CVA Podcast: Stuart Petersen, Algotrader

Transcript

[Music] hello hello this is your host sharaz ahmed ready to kick off another bite-sized episode of the crypto valley association podcast let's discover together the growing trends of this fast-moving space and try to shed some light on the mysteries it contains today we are joined by stuart peterson chief revenue officer at algotrader an algorithmic trading platform that enables trading firms to rapidly develop stimulate deploy and automate any quantitative trading strategy for any market so let's dive straight into the hidden world of algorithmic trading stuart thank you for joining us how is everything

it's great thank you very much raz for inviting me today today luckily in the united kingdom it is a very sunny day today and we've got over all the winds and the storms of last weekend and therefore my internet connection is working perfectly and i'm really pleased to be able to talk with you and the team today great well thanks thanks for joining us and uh how about we start uh this off then by talking a little bit about yourself and how you first got into the blockchain technology space yeah thank you very much it's uh it's a securities and long winding road in my my career in uh in financial services started off in the at the end of the 1980s and uh you know my first seven years was in uh farmer

management as i ended up being a fund manager for three years uh didn't like the uh the lifestyle uh at that particular point in time and uh long story short ended up working in uh financial technology before it even became fintech many years before that and spent pretty much 25 years building and growing quantitative finance and risk management technology companies in canada and the us mainly focusing on big banks tier one tier two banks uh big asset managers life insurers you know and so my career has been really around the front and the middle office and i was always fascinated about technology that could actually help

our funds you know execute better make better investment decisions and that's always achieved best price execution particularly now we've had method two coming into play personally i'd have been investing in looking in crypto for a number of years and i invested in a you know a mining crypto mining business about four and a half five years ago also so that really kind of piqued my interest in the crypto market so you know when the opportunity came to work alongside the fantastic team at algotrader both on the traditional asset and on the crypto side or digital asset side also it was literally a no-brainer for me well wonderful and yes congratulations on being nominated at the top 100 startup awards so just

recently and being among the top two fintech scale-ups in switzerland so it's great too great to hear so maybe you can give us some some insights into into what algotrader is doing and your platform yeah no great that's that's that's a that's a great point and thank you very much for the uh congratulations it's always well received together you know a recognition in in the industry from our perspective you know we started off by actually solving a real world business problem and i've always believed that you know the best technology solutions have always been actually solving a business problem that that you have today which you know which you live with every single day and then if we roll back about 10 years my colleague and andy fleury who's the co-founder and ceo

of albert trader was a partner his own hedge fund in zurich and they were trading vic's futures complex options but they were a a quantitative fund and and to that extent putting together all of that technology you needed to build quantitative trading strategies to be able to test them what we call back test them to then simulate them in live market so not actually executing but actually simulating what how they would perform with live market data and then from there then actually trading programmatically and then executing those trades he didn't have he couldn't find that one single piece of technology that would actually solve his end-to-end business problem so he ended up building a version of algo trader

and realized that he had a piece of technology that nobody else had at that point in time and that led him to actually move from being a hedge fund manager into starting up a financial services or fintech company solving the real world business problems for both quantitative trading and also for algorithmic trading okay okay great and so when you talk about quantitative algorithmic trading what do you really mean i feel like there's a there's a lot of complexity in that a lot of misconceptions so so what is it more concretely thank you that's that's that's a great point and there's a lot of misnomers in in the industry if you google quantitative trading you google algorithmic trading you kind you get different responses and some of them also overlapping as well so it can be confusing about what what the

two are and i think that the simplest way to look at it is quantitative trading is effectively what we call programmatic trading okay it means systematic trading where you are taking signals or events and a program will automatically generate an order to buy or to sell for example and then once you've generated that order you then need the ability to automatically execute that order as well so within quantitative trading you also have algorithmic tracking algorithmic trading is more around what we call discretionary funds right where you know an order is brought in by you know somebody wants to buy or to

