There is a revolution underway. Technology has already vastly changed the nature of trading and the financial markets. For retail futures traders the doors are wide open for improvements. What's new, what's changing and what still needs to change for the retail futures trader? We sat down with Chuck Mackie, senior advisor at Maven Wave Partners to discuss the landscape. Mackie has over 30 years experience in the financial services industry with expertise in electronic trading and the development of new markets. He was a principal in SaaS firm Fundamental Analytics for 2 years, Director of OTC Clearing at ICE for 6 years, and Head of Sales for the CME at trading software firm Trading Technologies. Other past employers include Paris Markets, the CME, and JPMorgan Chase.
Please tell me about Maven Wave Partners?
Maven Wave provides strategy-led, results-driven consulting and technology solutions. Our consultants assist clients by creating and capitalizing on change opportunities through a unique blend of strategic insight, business knowledge, and technology expertise. Clients increasingly want solutions that are more social, mobile, and rooted in analytics. To deliver on the promise of the cloud, Maven Wave fuses traditional consulting discipline with cutting-edge technology development.
What are the trends you are seeing at Maven Wave Partners in relation to technology?
The two broad themes that we see are data and design. Much is made about “big data” but this is more descriptive than proscriptive: it acknowledges that there is a data explosion going on but it doesn’t begin to address how data can be put to work. We believe there is a great opportunity to utilize the readily available and inexpensive resources available in the cloud and apply analytics in a way that realizes the potential of “big data.” Design is the secret sauce that unlocks the insight in data. Old methods such as spreadsheets and dashboards are no longer sufficient and an integrated and holistic utilization of UX (user experience) principles is needed to ultimately deliver the insight embedded in data.
What is "Fin Tech" ?
One of the hottest buzzwords going these days! Seriously, Fin Tech refers to areas where technology is being applied to financial markets in a way that creates new products or, more usually, disrupts existing players and practices. I often describe it as being “whom or what is going to be the Uber or AirBnB of financial services?” Fin Tech is obviously nothing new, the ATM in banking and electronic trading in futures and other markets were Fin Tech innovations. However, the ascendance of the cloud, mobile technologies, and other innovations has created conditions that are ripe for innovation.
How do the trends in Fin Tech affect retail futures traders?
Retail futures traders have already greatly benefitted from technology as the markets moved from open outcry to electronic trading. Ask any veteran trader and you’ll hear horror stories of unanswered phone calls, stop loss orders filled at the high or low of the day, and indifferent to downright hostile customer service. The move to electronic trading not only eliminated those problems but also increased access, enhanced market liquidity, and lowered costs. In fact, one could argue that Fin Tech innovation has been better for smaller retail traders than it has been for the big guys. That doesn’t happen too often!
Going forward, there is still a lot of upside for retail traders. The cloud not only lowers costs but it also makes computing power and tools available to all like never before. Advancements in mobile applications are being translated into new tools and services that have never previously existed for any traders, small or big, retail or institutional.
What are some of the benefits of Fin Tech companies in the way they provide services to their clients?
A driving emphasis of Fin Tech is to understand the user experience and create new solutions or redesign existing solutions in a way that creates an enhanced experience for the user. This isn’t technology for technology's sake, it’s technology applied to make things better. Added benefits are the beginning, middle, and end for successful Fin Tech applications.
Do you see the futures industry as ripe for "disruption?"
Markets that are the most ripe for disruption are those that have fat profit margins and old, hidebound systems and practices. The futures industry is not very attractive on the first count - it’s hard to make money as a futures broker or FCM these days - but there is a whole lot of room for improvement in terms of systems and practices. One interesting factor is that the markets should become a whole lot more interesting to trade in the near future. Volatility, particularly in interest rates, has been suppressed as central banks have kept interest rates low since the recession, but that won’t last forever.
What are your thoughts on trading in the cloud?
It’s not so much trading “in the cloud” as it is trading “with the cloud.” The actual matching of trades is still location driven, just as it was in the days when trading was done in open outcry pits, but now the locations are in places like Basildon, Mahwah, and Aurora. So, if you’re trading strategy is very speed sensitive it will be critically important that you, or more precisely, your trading algorithm, are in close proximity to the exchange matching engine. However, what we’re seeing now is that the furthest limits of speed are being reached and each incremental addition to trading performance is becoming more and more expensive, to the point where it makes sense for only the biggest of the big and the fastest of the fast continue to invest more in this type of technology. At this point, it makes more sense to look elsewhere in the trading value chain for improvement opportunities and that’s where the cloud comes in.
First and foremost, the cloud gives traders the ability to trade anywhere, and that means trade, not just get price updates and monitor positions. Down the road, the cloud will allow traders to use computing power on an as-needed basis to research new trades, to look at renting rather than buying data, and to get access to analytic tools that until recently, were only available to a chosen few of academic and government researchers. In short, the cloud can deliver cheap and powerful solutions that have heretofore been unavailable to most traders.
What do you expect to see from Fin Tech in the years ahead? How could it impact not only the trading world, but other aspects of our economy?
Any answer I give to this question is sure to make me cringe if I read it a few years from now! Very few people saw the promise and potential in Uber or Facebook or even the iPhone when they were first introduced and that’s the nature of disruption: it’s not easy to get outside of what you know and look at what might be possible. That being said, I think that the consumer relationship with banking and investment services is going to change pretty drastically. In banking, this is likely to take the form of disaggregation as competitors carve off pieces of business that banks aren’t doing very well. Personal or small business loans are a good example of this. With investment firms, there is the possibility of disintermediation, as new firms introduce whole new ways to get started with investing that traditional players simply aren’t set up to offer.
What potential changes could lie ahead for the trading industry? Traders in the years ahead?
I believe that the trading industry is set to enter another period of strong growth. The move from floor-based to electronic trading created a strong boom in the 2000’s but the Great Recession and subsequent recovery ushered in a challenging time for the markets. In the near future, an increase in volatility, the opening of new markets, and the many possibilities that become available from new technologies will usher in a new period of opportunity and growth.
Thank you, Chuck.