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Notes from The Trading Show Chicago 2018

Terrapinn’s Trading Show has established itself as a sure sign of spring in Chicago, and while the past few years have found the event swinging heavily to a focus on the technology side of trading, including chips, servers, databases and connectivity, the 2018 edition of the show had a strong leaning towards…you guessed it: cryptocurrencies. Everywhere you go in financial markets in 2018, bitcoin and other cryptocurrencies are sure to be there.

The exhibitors at the conference still skewed to the hard technology side (let’s face it, all of trading is touched by technology at this point) but the open seminars and VIP panel discussions were weighted heavily towards crypto, with 11 of 19 seminars focusing on blockchain, etc. and a separate track just for crypto panels and presentations. Also, the title sponsor for the Trading Show was Kraken, the large crypto exchange, and their team was everywhere on the trade show floor, leading roundtable discussions, appearing on panels, and even throwing an overcrowded (read: successful) party after the last day of the show.

There is no doubt that crypto has grown and matured in many ways over the past year, but the market ecosystem still bears many of the hallmarks of a wild west gold rush. Two cases in point: a wet-behind-the-ears cryptocurrency hedge fund manager wannabe actually began his panel appearance by declaring, “I am a genius,” and a representative from a large cryptocurrency exchange told the audience at his panel that their business was “very, very, very, very, very profitable” (I actually lost track of how many times he said “very”), which came off as a cross between boastful and ignorant. Any 49er would tell you that the surest way to lose your claim is to jump up and down clicking your heels and screaming “GOLD! I’m rich!” when your pan fills with nuggets. Best to accumulate your fortune quietly.

That being said, the crypto market has come very far very fast and there were a large number of “grown ups” who shed interesting light on where these markets are now and, perhaps more importantly, where they might be headed. For example:

  • Derivatives industry titans Bo Collins and Chris Hehmeyer kicked things off with an example of how old dogs actually can learn new tricks. Both have interesting crypto enterprises in development, and they had some interesting thoughts and observations to share. For example, Collins discussed how major wholesale exchanges will likely be centralized, and Hehmeyer talked about how hard it is to predict the evolution of something as unusual as smart contracts. Hehmeyer also said that this “genie (cryptocurrencies) is not going back in the bottle.”  
  • Jim Radecki of Cumberland Mining, the crypto arm of DRW, laid out five factors that need to be addressed for the much discussed institutional “wall of money” to enter the crypto markets: consolidated liquidity, standardized settlement procedures with the availability of services like repo, custody and security, valuation on research and metrics, and regulatory clarity. It’s hard to conceive of a scenario where Cumberland won’t benefit as the crypto markets evolve.
  • Kraken COO Dave Ripley noted the irony that cryptocurrencies are viewed as risky from a security standpoint, but they routinely find security issues as they interact with financial market incumbents (more on Kraken below).
  • All the panelists asked for greater regularity clarity, not necessarily more regulation. Michael Moro, CEO at crypto market makers and service providers Genesis Capital, verbalized what most everyone believes: in the U.S., the CFTC is the most natural regulator for these markets.
  • Garrett See of DV Chain, the crypto trading arm of DV Trading, echoed the thoughts of many when he complimented the introduction of bitcoin futures but lamented the lack of physical delivery for the existing products offered by Cboe and CME Group.

Finally, in a week that saw the New York Times report that Intercontinental Exchange, parent to the NYSE, was close to launching a cryptocurrency exchange, it was interesting to sit in on a roundtable discussion led by Craig Stoe from Kraken. Kraken had issues coping with hyper-growth last year, as did many other crypto exchanges, and Stoe began his comments acknowledging that fact. However, he went on to describe how the company is doing hard work identifying the needs of its key client personas (they use 6) as he listened to the thoughts and experiences of a diverse crowd that included 20-something crypto fund managers as well as grizzled industry veterans. It begs the question: how will the upstarts do against the behemoths? We should know a lot more by the time of Trading Show 2019.

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About Author

Chuck Mackie is senior adviser at Maven Wave Partners and a contributing editor to John Lothian News.