Matteo Cassina, a former head of prime access at Goldman Sachs, is a longstanding advocate of the electronification of the markets.
From supporting the needs of the first wave of fintech players, such as online brokers and digital wealth managers around the turn of the millennium, to subsequent roles at Merrill Lynch (now Bank of America) selling execution services to broker dealers and prop traders, and his time as European president of Citadel and then UK CEO of Saxo Bank, he has had a ringside seat for the changes that have swept the trading floor over the past two decades.
As well as providing bicycles to Bobby Axelrod in Billions, he now sits on the board of Adaptive, a UK fintech that provides software to banks and other financial firms.
FN spoke to him about his experiences over a quarter-century of financial innovation, what links financial acumen and high-performance sports, and what lies in store for the future of the trading floor.
Have markets evolved in the way you would have predicted, over the course of your career?
Yes, although the journey has been long, the future that Nicola Negroponte predicted in his 1995 bestseller Being Digital has finally become a reality. I have been a privileged passenger on this journey for the past 25 years and when I reflect on that and I look at what is happening today, with people working and trading remotely, you can see how far we have come.
Mobile technology, and with it real-time access to information, has been critical to this evolution. In 2001, I worked at Goldman Sachs where you had to be a partner to have a BlackBerry. Anyone else running a business unit, a risk function or a trading book, had no way of having real-time visibility of risk or interact with the system outside of the office.
A BlackBerry became ubiquitous by 2008 when I was working at Merrill Lynch, as the biggest global financial crisis was beginning to unfold. Even then, all we had was a daily email summarising revenues and P&L for the business. Traders, risk departments and management would go home every night not knowing whether the bank would implode overnight, and whether we would be sent home with our possessions in a cardboard box the following day.
On the day of the Lehman collapse I was working for Citadel Securities, a firm whose revolutionary infrastructure and risk pricing would accelerate the electronification of the markets. What followed was a period where the speed of messages increased 100-fold and the technology’s ability to process messages rocketed from 30 messages per second to 100,000+ messages per second.
Technology became exponentially cheaper to operate, democratising access to technology. By the time I found myself at Saxo Bank in 2014, on reflection we were quite prescient in offering technology-as-a-platform to other banks and brokers and our own offices in 26 countries, enabling them to trade with no IT staff and (potentially) with no office.
Tell me about your experience with the HBO drama series Billions...
After leaving Saxo, I decided to spend some time pursuing another passion – cycling. I took full control of Passoni, a maker of premium hand-built titanium and stainless-steel racing bikes — the Ferraris of the bicycle world.
This period coincided with an increase in popularity of cycling as a pursuit among finance professionals. Both cyclists and traders share strive for continuous performance — so it is no coincidence that some of the world’s most famous investors are also passionate cyclists.
When Bobby Axelrod showed up with a Passoni on Billions, that was a pleasant surprise, but not altogether unexpected.
What are you working on now?
I remain an investor in sportswear, cycle races and e-sports companies, but I have always been a passionate advocate of market efficiency driven by electronification. I did not want to step away from the industry just when things were getting interesting, so I am now applying my experience as a non-executive director at Adaptive, one of the fastest growing British tech companies which develops trading solutions on the cloud on open API and with thin web operated platforms — perfect for working from home these days.
How do you think the pandemic will affect the future of the trading floor ?
The pandemic is without a doubt accelerating the electronification of the markets, and its impact on trading will be significant. Technology will continue to change the way we work and trade, and with banks reporting record Q2 earnings form trading revenues, the smart ones will be reinvesting some of those trading gains into innovation to build virtual trading floors.
While the innovation of the past 25 years has been all about connectivity as speed – the next phase will be about concentration and integration, and there are three developments which, in my opinion, will enable this.
First, margins will continue to shrink, and financial markets will move toward eventually being open 24/7, with real time correlation that needs monitoring via a flexible and integrated infrastructure. Many assets will be short traded and only electronically, following the same market model that evolved for equities, listed derivatives and FX.
Second, more automation will lead to a convergence of market models, with over-the-counter and listed securities settling into hybrid models.
Third, existing infrastructures will be replaced by a new model enabling any participant in the value chain to manage an integrated [front-to-back] and cross asset infrastructure, hosted on the cloud and with real time access.
This integration will be reached by gradually replacing legacy monolithic infrastructure with modules integrated via open API, and fully and easily interoperable with other modules.
Is the heyday of the voice trader over ?
Yes. The virtual trading floor is closer than many think. And although certain aspects of the overall trading infrastructure will continue to be commoditised, the real competitive edge will come from the banks’ ability to fully automate and digitise their business models, not from hanging onto voice trading.
Global threats — from natural disasters, pandemics and cyber-threats to name a few — will continue to happen and create shocks to financial markets. Crises such as the current one have exposed the high degree of correlation between asset classes and geographies, making real-time redundancy testing across multiple locations and asset classes an essential. It won’t be long until policymakers and regulators follow suit.
Trading should brace for major change in the short term, but its future will be rosy. Technology has finally caught up with the aspiration of having real-time, electronic and transparent financial markets, something we should all applaud.
The only thing standing in the way are behavioural and mindset shifts which will help banks accelerate the transformation of their businesses in a way which is more suited to the way we will be living and working in the future.
The old trading floor is dead, long live the new trading floor!
This article originally appeared on Financial News.