sell but you want to then achieve best price execution and to able to achieve that you use what we call an execution algorithm to actually push that order out into the market to achieve that best price generally speaking an execution algorithm will break up an order into multiple sub-orders or lot level or child orders and then work those orders over a period of time or volume based upon the actual algorithm that you have deployed you can also then implement something called smart order routing which allows you to actually push an order across multiple counter parties or liquidity venues or exchanges as well so in in essence quantitative training is effectively the

programmatic order generation and programmatic order execution algorithmic trading is effectively the programmatic order execution okay well thank you so much for that concise definition there and so if we move on to the algo trader platform and what you're doing uh within that and your clients are able to trade cryptocurrencies how is that side of the business been doing how long has it be been about from absolutely that's that's another really good question so thanks for that leading question so albert trader is a and seven to eight year old fintech as i said andy van alder trader out of his uh his previous hedge fund but about five years ago we were approached

by you know the early crypto funds because we are zurich base we are crypto valley you know we were approached by them to solve the you know the complex and range of issues around both quantitative trading so the quant side of it but also to simply be able to provide reliable connectivity to different exchanges on liquidity venues as well so in respect of the crypto we're actually an old fintech right today i've been you know five years old into their business but we've all obviously learned a lot about the nuances and the differences between traditional asset quantitative and algorithmic trading versus crypto quantitative and algorithmic trading as well so today as an organization we provide solutions for both quantitative funds as i said also known as systematic

programmatic or event driven trading but also as well as discretionary funds funds as well so for who require our technology for all the management execution and connectivity to uh to venues as well and this is obviously both for traditional assets but what we're talking about today here is for you know it's for the crypto and digital assets in addition to that probably about year to year and a half ago we were starting to be approached by a number of banks and to help them meet their client growing needs for for crypto trading we don't get involved in custody or storage you know we are a trading order management platform as well in addition to quant side of it to help them effectively achieve best price execution

and uh signal bank as you probably know in zurich which won the world's digital asset from crypto banks they actually implemented our technology to help them efficiently execute and achieve best price execution for that for their clients also with the range of counterparties or liquidity venues or exchanges they wanted they were connecting with and that actually led us as an organization to realize that not only were we becoming very confident about the growth of algo trader in the digital asset and crypto space for buy side x except around crypto funds but also to actually solve those pain points for from on the banking side and therefore that led us to actually um launch our new brand about four or

five months ago called wire swarm and wise form is effectively a solution to help banks efficiently connect with the ultimate source of liquidity to achieve that best uh execution for their trading activities for their clients okay oh great well congratulations on that and that sounds i'm very very interesting as well and and maybe um connecting this to you to another podcast so that we had where we had uh maxine come on from sentiment and they do a lot of uh sentiment trading and we know that within the crypto space a lot is based around sentiment what are your thoughts about the differences between the crypto uh space the digital asset space and maybe

some of the other more traditional spaces whereby we've seen a lot of the cryptocurrency spaces being heavily impacted by emotion and fomo the fear of missing out and and other uh variables thank you i think that where the industry is going both in traditional assets but particularly around digital assets and cryptos is that traditional trading was based upon a sentiment that somebody had to to buy out to sell right within quantitative trading you are using events or signals whether that's a price the price going down or a technical indicator to if it goes below a certain level where do i buy or do i sell and therefore there's a there's a there's a an order that's actually

generated from there but what we've actually been seeing over the last couple of years is the rise of ai or what i would generally call natural language processing right or a natural language understanding to take unstructured data or alternative data to be used as an input into decision making as well so sentiment analysis is obviously one of those big areas that's a lot of the funds today are deploying in order to help them gain that competitive edge as opposed to using traditional signal movements like price or technical indicators but it is a real growing industry okay okay great and and so following

