Transcript

Julia: Hello. My name is Julia Streets and welcome to the podcast series StreetsTalksTo. In each episode, I interview leaders from some of the most influential firms, bodies and initiatives in the financial services industry.  And as every leader will testify, one of the critical factors of success lies in the strength of the team. In each episode, we invite the CEO to bring along a colleague and together we’ll be looking at what’s at the very forefront of innovation and change. We’ll be thinking about the challenges facing their clients and the industry at large and uncovering the opportunities that exist both today and as we look ahead. Not least, while we navigate these extraordinary times. We hope you enjoy the series, which you can find on all good podcast channels. And all our episodes are listed on our website, streetsconsulting.com and you can find the episodes using the hashtag #streetstalksto. Thank you for listening to StreetsTalksTo Etrading Software.

Etrading Software is an independent global provider of technology led solutions, and it’s all about assisting financial institutions and industry initiatives address those highly complex, constantly evolving, market and regulatory challenges. What they do is they design, build and operate technology for the front office, fixed income OTC markets, all about helping clients keep full governance and control using transparent and vendor neutral solutions. In addition to that, Etrading Software has a proven record of working with consortia and it’s there, they focus on creating a mutualized approach to design, developments and operation of technology based services. Think about what that means in terms of incubation, right the way through to execution, and it’s helping solve those common challenges faced by many parties in the industry.

Today I’m delighted to be joined by Sassan Danesh. Sassan is the Managing Partner at Etrading Software, and he has 20 years of experience assisting capital markets institutions to grow their OTC market franchise by optimising the business performance in their technology offerings.

When he’s not doing that, he’s also a member of the Financial Services Committee of the British Standards Institution also known as BSI, where they focus on assisting in defining electronic standards for the UK financial services industry. He’s also a member of ISO, the International Organisation for Standardisation assisting in the creation of electronic standards, right the way across the industry. Prior to co-founding Etrading Software, Sassan worked at JP Morgan for some 11 years, where there he was building technology to support fixed income sales and trading. Sassan, it’s wonderful to have you on StreetsTalksTo. Thanks for joining us.

Sassan: Pleasure to be here.

Julia: Wonderful. Joining Sassan today. I’m delighted to welcome James Haskell. James is the Business Operations Officer at Etrading Software, and his role is providing oversight on the day to day operational running of, not only Etrading Software’s existing new and managed services products, but also for their clients. Prior to joining Etrading Software, James spent some 14 years at Goldman Sachs, he worked in London, Hong Kong, and New York, across some many roles, including operations, finance, and commercial banking divisions. Prior to joining Goldman Sachs, James served for several years in the British army. James, great to see you. Thanks so much for joining us today.

James: Thank you, Julia. Delighted to join you.

Julia: Wonderful. I love these StreetsTalksTo episodes, because we get to, not only just talk about what you do and I, for the benefit of the listeners, I’ve talked a bit about how you help clients and also very interested in the consortia piece, by the way. Coming back to that in a second. But before we get into that, where I really like to start our discussion is what are the issues that are really concerning the industry today? You’re out talking to clients, albeit over digital platforms these days, the beginning of 2021. What is it that’s keeping the clients awake at night, a moment? I particularly want to think about this, let’s start with the current state. And then I’d love to get your thoughts on the changing state and then perhaps even what we might be overlooking. Sassan, let me come to you first of all.

Sassan: We find that our customers are talking to us about the challenges of the cost of data as more and more of their processes go electronic. They now need to subscribe to more and more data vendors, data streams. And it’s both acquiring that data, but it’s also then the processing of that data and analysing it. In a way it’s a positive side of the electronification of the industry. But the downside of that is there’s more and more digitised content that now needs to be consumed. We can see that in our space most clearly with the cost of market data.

There’s been a loss of talk-us-through work within industry participants that we deal with as to how the ever increasing cost of market data can be capped. When we look at where regulators are going with this, of course, there’s a lot of discussion and regulators are aware of this as well. Initiatives such as the consolidation tape, which is something that European regulators have been particularly focused on are now at a stage where it seems to be moving from just talk to, “Okay, let’s actually do something about it.” So what’s nice about this, I feel, is with market participants and regulatory stakeholders are converging on a consensus to move something forward, so they can come to an implementation solution or a consolidated tape provider.

