FinTech Exchange, Chicago

Now in its fourth year, Barchart’s FinTech Exchange* event seems largely designed to address the specific needs of the Chicago trading community: technology and data vendors; brokers and intermediaries; and commodities, futures and derivatives markets – with an emerging thread of Blockchain and crypto.

In fact, the Keynote Speaker, Dr. Richard Sandor, spoke of Blockchain as being as significant as the invention of double-entry bookkeeping, the launch of stock markets, the introduction of electronic trading, and the creation of financial derivatives combined.

Other topics included: the evolution of global financial markets; the threat or potential of enterprise Blockchain and FinTech solutions; the role of cryptocurrency exchanges; understanding big data and data analytics; deploying AI and machine learning within FinTech; and the rapid expansion of API solutions as products and services in their own right (not just as a means of data delivery).

There was also a panel discussion with the winners of the previous day’s Startup Exchange pitch event.

On behalf of Brave New Coin, I ran a series of round-table discussions on the current state of cryptocurrencies, token sales and digital assets; and the prospect of so-called security tokens (a topic which is sure to feature in this blog in coming months).

Finally, the notion of “alt data” is gaining attention, and not just among hedge funds. In part a by-product of big data (how to make sense of all this data), alt data is set to become the high-octane fuel for generating yield (if data is the new oil).

* Declaration of interest: Barchart syndicates Brave New Coin news and technical analysis content

Next week: Corporate purpose, disruption and empathy

 

Startup Exchange, Chicago

As part of its annual FinTech Exchange event in Chicago last month, Barchart* ran the Startup Exchange pitch competition, where 16 hopefuls competed in front of a stellar panel of judges.

The presentations in order of appearance were:

Mercaris – A market data and trading platform for niche agri-products e.g., organic, non-GMO, certified and other niche food products and commodities where identity preservation (IP) is critical.

KTS Operations – A configurable software development solution for data handling and trading. It aims to automate redundant data tasks, such as putting CPU processing on a Blockchain.

HALO – Is a platform for trading structured notes. Currently working with 10 banks and 5,000 financial advisors.

UCX – Offers a consolidated market place and platform for buying Cloud services.

Demand Derivatives Corp – Allows clients to design new derivative instruments for listing on futures exchanges, as compared to standard futures and options contracts. As well as supporting unique instrument design, the service focuses on IP protection, exchange listing and liquidity.

UpTick Technology – Identifying the in-house talent gap at many firms, this spreadsheet-based analytical tool integrates with any data set, multiplies internal development capacity and supports data distribution within the client organization.

MaterialsXchange – Is a raw commodities exchange offering a B2B e-marketplace to digitize and automate trading data. It features a live, two-sided (bid/offer) venue with full execution and delivery, plus connectivity to ancillary services. First product is a lumber market place.

Coinifide – Has launched a P2P crypto trading and auction market place, combining elements of a social trading platform with an emphasis on providing investor education, It features key influencers and subject-matter experts and a simulator to replicate trading strategies.

Upper Room Technology – Is a new analytics solution for professional bond traders, with algo-based modelling and trade execution services.

Tipigo – A decision-support and information tool aimed at self-directed investors and day traders. It combines machine learning and fundamental research (450+ data sources tracking 8,300 US companies) to screen and funnel investment strategies, with trade execute via 8 traditional brokers.

TrendyTrade – Designed to encourage millennials to invest, it aggregates 400+ data sources, as well as Twitter, StockTwits and traditional media. An AI-based algo model makes recommendations, and explains why a specific stock might be moving. Currently has 30,000 users (under a freemium model) and boasts 79% accuracy.

Peak Soil Indexes – Aiming to “democratize farmland”, this is all about so-called “precision agriculture” – financializing farmland, creating a new asset class and offering a passive investment product, tracked by their own farmland index. It recognizes the demand for farmland, while offsetting some of the inherent risks of highly volatile crop prices.

SixJupiter – This is text-based robo advice platform. Focuses on liquidity, diversification and aggressive growth. Data suggests that 36% of the US population don’t get financial advice.

FreightWaves – A trucking futures marketplace, developed in response to a lack of market transparency and the corporate headwind of freight costs. Combines insights from market trends, regulatory factors and the impact of new technology. Primarily a content site, the service has achieved 1 million paid views per month.

PanXchange – An OTC marketplace for physical commodities – agri, energy, food and metals. Provides Instant access to realtime and historic data, for price discovery and for
trading futures and derivatives. Live data includes bid/offer spreads and trades (as opposed to traditional price reporting agencies. Its first key product has been a weekly benchmark price for Frac Sand.

Matrix Execution Technologies – Trading solution for active traders in equities, futures and options. Includes order management and executions services, especially for trading spot markets against listed contracts (such as CME and CBOE Bitcoin futures). Aimed as family offices and HNWIs.

Based on the judges’ verdict, the winners were:

1. PanXchange
2. Coinified
3. FreightWaves

* Declaration of interest: Barchart syndicates Brave New Coin news and technical analysis content

Next week: FinTech Exchange, Chicago

CoinAlts Fund Symposium, New York

Following on from last week’s theme on Blockchain, crypto and asset management, the recent CoinAlts Fund Symposium in New York brought together various parts of the fund industry to discuss issues connected to crypto investment, portfolio management and back office solutions.

Although conducted under a veil of non-attribution, it wouldn’t be betraying any confidences to describe some of the key talking points. If anything, the main themes echoed much of what I have heard at similar events over the past 6 months: scaling transaction capacity and establishing Blockchain interoperability; building industry standards for this new asset class; and creating valuation models for new token issuance projects.

In addition, the conferences addressed operational matters such as crypto fund administration, audit, custody, taxation and client reporting. All the usual back office functions that are taken for granted in other asset classes.

