Trade Talk Blog

If it seems you can’t go a day without reading something about the world of financial technology a/k/a fintech, you’re probably right. Fintech is on fire. Reports say global investment in financial technology has ballooned from $2.8 billion in 2012 to more than $22 billion in 2015. And the pace of investment is not slowing down: $5.3 billion flowed into fintech in the first quarter of this year, up 67% over the same period in 2015.

Fintech is certainly hot in Trading Technologies’ hometown of Chicago. According to World Business Chicago, our local fintech economy represents $25.9 billion in gross regional product and 123,156 employees from 8,412 companies.

Barchart recently brought together representatives from many of these companies to explore the latest technologies for financial exchanges and trading at the second annual FinTech Exchange.

I don’t think anyone was surprised that the event sold out. As Barchart’s Mark Haraburda explained in his opening remarks, Chicago isn’t just another fintech hub. What differentiates Chicago’s fintech ecosystem from other cities where fintech is strong, he explained, is the enduring leadership we have in the capital markets space. Mark said this became abundantly clear to Barchart’s team as they prepped for FinTech Exchange 2016 by attending events in other cities.

FinTech Exchange put a spotlight on some of these companies by giving more than 20 firms the opportunity to talk about their latest innovations and how they’re being used in the financial markets. Topics spanned from alternative data, artificial intelligence and deep learning to binary options, bitcoin and more. I walked away with a deep sense of appreciation for how our industry contributes to Chicago’s reputation as a leading fintech hub.

Here are some of my key takeaways.

CME Group’s Julie Menacho shared how the exchange is leveraging technology to fuel the customer experience. First, she said CME is getting out of the data center business to focus more tightly on their core business. Another big change coming soon: the exchange will deliver market data to customers through the cloud instead of on hard drives, eliminating a process that presently takes weeks. She also revealed CME will soon launch an online ecosystem to facilitate connections and collaboration among its many partner firms. Of course TT is a CME partner, so I’m especially looking forward to seeing how this last development plays out.

Our own Brian Mehta took the podium for “How to Think Like a FinTech Startup.” He told how Trading Technologies focused on the three Cs to drive the company’s transformation as it built and then launched the new TT platform:

• Craft: Be user-centric, nimble and obsessive in pursuit of your vision, communication and culture.
• Communication: Start from within, and make it consistent, honest and fun.
• Culture: Keep evaluating talent, establish clear vision and principles, and create a work environment that reflects your personality.

Quandl’s Tammer Kamel explored the value of alternative data—data you wouldn’t necessarily think of as financial—and how it can be turned into a valuable product for our industry. He gave a personal pre-Quandl example of how he once used alternative data: his team estimated a company’s sales by paying farmers to count trucks leaving the factory. Another example that resonated with with the audience was how farm field measurements calculated during fertilization might be used to estimate crop yields to inform commodity trading. He asserted that the convergence of the Internet of Things (IoT) with the rise of the data center organization is ushering in the “dawn of a new Golden Age.” I expect to hear much more from Quandl.

Tim McDermott of Nadex focused on the outlook for binary options. He explained how these simple contracts, which are designed for individual traders, offer limited risk and asserted “you’ll never get a margin call” if you’re trading these instruments. This may be one reason why Nadex is recording growth—McDermott told us Q1 ‘16 volume was 68% ahead of Q1 ’15 and said the rise is driven by mobile, which is making the market more accessible. He foresaw the maturing binary options market would lead to more opportunities for developers, educators, signal providers, market makers and, most importantly, traders. There are many who don’t believe in binary options—just Google the phrase—but maybe Nadex’s approach and its focus on educating the next generation of traders will make a difference.

Tally Capital’s Matthew Rozak talked “Bitcoin, Blockchain & Beyond.” Despite the amount of attention given to bitcoin and blockchain, large-scale adoption has yet to occur. Although nearly every attendee in the room raised a hand to indicate they were familiar with these technologies, the question “How many people here own bitcoin?” sent only a few hands into the air. But more and more money is being invested into blockchain technology, with notable investors including Goldman Sachs, Citi, CapitalOne, MasterCard, Visa, New York Life, Nasdaq, NYSE and CME Group. I expect more hands will pop up if this question is asked next year.

Binary options were on the agenda again with Rich Jaycobs from Cantor Exchange (CX). CX currently lists currencies and commodities and, like Nadex, is regulated by the CFTC. Rich talked about the advantages of trading binary options through CX. Among the benefits: the exchange is not in the business of developing trading GUIs—nor should it be, he said—so traders can use their favorite trading interface on CX. He said no one can make a trading platform better than an ISV and gave a nice shoutout to Trading Technologies.

Space constraints prevent me from recapping every presentation, but you can see more coverage on Twitter at #FTX16. With two sold-out events under the belt, it will be interesting to see what Barchart does with FinTech Exchange 2017. To get the details when they’re available, follow @FinTechChicago on Twitter.

Tags: Trade Execution