I find that quite exciting because it’s really a significant opportunity to reduce market data costs for everybody by having one consolidated source of market data, at least within the EU, and of course, quite likely post Brexit and in the UK as well.

Julia: It’s a fascinating topic, isn’t it? Because I’ve lived through MiFID I, MiFID II. Now we’re talking about MiFID III and the conversation about the consolidated tape has prevailed through all of them, but yet nothing’s happening. Hearing you talk about this could be a real moment of significant changes. It’s going to be fascinating, not only for the listeners, but also thinking about what that means for the industry as well. James, can I bring you in here? Because I mentioned in my opening comments, you’re really focused on the operational side of things as well. Also keen to hear your thoughts about, what is it that’s concerning your clients most right now?

James: I’d probably touch on the point Sassan raised, around minimizing data costs. There’s a linked point around reducing operational risk as particularly larger players in the markets provide regulatory data. There’s a considerable amount of operational risk run there, which the quality of the dataset, the ability to have it streamlined, consolidated, converged, all of those factors reduce the operational risk and therefore, ultimately the cost, if clients are running into legal issues or regulatory reporting issues. That tends to be fairly front and center of certainly the regulatory operation space in a lot of our clients minds. In terms of how we’re thinking about helping that, or how as an industry, we can help tackle that issue of cost and control. There are various things that we’re looking at from cybersecurity to how we implement, how software is implemented through, for example, implemented natively in the cloud.

One that’s probably at the forefront of our force and has been for a while, is around how we manage stakeholders or how the provider of a data service manages the stakeholders, particularly ensuring that the governance around that stakeholder management allows for the industry to have an input into how those processes are run, and how the service is run, so that the industry itself can help influence and then shape how the dataset’s implemented. I think that’s very important to our clients that any service that is implemented with the idea of simplifying and de-risking, de-costing on their behalf, that they actually have an input into that and ability to influence and shape it.

Julia: I think that right now, and funny enough I have lots of conversations about this, where the world used to be very proprietary. And of course I mentioned in the opening remarks about how you’re bringing consortia together as well, to tackle some of these common challenges and how, as you say, the stakeholder engagement James, is really important, about how people come together and just go, “There are common challenges that we could all address and we all have the same or similar appetite for cost and control as well.”

What’s particularly shifting in terms of attitudes. I suppose I have a second element to that, which is, now what are we at risk of overlooking? Sassan let me come to you first on that question, which is, what are we at risk of overlooking?

Sassan: Yes, what’s really interesting for me is the discussion around the traditional capital markets asset classes that we’ve just touched on in the context of the consolidated tape and industry consensus and regulatory consensus. There is none of that in the new asset classes that are now forming in the form of crypto assets and the whole digitised finance that is starting. So of course, is that mainstream today? No, but is it becoming mainstream? Yes and what’s missing is any kind of consensus either between industry participants and market participants or even regulators. That said, the hole that today is relatively small because the crypto asset class is relatively small, but growing rapidly. If we’re not careful, we’re going to miss a considered discussion on this because both regulators and market participants will be overtaken by events.

Julia: This huge high-level discussion about the policy, I think, as a central bank digital currencies, I think about, you knew the institutionalization of cryptocurrency trading in some of the wholesale markets as well. But James, from your point of view, on a technical perspective, now there are some very detailed, precise elements that need to be taken into consideration, I would imagine. I’d love your thoughts on, what does the industry need to do in order to be ready for this wave of change?

James: You’re absolutely right, and the operational considerations around how to build a reference dataset to the crypto asset space, they’re considerable. I think that a guiding principle would have to be to minimise the rework of systems and processes that banks, institutions, hedge funds and all the market participants that are starting to take a serious look at the crypto space, want to minimise the rework they would have to do in order for post-trade transactions to flow seamlessly and with minimum strategic work on their behalf. That starts with having a clear set of golden source reference data, i.e. A definitive, unambiguous, immutable reference data.

James: And front and center of that is an ability to identify the assets themselves. I think anybody who’s either dabbled in this space or has read about it fully understands that the crypto assets behave in many ways, very differently from traditional capital markets instruments in that different market participants might define the same asset differently. They might categorise it differently. Assets can actually change from one category into another, as part of the normal transaction life cycle for that asset.