through on on that growth uh perspective where do you see algo trader growing uh within the cryptocurrency blockchain space so i see us growing very well both on the on the buy side and on the sell side and that's the reason i said that we created the wire swarm brand uh for four algo trader so we just took the buy aside for a second what we've actually noticed over the last year year and a half there you know based upon the the price and changing the volatility of different uh crypto currencies and also tokenization of assets we're now seeing a lot of funds that are coming to market now there was a lull probably about a year ago but i'd say in the last six to seven months

and i'm not sure whether it's completely correlated with covid but we have definitely seen there's been a huge rise in the number of start-up and scale up crypto funds who are coming to markets not just in in europe but also importantly in the asia pac region and also in the us the us has traditionally been the biggest market for though the hedge fund industry or the alternative asset industry and we're we are seeing you know that growth also in in the americas with regards to with regards to the crypto funds so that's one part of our business the other part of our business in the crypto business is wire swarm and as i said that solves those those

needs that the banks have and we're definitely seeing a growth in certain jurisdictions globally where there have been friendly friendly regulatory environments for for crypto and digital asset trading so for example switzerland germany where new york in january you had the bathroom regulation around the ability for banks to become crypto custodians singapore hong kong and obviously the now you know the occ declaration a couple of months ago back in in the us we're now seeing that the there's a lot of banks in the u.s who are coming to market and saying we want to meet our clients needs for you know buying and holding and storing

cryptos and digital assets you as in with your technology is one component of them so we're definitely seeing a rise both on on the buy side and also on the sell side all right well yeah very very exciting stuff there and and so this is one that i always like to to ask our our guests is if they see the potential for incorporating blockchain technology within uh their current company so we know that you're you're trading uh with a blockchain based companies and cryptocurrencies but do you are you looking to maybe in the future incorporate blockchain technology within algotrader we haven't made that conscious decision yet i mean our technology is is really to help you know on the

quantitative side to help funds define their their quantitative trading strategies to test them and to execute them as well and then on obviously on the discretionary side and on the execution side we are helping you know financial services institutions to be able to efficiently execute those trades to achieve best best execution we haven't actually seen a real need within our core technology stack today to implement a you know dlc-based architecture i'm not saying that that will not happen as we're seeing with the with the exchanges you know both in the in the crypto and digital asset space and i believe will happen over time in the traditional

asset space as well you're seeing a move to a dlt stroke blockchain type of technology environment which i believe is going to be critical for the future of the financial services industry but also very beneficial for the growth of the elbow trader company okay well well thank you and now if we move on a little bit to your position within algae traders as chief revenue officer maybe you can tell us a little bit about how this whole chronovirus situation has impacted your business and if you've had to change your approach uh at all well me personally i haven't been able to leave the uk and get to switzerland every week so there's been a bit of a change for me but in terms of our business it's it's very much been business as

usual and actually we've actually seen a huge growth in in our business where we were initially concerned that we were launching a wire swarm for the sell side to the institutional sell side community around about the time that covert actually hit and everything became locked down we were concerned that maybe we wouldn't get the market brand awareness and also the the connectivity with the banks who are looking at innovation deployment programs banks generally buy in cycles they generally have worked with their suppliers and you'd have to go in and meet and have demos and banks really traditionally didn't work in a virtual environment but what we've

actually seen is that because the way the industry is changing it's so fast paced and fast moving and ultimately any financial services institutions whereas will always meet what the needs of customers are we've seen banks go to market to look for our technology and they are working you know in a distributed a way where they are working from home they're having to find solutions so you know they've adopted zoom and teams and other technology so we are definitely seeing the buying process continue within within the sell side which is great for us if we then look at the buy side as i as i mentioned a few minutes ago we've seen a huge growth in the number of crypto funds come to market as i said

and it's not just been in the us or in apac or europe it's been distributed globally where we've seen these funds come to market so the benefit i see for us is that irrespective of you know covered and how long this will last for business is carrying on as usual and i am seeing businesses looking at the current market and looking at the the disruption that's happened with covid and seeing new business models new business ideas and actually taking probably the plunge to actually set up their own crypto funds so a lot of these guys are coming out to the traditional asset market whether they've been in multi-asset class or whether they've been in fx they are moving that subject

