Day two of FIA Expo is always more subdued than the first day, but it allows for time to go into greater depth on certain subjects. This year, a big focus was placed on digital assets. Nearly all of the major exchanges had a seat at the table to discuss their plans for this new asset class and some interesting developments were revealed.
Kicking Off With a Positive Note
The first panel of the day was a perfect highlight for all of the promise that is digital assets. David Olson of Jump Trading moderated as Chris Hehmeyer of Hehmeyer Trading + Investments, Omniex’ Hu Liang, Tom Jessop from Fidelity Investments, and Kelly Loeffler of Bakkt showcased the good, the better, and the best of digital assets.
- Hehmeyer described the moments when he has been “gobsmacked” in his career: upon discovering Treasury futures, watching an electronic trade for the first time, and exchanging cryptocurrency in a wallet-to-wallet transaction in his office. This industry veteran maintains the same sense of wonder that he had back in the ‘80s and is building a solid crypto business.
- Hu Liang is a prime example of the melding of tech start-up experience with Wall Street credibility, having successfully started and built Currenex and then selling it to State Street. Omniex is attempting to meet the needs and demands of institutions in digital asset markets and, as such, represents how quickly the space is maturing.
- From a perception and reputation standpoint, the presence of Tom Jessop from Fidelity on the panel was the biggest step toward the mainstream for digital assets. Fidelity is privately-held and has long been known for innovation, so it makes sense that they would be among the first of the large financial services firms to take steps toward the digital asset markets, which was just announced last Monday. They are a long way from offering digital assets to run-of-the-mill 401K plans but their steps to offer trading and, most importantly, custody count as a big win for the asset class in the long run.
- Similarly, the presence of Kelly Loeffler from Bakkt, the digital asset exchange from ICE, is another sign that the market is growing and maturing. Bakkt will offer the first federally-regulated, physically delivered Bitcoin trading and their innovative risk management regime and custody solution are a big evolutionary step for the industry.
Taken together, the members of the “Digital Assets: The Institutional Investors Perspective” panel point to an area of the industry that is growing faster than most would have recently been predicted. It will be interesting to see where we are with this asset class when Expo 2019 rolls around.
Show Me the Data
The “New Frontiers in Data” brought together a diverse panel of providers, vendors, and users that showcased the current and future state of the data industry. The panel was moderated by Jean Donnelly of FinTech Sandbox and featured Keith Fishe from TradeForecaster, Adam Honore of the CME Group, Prattle’s Brian Peterson, Jonathan Reeve for ICE and David Potere from TellusLabs, last year’s winner of the FIA Innovation of the Year award. Some highlights included:
- Honore displayed the pragmatic yet progressive way in which CME has and is developing their data business, with a heavy emphasis on cloud-to-cloud delivery that makes the most of the promise of cloud technology
- Reeve noted that ICE has benefited from the global delivery capabilities of their network and is building desktop visualization capabilities
- Fishe, as the end user, commented that there have been big changes in how data is delivered but the cost has not fallen, as might be expected
More Digital Assets: Emerging Derivatives Products
Continuing on the digital assets theme, the Emerging Derivatives Products panel offered an unusual and somewhat ironic situation where the established futures exchanges of Cboe, CME and ICE were in the position of challengers to the industry leader in the U.S., Coinbase. It’s a whole new world with digital assets.
A few observations from the panel, which was led by Bob Fitzsimmons from Wedbush Securities and featured a packed lineup of John Tornatore from Cboe Global Markets, Tim McCourt of CME Group, trueDigital Holding’s Nick Goodrich, Tom Chippas from ErisX, Trabue Bland of ICE and Coinbase’s Paul Bauerschmidt:
- Bitcoin (BTC) contracts are starting out small. The existing futures products are 1 BTC at Cboe and 5 BTC at CME with the proposed products from ICE and trueDigital also at 1 BTC and the ErisX contract at 0.1 BTC. Small contracts = expensive to trade so professional participation may be limited, especially at first.
- Chippas energetically touted ErisX’s combination of spot and futures on the same platform
- Tornatore noted that he is the Global Head of Cryptocurrency, not just BTC, at Cboe, implying that BTC is not the be all and end all for them
- Bland touted the fact that they recently hired the 5th original employee from Coinbase
- And Bauerschmidt countered that the traditional exchange had to run to a digital native to do things right
Finally, the audience was polled during the panel and nearly 50% of respondents believed that the price of BTC would be less than $5,000 in one year. The current value is close to $6,400, so it’s fair to say that the professional futures crowd is not overly bullish on cryptocurrencies.
And The Winner Is…
The FIA Innovators Pavilion has been a big hit since being introduced four years ago and this year marked the third time that an Innovator of the Year was chosen following a “shark tank” style competition for five firms that featured a short presentation followed by questions from an all-star panel. I correctly predicted the winner the past two years and for 2018 I selected FreightWaves as my favorite to win and I was…correct again!
According to FIA, the judges chose FreightWaves as the winner based on its potential to create a new class of futures products and market data based on the rates charged by trucking companies to move goods across the U.S., and I concur in that assessment. They are by no means assured of success – by some estimates, nearly 90% of new futures contracts fail – but they have a realistic approach to a genuine, addressable market. I join with the rest of the industry in wishing them good luck.
Odds and Ends
A few final thoughts:
- Attendance was down this year and several trade show exhibitors that I spoke to said that traffic through the booths was much lower. However, they also said that it was a question of quality over quantity and they generally had good results from their interactions with clients and prospects.
- I spent some time in the Innovators Pavilion the past couple of years to get a sense of which exhibitors generated the most “buzz” but other obligations limited my ability to roam the Pavilion this year. That being said, one firm that I found time to speak with was Genesis Global, and they have an interesting story to tell.
- The Great Chicago Steak Out was once again a big hit. You should make plans to attend if you’re in Chicago for FIA Expo next year: the food is fantastic and the cause is even better, with proceeds going to support the work of The Greater Chicago Food Depository. Over the years, FIA has raised over $4 million to support GCFD.
- New this year was an all-star band featuring Walt “Porkbelly” Lukken on trombone taking over Buddy Guy’s Legends for a late-night jam session after the Steak Out on Thursday. I’m embarrassed to say that I was too burnt out to join in on the fun. Maybe next year.
Thanks for reading. Please let me know if you have any questions or would like to discuss how Maven Wave can help you tackle your technology and transformation challenges.
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