James: All of those features present significant operational challenges for regulatory reporting, is one piece, but even managing to keep track of liquidity to aggregate for price discovery, to aggregate trading activity. All of those very conventional and tried and tested processes in the traditional capital market space, we need to have a look at. And as I say, I think having a golden source reference dataset, particularly an ability to identify unambiguously these assets is a very important first step in that.

Julia: For any listener as indeed, I’m smiling while you’re talking because I’m thinking naturally, that’s what you focus on. I mean, that’s what you do in terms of helping clients address some of these common challenges around the cost and the control, the handling of data and its complexity, and not to mention, some of the standardisation that needs to come together as the industry sits around, hopefully, one table to tackle that. Sassan, let me come to you, first of all, keen to hear what you’re doing to help. Let’s focus first of all, on the consolidated tape.

Sassan: The areas that we’re involved in is to look at building an appropriate technology infrastructure that can be deployed, that can act as the basis of that consolidated tape service. How can we leverage standards? How can we leverage open-source? How can we leverage open data principles coupled with this stakeholder management model that James was talking about? In our view, if you can do that and stay away as much as possible from proprietary processes and technologies and some closed governance models. The more you can actually, almost get that on its head and talk about simplification of the technology stack and open governance models with lots of input from the broader diversity of the user base.

That is a mechanism to both, initially implement a low cost solution, and then also guarantee that low cost through the stakeholder management model that James was talking about. That’s really our focus, and one of things that we find people coming to us and saying, “We really like your views on this,” is as a technology provider rather than a data business, lots of our clients are saying to us that, “We love your business model in terms of helping bring this about because there’s no legacy business model that we need to protect.” Our role is to help reduce market data costs for the broad industry, with no conflicts of interest because of any data business that might be there already.

That’s what we’re hearing, hence very happy and we’re working with stakeholders to see if the model and our vision is the appropriate one for a consolidated tape part.

Julia: The governance and the independence really comes to bear, I imagine, in hosting those conversations because some have tried, and it’s not an easy topic to tackle. Looking at it from a more technical point of view as well, James, I mean, when you’re thinking about how you could help that process along, what are you particularly focused on in terms of getting ready for that time?

James: I’ll go back to one of your earlier points, on the experience in building and working with consortia, were somewhat similar to operate in the Derivative Service Bureau, which is something we do. It’s really working with the members of the consortium to look at what are core mutually beneficial or mutually essential elements of a service from a technical and operational perspective. Separating those out from individual proprietary pieces that might benefit one or two members of the consortium, but wouldn’t necessarily be that additive as a whole. Then having a process in place so that the technical and production components of operating the service can be regularly and consistently reviewed with the stakeholders who utilise the service and making sure there’s a mechanism for evaluating issues or potential enhancements as they arise. Then making sure that the system and the service are continuously improved and enhanced.

That’s obviously fine in practice, but that is the guiding principle that we worked to in these situations and industry consultation, working with regulators, working with organisations which set the widely accepted standards. Those are the first steps in a sense, to understand what the ask is, and to start thinking about a solution that will not only work at a technical operational level, but will also bigger picture fit the bill for the industry need. So that’s really where we’re at at the moment, having these initial conversations.

Julia: It’s so important to be thinking about it from the granular detail, right the way through to the strategic. It’s interesting, you’re saying about having the regulators at the table there as well. It’s going to be very interesting times for sure. And I think there’s this clear appetite for change, but the complexities can not be underestimated in any way, shape or form. Love to hear how that goes. If I may note, I’d like to attend to the second topic. I mean, normally we have guests who have got one fascinating topic, but you have two. I mean, the other being the world of cryptocurrencies and crypto assets, and digital assets, thinking about the realities and complexities of unlocking potentially some of the friction that exists in the market and as you were saying that the lack of standardisation. But just imagine what impact that could have. What role do you play in tackling that challenge? Sassan, let me come to you first.

