The need for regulatory clarity emerged as the issue most needing resolution before institutions fully embrace the world of digital assets, delegates at A-Team Group’s TradingTech Summit in London heard.
The TradingTech Summit saw a welcome return to the physical world this week, following last year’s break due to the Covid-induced lockdown. The event was well-attended, with representatives from across the industry gathering to discuss the latest trends and developments in trading technology, with specific emphasis on infrastructure and institutional participation in digital assets markets, including crypto.A panel exploring new opportunities for institutional players in digital asset trading – featuring Previn Singh of Credit Suisse, Patrick McTurk of State Street, Coinbase’s Andrew Robinson, and moderated by Dr Ruth Wandhöfer of Gauss Ventures – looked at a wide range of topics, among them the importance of collaboration between the new and old world of DeFi and TradFi, risk and compliance around distributed ledger technology (DLT) networks, and what role CSDs might play in the world of DeFi.
A key message from the panelists, though, was the need for regulatory clarity, the current lack of which appears to be making institutional players reticent to commit fully to participation in markets for digital assets.
In a presentation immediately following the panel, Targ Patience of Dolya Consulting provided a regulatory update, focusing on the parallels between the EU’s new MiCA (Markets in Crypto Assets) regulation and MiFID II, as well as touching on other upcoming regulations such as DORA (Digital Operational Resilience Act). Patience’s presentation mapped many of MiCA’s abstract provisions to the more familiar MiFID II terminology, providing institutional players with much-needed context as they consider digital market participation.
A later panel – titled A Design for (Digital) Life – built on the themes of regulation and standardisation. Moderated by Jim Kaye of FIX Trading Community, and featuring Mark Makepeace of Wilshire, Alexandre Kech of ISO and Bediss Cherif of Kaido, the panel examined the different characteristics and infrastructures of digital asset markets vs. traditional markets. Panelists discussed how to navigate the plethora of digital asset venues, and the importance of standardisation and a recognised taxonomy, exploring initiatives such as the Digital Token Identifier (DTI).
The conference’s digital assets segment had kicked off with a post-lunch keynote fireside chat between A-Team’s Andrew Delaney and Michele Curtoni, Head of Strategy at SDX. Curtoni gave an overview of the digital asset space, and shared SDX’s experiences in launching a digital asset exchange. One of the key challenges Curtoni discussed was how to address atomic settlement, particularly in digitised fixed income securities.
A subsequent panel session – moderated by industry consultant Ian Salmon, and featuring Sophie Schluger of Amber Group, Simon Barmby of Archax, Exberry’s Magnus Almqvist, and Usman Ahmed from Zodia Markets, was focused on accessing liquidity in digital assets. It was clear from the discussion that there is a great deal of activity and creativity happening in the digital asset space, both in terms of tokenisation of traditional securities and creating proxies for items as diverse as fine art and dinosaur bones(!), but that the vast majority of trading is still occurring in Bitcoin and Ethereum, which remain the main entry points into digital assets for institutions.
Beyond the world of digital assets, the conference kicked off with a keynote fireside chat between Irina Sonich Bright of Credit Suisse and Duncan Higgins, founder and guiding light behind Sustainable Trading, launched last week as a membership network to drive transformative ESG Practices in financial markets. Higgins explained the background behind the initiative, why it is generating so much interest, and what it hopes to achieve.
Matt Barrett, CEO of Adaptive, then delivered a keynote on the subject of technical intensity, sharing his insights on how firms can avoid creating processes that are digitally ‘frozen in time’ when undertaking digital transformation initiatives. This was followed by a panel discussing how firms can differentiate through technology, featuring Adaptive’s Barrett alongside Duncan Cooper of BNY Mellon, Mark Perkins of Luxoft and Glue42’s James Wooster.
This was a lively session, where various approaches to innovation and modernisation were discussed. The panel looked at the practicalities and challenges of moving from legacy systems to modern architectures, and why a buy and build approach is advantageous when buying utility/commodity components and building in areas where the business is differentiated. The subject of interoperability, which is currently a hot topic in financial technology, was also discussed. A key takeaway was that firms should always focus on the business value when modernising their technology stacks.
Matt Hargreaves, Capital Markets Industry Lead at Luxoft, delivered the next keynote, which focused on the benefits of as-a-Service operating models in the capital markets technology space. Matt highlighted recent research from Deloitte that suggests 50% of IT budgets will be spent on as-a-Service models by 2025, with good reason, given the current massive spend on complex, fragmented IT estates. He pointed out that by adopting as-a-S solutions for non-differentiating activities, firms can achieve greater levels of efficiency and lower costs, thus freeing up budget and resources that can be directed towards client-centric differentiated services.
The next panel session of the day, focusing on market data in the cloud, featured Richard Croucher from a Tier 1 bank, Options Technology’s John Bryant, Sapna Swaly of Exegy and market data specialist Julie Guerasimova. The recently announced partnerships between CME/Google and Nasdaq/AWS were discussed, along with what impact these might have on the industry.
It was generally agreed that colocation is likely to be around for a while, as wherever speed offers an advantage, firms will want to collocate next to exchange matching engines. Issues around timestamping of market data and fairness of distribution were also covered, and how these might work in a cloud environment. And the thorny topic of data entitlements and licensing was also discussed, along with multicast/unicast issues. One takeaway was that cloud networks will need to be less opaque in terms of telemetry and monitoring, before market data infrastructures move to the cloud.
The final panel session of the morning featured Ben Stephens of Instinet, Scott Charity of Berenberg, IPC’s Richard Balmer and Alastair Watson of TNS, discussing optimisation of trading infrastructure for high performance and agility. This panel looked at the latest trends in connectivity, infrastructure monitoring, co-location and hosting. With the volumes and volatility the markets have experienced recently (particularly as a result of the growing retail interest in option trading), panellists suggested that 10GbE networks are now regularly hitting capacity – as a result, some firms are moving away from service provider networks to their own dark fibre. It was generally agreed that the ‘race to zero latency’ is alive and kicking. On the subject of cloud-based trading, one panellist pointed out that crypto exchanges such as Binance run entirely on the public cloud, so will other, traditional, exchanges follow suit?
The event closed with the TradingTech Insight Award Winners Ceremony.
Videos, recording and presentations from the event are available here.
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