The FIA annual Expo in Chicago delivered a wide range of themes and discussions across the listed derivative and cleared swap industry.
Starting just after a wet and glum Halloween, and during an unseasonable heat wave, the weather fairly reflected the conflicting moods of the industry.
For the first time in decades the loop was almost devoid of trading jackets after the CME closed most of its trading floors.
A series of grainy old film clips showing some arresting 1970s fashion statements, hairstyles and facial hair ensembles opened the event that, ironically, promoted innovation at its centerpiece.
The inevitable exposure of spoofing came under the spotlight with the first jail sentence being given for activities dating back to 2011.
It was interesting to see the growing number of new technology vendors appearing to offer solutions for this and other market supervision and abuse scenarios.
The usual defense of ‘I just change my mind quickly’ but not 20,000 times in a second, will give rise to another level of machine-based intelligence.
It is impossible to avoid the evolving regulatory framework and harder still to fathom the real impact on how the business will be able to encompass even more demands.
What is clear is that more and more information is being required to be captured, reported, analyzed and processed. And with that the ownership, intrinsic value and fundamental record of data will dominate much of the attention of Mifid II (as well as the budget of those the directive will affect during the 2016 build up and into 2017).
I spoke to the head of a major global bank FCM and the regulatory demands over capital are, in his mind, the biggest threat to the industry ever.
The lobbying and increasing, yet guarded, co-operation between the protagonists could throw some sunshine onto what looks like a potential gloomy outcome. Let’s see and hope.
No self-respecting conference or exhibition these days can be without a Fintech innovation slant and this year, 20 selected firms were able to showcase their wares in a dedicated Innovation Pavilion.
With the aforementioned backdrop of ‘goodbye to the floors and hello innovation’, it was interesting to ponder over what we mean by innovation and what is just really evolution.
A quick google search later and I am told that evolution is ‘the gradual development of something, especially from a simple to a more complex form’, whereas innovation is ‘the process of translating an idea or invention into a good or service that creates value’.
It’s interesting to consider these descriptions in light of the many new ‘innovations’ in our industry.
We are certainly living in an era of unprecedented technological innovation, that’s for sure, but when we come to Fintech, perhaps some ‘innovations’ aren’t that at all and just good old fashioned evolution? Language is a complex thing.
And finally data. Be it more surveillance, regulation infrastructure, reporting or technological advances, what is clear is that the listed and cleared swaps world will create an ever-increasing avalanche of data.
The layering of data on top of complex technology environments will become an increasing area of focus and concern for participants and regulators alike.
And with more data will come an even greater need to adopt intelligent computer science-based approaches to make sense of this information.
The traditional approaches of either setting up a vastly expensive project in conjunction with a consultancy firm or employing thousands of temps on spreadsheets will just not work.
We have seen quantitative, computer based analytical approaches in algo trading for years, it is now the time for the same advances in the post-trade environment.
The value of data and its analysis will increase and become a crucial commodity as the industry looks to come out of the doldrums and re-invent itself in the new regulatory environment.
The commercialising of some exchange data to members, the recent ICE purchase of Interactive Data for £5.2bn and regular fines for misreporting just go to show how data is moving centre stage of the financial markets.