Sassan: We’ve just been awarded the contract by ISO to provide the golden source of crypto currencies, crypto assets more generally, across the globe. We’re really excited about that. We see a possibility here for establishing best practice data service that implements all the good points that we were already discussing for the consolidated tape, which if you like is for the traditional asset classes. But actually leapfrogging what’s happened in the traditional asset classes and just going straight in implementing a best in class service.

What does that mean to us in terms of best in class? Well, we’re literally engaged with both regulators and industry stakeholders right now in defining the governance model for this and making sure that there’s input from market participants on how the service will run. We’re looking at providing the core service on a cost recovery basis. And again, that has a nice link in our view to the consolidated tape, which really we feel should be run on a cost recovery basis as well to keep costs low for everyone. We’re using the latest standards for this, of course, the entire reference data model that we’re creating here is based on an ISO standard. It’s a new ISO standard that was established in 2020 and is being implemented in 2021.

We’re really excited because we can see the link from all the CTP discussions we had before to this new crypto asset. I think as traditional incumbent financial institutions and the service providers that support those financial institutions, start to actually move into the crypto asset space. Our focus is to make sure that the way we design this service supports their migration into the new asset classes with a minimum of turbulence of the back, which is, we want maximum interoperability. And that’s our vision, and that we’re building that service as we speak.

Julia: I was saying earlier, you’ve moved some of those frictions, inherent frictions, blameless frictions and create some standardisation and governance and structures around that. Imagine how that could be transformational because asset owners and investors are very keen to get into crypto. Is my opinion, from various other conversations as well. But again, the technical pieces must work, they have to come together. James, you know I’m coming to you on this question clearly, because now, when we’re thinking about the standardisation of data, when we’re thinking about the governance models, now on a technical point of view, where do you begin? What are you offering?

James: It’s a really exciting and interesting space that we’re getting into. The asset class is becoming more mainstream, just a simple fact. As it becomes more mainstream and the mechanism of it becoming more mainstream will be larger investors coming in, retail investors coming in and scale, institutional asset managers, regulators taking more of an interest as those market participants join. There are a few different viewpoints that we’ll need to coalesce around. As I say, it does go back to the reference data. No one would argue that having a clear golden source, unambiguous, immutable set of data points would be a bad thing. It reduces friction, it reduces confusion. It enables processes that benefit everybody from price discovery to liquidity management, to managing operational risks, ultimately up to legal and reputational risks, which are the things that keep the C-suite up at night.

All of that stems from knowing clearly what you’re dealing with, that buyers and sellers are talking about the same product, that regulators are understanding transactions in the same context that buyers or sellers transacted them. All of that stems around the datasets. The challenge here, and it’s an interesting and an exciting one, is applying the same principles of consensus building in a sense, you’re building a consensus view around what the ask is of them, what the solution is. But we’ve got a much wider range of viewpoints in the crypto space. And some of them are fairly new in terms of the players that you would see in the traditional capital markets sense. So, in summary, I’d say we’re taking a very focused look at the reference data set, particularly the ability to identify individual assets unambiguously. There are very interesting technical points around how those assets can be identified in the crypto space where the identifies traditionally used on the capital market side wouldn’t necessarily be appropriate. That’s where we’re spending a lot of time and focus.

Julia: Listening to you both talk with such passion about not only the consolidated tape, but also the cryptocurrencies and everything that’s required around the institutional trading of that. It almost feels like a bit of a rallying cry to say to people, “Get involved, come to the table.” Because these both suggests that they could unlock enormous potential for the industry, particularly at a time where we need it, arguably. As we are, 2021 is going to be a tough year. Potential is there for all to take drive down costs, improve operating models, bring in some governance and standardisation. And of course you can unlock liquidity. Just imagine. Well, I look forward to hearing how you’re getting on. I’m now going to take a slightly different tack if I may. This is a question that I ask all our senior guests, because it does really matter, but it’s a slightly strange one, which is,I like to ask everybody what their favourite piece of regulation is. I did say it was a weird one. Sassan, tell me what is your favourite piece of regulation?

Sassan: My favourite piece is probably the one that’s not there at the moment, which is regulating the crypto assets marketplace. Why would any market participants say we want regulation? The reason actually is, in my view, that regulatory focus will allow the asset class to grow, and to grow in a consistent and standard manner and bring in the traditional really robust processes that exists today in the established capital markets. So perversely, I think if we actually had the right regulation and the crypto asset space, it will help really take the crypto asset marketplace to the next level. We need it, it’s growing at a level where some structure can accelerate its growth.