What was particularly noticeable about this event was the lack of international participation. In fact, a number of the speakers almost berated the audience for choosing to ignore overseas industry, market and regulatory developments at their peril.

For example, on regulation, it was suggested that if the SEC doesn’t provide some constructive guidance on new token issuance (especially so-called security tokens), the USA could be left behind. Indeed, one industry representative stated that for his company, the USA is only their third largest market. Another presenter drew attention to the fact that South Korea (a leading marketplace for Blockchain and crypto) produces 15 times as many engineers as the USA, while the USA produces 40 times as many lawyers as South Korea.

A recurring theme throughout the day was that without formal standards, clearer regulation, and institutional-strength tools and infrastructure, major asset managers, pension funds and Wall Street firms will remain very cautious about investing in digital assets, whatever their current level of interest.

Next week: Startup Exchange, Chicago

 

APAC Blockchain Conference

The 2nd APAC Blockchain Conference was held in Melbourne last week. According to the organisers, the previous event attracted about 150 people. This year, registrations were around three times as many. The Blockchain story is only just beginning, if the level of interest and the range of conference topics are anything to go by. Here are a few random observations from the two-day event.

A story is just what we got from Robert Kahn, speaking on the role he played in developing the TCP/IP protocol, and the evolution of “Digital Object Architecture” as a way to identify any type of data, regardless of the technology used to create, store or retrieve it.

From NEO founder Da Hongfei we heard about dBFT (Delegated Byzantine Fault Tolerance), and ANZ’s Nigel Dobson outlined the use of Blockchain and DLT (distributed ledger technology) to remove transaction inefficiencies in commercial property lease guarantees. Civic Ledger CEO Katrina Donaghy talked about her work on “Civic Commodities” (government-issued permits and licenses) and “Sustainable Commodities” (water trading, patent registrations).

Gingkoo CEO William Zuo and Novatti‘s Blockchain Head Peter Christo introduced their collaboration on a Blockchain-based cross-border payment platform. There was a presentation on Hcash by Andrew Wasleyewicz, which talked about the “7 H’s” of their solution. While the quirkiest (and possibly most engaging/authentic presentation of Day 1) came from ConsenSys‘s Blockchain expert Lucas Cullen, who told us “7 Reasons Why Not To Use Blockchain Technology” (compulsory listening for any hapless corporate CTO under board pressure to come up with a DLT strategy…).

In between was Data 61‘s Zhu Liming who talked about some of the wider implications and opportunities for Blockchain in his capacity as Chair of the Australian Blockchain and DLT Standardisation Committee. There were also some insights from Gilbert & Tobin‘s COO Sam Nickless on how lawyers must embrace the new technology to avoid becoming disintermediated.

A diverting interlude from economist Lord Desai suggested that “Bitcoins are not coins, and cryptocurrencies are not currencies”. Many might agree, but we already know they are a new asset class in their own right, and need to be treated as such.

Standards (both technical and regulatory) were the topic of a panel discussion comprising mainly lawyers and regulators. The remaining panels on Day 1 (representing commerce and industry) addressed key themes of Blockchain scaling, interoperability, privacy, security and commercial deployment.

Day 2 began with an interesting keynote from former ASIC Chair, Greg Medcraft, now at the OECD. Mr Medcraft is no stranger to the debate on cryptocurrencies and ICOs, but chose to focus his remarks on the benefits, risks and opportunities for Blockchain. On the plus side, Blockchain can reduce the number of intermediaries in a transaction, it provides traceability and transparency, it increases the speed of payments (and reduces the cost), it offers data security, and it provides greater access to markets (e.g., SME supply chains). He foresees fiat and asset-backed digital currencies, and government support for Blockchain solutions in areas such as identity, provenance, supply chain and AML. Plus, for consumers, there should be greater trust and security, better financial access and inclusion, lower costs and better products. Key risks remain, however, in data privacy, security (ID, authentication, cyber-attacks), and consumer and investor protection. Policy makers need to be pro-active and forward-looking, keep up to date on these rapid developments, and co-ordinate across industry, sectors and globally. Citing some of the issues associated with ICOs, Mr Medcraft then urged regulators to exchange information with their counterparts and identify best practice, avoid regulatory arbitrage, create greater legal certainty, and raise awareness of the risks and rewards.

Victor Wang from the China Wanxiang Group followed up with a presentation that re-cast Blockchain as a new economic model, drawing on his reading of “Das Kapital”, and introduced the concept of GBP (“Gross Blockchain Product”). According to this theory, Blockchain is a means to redistribute and reallocate resources and assets; it is transforming the cost of transactions and value exchange; it is creating new assets; and it is building new products and services, as well as the delivery mechanism itself.

We heard from Zuotian Luan of Fortuna Blockchain on the future of OTC derivatives, and how decentralized exchanges are addressing legacy problems of counter-party and credit risk, operational efficiency, and lack of liquidity. He sees a “decentralized margin system” as a long-term solution that will reduce the costs of posting and managing collateral on traditional OTC exchanges.

There was an interesting discussion on the future of capital markets themselves, reflecting the perspective of traditional exchanges, clearing houses and custody providers, plus tZero. (As an aside, I was pleasantly surprised to see so many representatives of the “back office” at the conference, including trust banks and share registries. However, there didn’t appear to be anyone from the brokerage or advisory side, and no-one from the ASX, even though their Blockchain project to replace/enhance CHESS has been widely lauded as being in the vanguard of this new technology.)

Finally, a quick plug for my colleague, Fran Strajnar, CEO and co-founder of Brave New Coin who moderated a panel on ICOs. I think he summarized the tone of the discussion really well, when he said this is probably the only financial services sector that is asking for regulation. “Tell us the rules and let us get on with the job.”

Next week: Tech Talk on Crypto