As the role of technology in financial markets continues to evolve, numerous speakers at the Futures Industry Association’s 14th Annual Asia Derivatives Conference in Singapore shared their thoughts on the road ahead.
With so much focus on new technologies like distributed ledger, artificial intelligence and machine learning, some speakers stressed the importance of realizing how little some aspects of market infrastructure have advanced.
“Many fundamental functions of our industry are operated on technology that was devised before email even existed,” said Andrew Stewart, Executive Director & Global Head of Futures at Macquarie Bank. “We kid ourselves that we’ve made great technology advancements in the futures industry when we haven’t.”
Quantitative Brokers Co-founder and head of APAC Christian Hauff echoed Stewart’s dismay about the progress toward big technological changes that has been made.
“If you would have asked me 11 years ago where the status of the derivatives markets would be today, I would have said they would be a lot more advanced than they are,” Hauff said.
Helen Lofthouse, Executive General Manager for Derivatives & OTC Markets at ASX. ASX is involved in a high-profile partnership with Digital Asset to shift equities settlement to distributed ledger technology.
“DLT from a clearing process perspective has a lot to offer our industry, but these are not small projects,” Lofthouse said. Lofthouse added that the kind of industrial scale implementation that ASX doing is the best way to get the most out of new technologies.
Lofthouse added that expectations from various stakeholders can also present hurdles in the march toward new solutions. “Clients want everything to be global while regulators want everything to be regional. The complexity comes when those things meet in the middle.”
Chip Dempsey, SVP and chief commercial officer at OCC, pointed out that while some technology use cases are aimed at tackling new problems, his firm is constantly working to solve for one of the biggest challenges in markets: trust.
“We think about how we can use Big Data and other tech to ensure the trust problem is solved more efficiently,” Dempsey said. Dempsey believes standardization efforts like legal entity identifiers can also be useful because they can act as a force multiplier by giving firms the same starting point for enhancing risk management practices.
One of more overlooked aspects of technology evolution is the proactive approach regulators can take to encouraging new developments and steering firms away from trouble. John Ho, Head of Legal, Financial Markets at Standard Chartered Bank lauded the smart contract guidelines that were released earlier this week by the Commodity Futures Trading Commission.
Perhaps Keith Todd, executive chairman and CEO of KRM22, put it best when he concluded that the justification for pushing for greater technological advancement is obvious from a cost-savings perspective, but that firms just need to think bigger.
“We need to use technology to not just shave costs, but take a sledgehammer to costs for the industry.”