Julia: Well, I have to say, I’ve never had a guest who’s ever come on the show and said, “We want more regulation.” And this is what we’re asking for. It makes perfect sense, though, again, it builds on your previous comments about, you need regulators at the table and I’m sure they are deeply thinking about this. It’ll be interesting to see what happens with that. And James, how about you? What’s your favourite piece of regulation?

James: Just to make it even more of a contrarian view. I think I’ll double down on Sassan’s desire for more regulation. I’ll say specifically for me, and it really ties back to the challenges that we were discussing earlier around the fundamental building blocks of the table, or in this case, crypto assets and getting enabling market participants to understand clearly what they’re dealing with and what they’re talking about. It will be one specific piece of regulation around just having an identifier that standardised, global, unambiguous, everybody knows what they’re talking about, that almost bizarrely isn’t in place yet. And yet that is absolutely foundational to allowing the market to operate at the type of scale that it should do. And allowing the type of investors that will facilitate that scaling up to enter the market.

As we discussed earlier, the institutional investors, asset managers, and retail investors at scale do require a minimal set of regulation in order to make the market safe, competitively fair, even to iron out an extreme volatility, things that you take for granted in the capital market space. I would say if I had my Christmas list for regulation it would be to mandate and identify that was a global standard. I think that would eliminate a tremendous amount of confusion and ambiguity that frankly unnecessarily exists today.

Julia: When we think about it, it’s almost sort of an entry level basis, It gets so much more complex than this, as you know, different trading venues have different symbols for Bitcoin. So on a basic level, but then also you said, much more sophisticated level from there as well. Well, let’s see what happens. I think it will be interesting to see how the regulators approach both the consolidated tape, as I mentioned earlier, around MiFID III, where we see the consolidated tape in that. And then also around the regulation of cryptocurrencies. Fascinating, really, really fascinating. Thank you both for all your thoughts on that. For those of you who are wondering how on earth, you can find Etrading Software, I will give you that information a bit later, but I will for a second, just tell you about how to find this series.

StreetsTalksTo is available on streetsconsulting.com. You can find us on our website with all our other episodes as well. And also on social media with the #streetstalksto. I’m talking to Etrading Software. I’m joined by Sassan Danesh and James Haskell. Let’s go into some closing thoughts if you would. But I don’t want to do them too quickly because it’s a road ahead that arguably, obviously we’ve never faced before. I’m not going to use the word unprecedented, but these are extraordinary times. There’s great potential on offer and there is some regulatory change required that is going to unlock potential in the market as well. I would love your thoughts about, what are you particularly thinking about on the road ahead? And what advice are you giving clients? James, let me come to you first of all, actually let’s stay with you, your thoughts on that.

James: It’s obviously a very interesting question. I think front and centre for us operating as a company, has been, as I’m sure as for everybody, been adjusting to the new normal, in a sense of working remotely. We’ve got a global company, we are now entirely operating remotely in a distributed way. I think we’ve gone through an evolution over the past 12 months with that of initially in a business continuity planning mode.  As the first couple of weeks unfolded, we were relieved that everything worked particularly at a tactical level. Then weeks continue to unfold with us working remotely, including our developers and all the testing and development support functions that we run. The measurements coming back in, told us that everything is actually working fine.

We’ve gone through relief, but the tactical is working, the delivery for our client’s going ahead. We’ve had very similar feedback from clients as we’ve been discussing with them around their own businesses that everyone’s largely been able to operate as intended, initially. I think we’re now starting to switch from the tactical and day-to-day operating is running fine. What we have seen is it’s more challenging to get strategic planning done and more challenge to get strategic work done. And certainly our clients have fed that back to us. That they’re also experiencing similar challenges and the point around the strategic work is something we are being increasingly mindful of, that as we are talking to clients about solutions and helping them to design solutions, we need to design things which are strategic work-lite. If that makes sense, things that do not need systemic overhaul and significant work around process redesign.

