More tech than trading: Terrapinn’s Trading Show Chicago 2019
Spring is a perverse season in Chicago. Not only does the weather engage in a schizophrenic zig-zag between nasty and nice, the business calendar is also comically crammed with too many events in too few weeks. There is little interest in holding an event in the window between Memorial Day and Labor Day and, as a result, hard choices have to be made. This past week, financial services events covering agricultural markets (cmdtyExchange from Barchart), advice for investment advisers (the Morningstar Investment Conference), a curious combination of old school and emerging markets futures exchanges (The Association of Futures Markets conference) and the technology-focused (Terrapinn’s The Trading Show) went head-to-head. With a focus on what’s new and what the future holds, I chose to spend my time at The Trading Show at Navy Pier.
Two veterans kick things off
The first day kicked off with opening remarks from a couple of industry heavyweights: former Cboe Chairman and current Chairman of Navy Pier Bill Brodsky and President and CEO of Geneva Trading Rob Creamer. Brodsky welcomed The Trading Show for it’s 10th year on the Pier and noted that attendance has climbed to a record of 2,000 plus. Creamer, for his part, gave a keynote on “The Ideology of Market Structure” and delivered his usual clear, informed and forceful perspectives on the current and future states of the markets. In the face of numerous efforts to introduce speed bumps into markets and a continued demonization of high-frequency trading from some camps, Creamer makes a strong argument that decisions regarding these market structure issues should be left to the exchanges and not the regulators.
Keynotes: State of the Crypto Markets, Low Latency Components, DLT and AI
The first panel of the day was a focus on the crypto markets and was led by Michael Moro from Genesis Global Trading and included Gabor Gurbacs of VanEck/MVIS, BlockTower Capital’s Ari Paul, Yoshi Nakamura from Galaxy Digital and Rich Teo of Paxos. Broadly, they represent the key components that are developing to support the new crypto asset class: market making and liquidity from Genesis, investment from BlockTower, merchant banking from Galaxy, infrastructure from Paxos and, perhaps most importantly right now, indices and ETFs from VanEck. All of the panelists delivered sober and reasoned insight into the development of the rails that will support future growth of cryptoassets but Ari Paul had the most pithy comments to share. Among them:
- The next major burst of institutional investing interest is likely to come after a major endowment has a quarter where half of their outsized returns are attributable to a crypto investment that is only 0.25% of their investable assets. FOMO will surge.
- Nearly all ICOs in 2017 were some form of fraud, with 50% being intentional and 45% being accidental fraud borne of ignorance. It’s not clear why the SEC hasn’t pursued these cases yet.
- Instead of the “fat protocol thesis”, which holds that the protocol will get paid in crypto while it did not with the internet, he is a proponent of the “fat lawyer thesis”. The lawyers are going to make bank as the cryptoasset market develops. Hard to argue with that one.
The second panel of the day was led by Mark Dawson of Belvedere Trading and focused on the infrastructure of trading through the lens of low latency components. Dawson was joined by Alex Gerasev from Marquette Partners, Mike Madigan of WH Trading, Supermicro’s Heath Hutchison and Davor Frank from Solarflare. Aside from reinforcing the notion that the drive toward speed and efficiency is relentless in markets, describing how technology costs continue to fall and highlighting the importance of team dynamics in building success, the lion’s share of the panel was a blizzard of terms and phrases that amounted to a whole lot of inside baseball talk to me. To stay occupied, I wrote some of them down: kernel bypass, layer two API, multiple threads, trace points, QPI bus, cache hierarchy, fibertap, compiler flags, open CL, HCS, RTC, C++ string class, and hashing options, to name a few.
The final panel of the day touched on the subjects of DLT (crypto) and AI and featured Sam Cassatt from ConsenSys, Arijit Das of Northern Trust, Travis King from Ikigai Asset Management in a panel moderated by Richard Johnson from Greenwich Associates. In reality, nearly all of the conversation focused on DLT and all of the panelists contributed keen insights:
- Cassatt compared DLT to cloud: everyone is afraid to do it at first but it promises nearly unlimited possibilities akin to the Cambrian Explosion.
- Das discussed how reconciliation processes are so large and, as such, a rich source for savings and efficiency gains.
- Picking up on the evolution theme, King referred to permissioned blockchains as Sheets on steroids and a force that “will evolutionize the Wall Street back office”. (Interesting choice of words: Sheets instead of Excel and evolutionize instead of revolutionize.)
Time is money
One highlight of the show is analysis presented by Mike Persico of Anova Financial Networks. The markets may have moved on from ten years ago when speed and connectivity was seemingly everything but there are still important stories to tell — and money to be made or lost. This year, Persico analyzed the Chicago — New Jersey connectivity corridor and determined that the total annual value of a microsecond of latency for the ES — SPY trade is $178 million. With rewards like that it’s easy to see why there is still a need for speed.
What does the smart money think?
It’s usually a good idea to pay attention to what professional investors are thinking (and doing) and the last panel of day one gave just such a chance as Peter Johnson of Jump Capital moderated a panel that included Jeff Carter from West Loop Ventures, Wave Financial’s Tom Lombardi and Greg Carson of XBTO. A few tidbits from their comments included:
- Carson referring to crypto as “the real fintech” and professing a strong belief on the future for stablecoins.
- Carter taking a characteristically contrarian view and stating that he believes we’re not out of “crypto winter” yet and are likely three years away from “cool stuff”.
- Lombardi made an analogy between crypto winter and being from Los Angeles: they don’t recognize seasons in LA like we do in the Midwest and the same is true in crypto now: they have their heads down creating and aren’t concerned about the short-term weather.
When it came down to making one bold prediction at the end of the panel, Lombardi said bitcoin will outperform while “shit coins” will go to, well, you know, Carson thinks there will be many more stablecoins, Johnson said that existing payment networks should be scared because stablecoins will be the new payment rails, and Carter expects that we’ll have pretty much the same conversation next year as U.S. regulators (SEC and CFTC) will go very slowly.
Odds and ends
- Where are the women? I took a look around the room at the first keynote and estimated that less than 10% of the audience was female. This has always been the case in trading and technology but one would hope that more diversity is in the offing. The industry in general and the conference in particular should pay more attention to inclusion.
- In another sign that crypto is growing up, there were no examples of the “I am a genius” comments from panelists like there were in 2018. There are still a good number of business plans in search of a business idea but the hand waving wing-nuts have, thankfully, been vanquished.
- Native Chicagoans should give thanks to Terrapinn because if it weren’t for The Trading Show they wouldn’t get their annual chance to make a sojourn to Navy Pier. What’s more, it’s a good chance to get your steps in for the day because the event is held on the part of the pier that is closest to the state of Michigan and the furthest from downtown.
- There are always a number of firms that stick out as ones to watch and this year my list includes:
- Open Finance Network
More tech than trading
It should come as a surprise to no one that trading these days is synonymous with technology. The battle between analog and digital trading was decided over a decade ago and the emergence of cloud, AI, and, more recently, cryptocurrencies and distributed ledger technology all point to a present and future that are driven by technology. This has been true over the past five years that I’ve covered this event (you can read my posts from 2015–2018 on Medium) but the emphasis is continually shifting. While connectivity and hardware were the primary focus several years ago, the past two years have seen crypto rise to the top. In fact, ~40% of the panels, roundtables and keynotes had a crypto spin this year and many of the most interesting companies come from this sphere. It will be interesting to see how things shift and evolve in the years ahead.
Chuck Mackie is a principal at Fathom Communication, where he provides content driven services including strategy, website subject matter, sales materials, blogs and white papers that deliver depth and understanding in financial services and technology.