matter into the crypto and digital asset space to position themselves for the future growth in the dlt market okay well it's great to hear your positivity on that front right with all the kind of doom and gloom that we're hearing uh with the whole coronaries situation it's it's great to hear that positivity and great to hear that uh algo schrader has been doing well and growing from it as well and so as as we approach the the end of the the episode here maybe should you'd like to give our audience your future vision of the blockchain space as a whole yeah absolutely and i and you know the question a few minutes ago about where do we see our technology and it would it become blockchain or dlt enabled

as i said i don't see our core technology stack being dlt enabled in an in the next short while however what i what i have a vision of is that krypton is really effectively phase zero in the way that dlt and blockchain will disintermediate and disrupt the financial services industry where i see this is is really growing into what i call phase one is really the digitization of traditional assets where you then can have fractional assets where all of the traditional exchanges will have to move over to a dlt based blockchain based environment that is going to help trading immensely

simply because you will remove a lot of the credit risk the counterparty risks being involved in traditional asset trading you know today in equities you know even you can buy and sell within 10 minutes you still have t plus two in terms of settlements as well and that's really based on 40 or 50 year old working practices and architecture so what dlt will do is to disintermediate that and really allow trading and and investment decisions to happen and to be made instantly and immutably as well so what we are doing is our vision is not just building the connectivity to the crypto exchanges and liquidity providers but also building out in

the mason connectivity to the digital asset exchanges that are starting to come to market okay very interesting maybe just uh rebounding off of that how do you see the traditional players acting or even reacting to that disintermediation as they will be left potentially without without a job yes we have i think what was i think what we've seen with you know the market in in switzerland with you know sdx or the six digital exchange looking to bring its digital asset exchange to market and what you're seeing with burst stuttgarts and and other exchanges around the world who are looking at innovation projects to say how do we take advantage of this dlt based network infrastructure

technology how's it going to benefit us how's it going to benefit our clients how is it going to benefit the future of financial services so for me what we're seeing is that there will be these early adopters and the early adopters are you know the forward thinkers the disruptors the the chance takers the people who have been involved with the crypto space who are then moving to go from often crypto exchanges to digital assets and tokenization exchanges but then i believe you will see the rush of everybody else in the traditional asset space coming to market right it's just a it's a technology adoption change that will change the way that trading investment management and all of those other ancillary business units will be

done okay well thank you so much stuart for those fascinating insights and is there anything else you might like to share with our audience before we have to close off today i think the only thing from from outside is is that what what we have seen as as an organization both across the buyer side and the sell side is this a bit is this requirement for a lot of institutions to to achieve that best execution as well i mean even though cryptos today are you know are not under like method two we're not sure we're hoping that that will become part of a regulatory regime at some point in the future i mean some people never want that to be but if you look at the evolution of finance it probably

will be regulated in some way shape or form and i think what what we are finding is is that a lot of institutions want to have the transparency of understanding that they always got best price execution for their clients right they don't want it to be in a trend in a non-transparent way they want to make sure that you know they they traded with x but if they traded with y or zed that they would not have got the best price at that particular point in time so what we are seeing is is that that people institutions want to be able to deal with the ultimate source of liquidity but also have the flexibility to achieve that best price but to be ultimately in control and we're seeing

that really strongly on the buy side but also on the sell side awesome well thanks thanks so much and and there you have it folks a little bit of demystification of quantitative and algorithmic trading and if you enjoyed this conversation well feel free to check out more on our website cryptovalley.swiss where we host plenty of events educational content and even provide information on how you can join our growing community so thanks again stuart for joining us today it's my pleasure schrezen thank you so much for inviting me an alco trader thank you and uh stay tuned stay safe and until next time from the crypto valley in switzerland [Music]

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