That talks a little bit to some of the other points we mentioned around what would make, for example, a CTP or the new digital token identifier successful. And it is that, an ability for companies to start, institutions to start using them without having a heavy burden strategically on reworking systems or processes. That’s basically it. I think, as we are looking forward, we are conscious that this new pattern of increasingly working remotely will continue either COVID driven or just work life change driven. And we need to be mindful of it in the solutions that we’re working on for clients and for the industry.

Julia: It’s interesting, isn’t it? Because you think, progress still needs to be made and finding partners like yourselves to help people just to identify what is key and how to make that as effective as possible. I like your strategic-lite description almost, in the way that you’re helping clients tackle some of those questions. Really interesting. Thank you, James. Thank you for your thoughts on that. Sassan, to close out the show. We return to the Managing Partner of the business. You obviously thinking about the business itself and also talking to clients as well. What are you particularly focused on as you look at the pathway ahead?

Sassan: Well, our focus and certainly, my focus is the continuation of what James was saying. On a slightly more holistic basis, which is, okay, we have this new normal, what appears to be the new normal. And whilst the tactical stuff is working. Okay, let’s just think about this slightly more strategically. Where’s the innovation happening? Because historically, innovation, at least in our experience, occurred through informal contacts, you’re around a group of, whether it’s colleagues, clients, other industry participants, and someone has some great idea, and it’s the spark of something new. Then a group gets together and does something about it and all of a sudden, three years down the line, some great new service is being launched.

But now that spark is missing, so what do we do? And that’s the area that I find I’m thinking about and others and at least where we come from, because the whole stakeholder engagement is embedded in our DNA. It’s how we operate. My analogy is that informal engagements in the new normal need to be slightly more formalised. whereas in the past it would have been almost semi-chance encounters, semi-chance, because actually it’s some events, some conference, or even, “Oh, I haven’t seen that card for however long, let’s have coffee together.” And then something happens.

Those things now need to be more structured and therefore have more formal engagement model. I think is something that pretty much all of us in industry need to be thinking about. How do we actually make sure that we understand our client’s pin points. Historically it would have been, “Oh, let’s go for dinner.” We’re not doing that now. So how are you hearing what your client’s pin points on the foreword are because that’s what’s going to give you the ideas for your new services or the refinements to the existing services. How we deal with that formal engagement or more formal engagement, and that of course ties in with the way we do things anyway, in terms of stakeholder management. But it’s an area that I think all market participants should be aware of a more formal method for engaging clients, Service providers and regulators. Unfortunately, that seems to be the new normal going forward.

Julia: Well, it’s important to keep it front of mind, isn’t it? Because I think we’re going to be in this state of play for some time to come. However, it changes around the edges. I think the core of working models is going to be, not necessarily returning to the way it was before. I think it’s very salient that you share your thoughts on that. So thank you so much. I’d say, it’s been a fantastic conversation. If you think about it, we’ve talked here about everything from huge market infrastructure challenges around the consolidated tape, thinking about the growth of a potential asset class in cryptocurrencies. Also thinking about clients, James, you said it best, what keeps them awake at night. And then thinking about working models and how you get closer to the clients, right from the highest levels of governance and authority down into some of the technical requirements around data and standardisation. I’ve loved it.

James Haskell, thank you so much for joining us today. It’s been great to have you on the show.

James: It’s been a pleasure. Thanks, Julia.

Julia: Sassan Danesh, Managing Partner of Etrading Software. Thank you very much for joining us.

Sassan: Thank you for having me.

Julia: And to all our listeners. If you want to find out more about Etrading Software, go to etradingsoftware.com. You can find them there and as I said earlier, it feels like there’s a bit of a call to action. So do get in touch. I’m Julia Streets, I’m the host of StreetsTalksTo, and today I’ve been talking to Etrading Software. Thank you for listening.

Kieron: This episode of StreetsTalksTo was produced by me, Kieron Yates, on behalf of Streets Consulting Limited. Streets Consulting is a business development, marketing, communications consultancy that’s focused on helping Fintechs from the smallest startup companies to some of the world’s largest global organisations. Everybody’s trying to innovate and everybody’s trying to grow. You can find this episode on Streetsconsulting.com and using the hashtag #StreetsTalksTo. We can be found on LinkedIn and on Twitter at @StreetsConsult. Thanks for listening.