from FIS. I exaggerate, of course, but everyone in the industry knows that it’s good sport to complain about FIS’ Sungard products. Omahen, for his part, did an excellent job at stating his case, particularly regarding the FIS utility services offering, but the multiple angles of attack on FIS highlight the fact that technology is finally starting to have an impact on the middle and back office. Jayaram as the upstart was particularly vociferous in his arguments, even when it came to the subject of blockchain (hint: he’s not a big supporter of blockchain for existing systems and processes). At the end of the day, new technology, including open source solutions and SaaS delivery models, promise a post-trade future with more flexibility.

The final panel of the day covered the tech sizzle subject de jour: machine learning and artificial intelligence (ML & AI). Rob Creamer from Geneva was back on the dais as moderator this time as Bill Dague from Nasdaq, Cris Doloc of Algomex, Innovation Pavilion participant Amenity Analytics’ Scott Hesse, John Kain of AWS, Luca Lin from Domeyard, and Nader Shwayhat of GreenKey detailed exciting but generally practical developments in ML & AI. A big emphasis was placed on data with Kain saying that 80% of their clients time invested concerns data. Dague observed that the greatest success comes to those that have the most precise focus and offered the colorful analogy that standardizing models is akin to pre-chewed as opposed to pre-digested food. When asked how those in the market should look at ML & AI, Shwayhat suggested a focus on the problem set (and hiring!), Lin favored exploitation over exploration (which I took to mean as focus over “science projects”), Hesse advocated a focus on outcomes that make or save money (and reaching out to companies like his for help!), Doloc cautioned to stay away from the hype, which Dague described as “skeptical exuberance”. All in all, a stimulating and educational experience.

One Last Thing, One More Day

It’s not too late to get your tickets for FIA’s annual “Great Chicago Steak Out”. Top Chicago restaurants put their best hoof forward as the futures industry raises funds to benefit the Greater Chicago Food Depository. FIA has raised over $3.2 for GCFD over the years and the Steak Out is a great networking event.

Thursday offers panels on cryptocurrency, a look at CCPs, open source meets quant trading and more. A report on the final day, including some general observations, will hit your inbox on Monday. Stay tuned!