FIA Expo - Retail, 'DeFi' panels explore derivatives off the beaten path

Experts look beyond traditional trading to the future of futures

16 November 2020


FIA Expo gives the industry the opportunity to check in with the major players that form the core of the derivatives industry, the likes of CME Group, Nasdaq, Eurex, ICE and Cboe, but it also provides a peek into some parts of the business that usually avoid regular scrutiny. At times, these sessions cover underappreciated areas and at others they provide a glimpse of what might lie ahead.

At FIA Expo 2020, the panels "How Small Can You Go" that delved into retail trading trends and "DeFi Demystified" that explored the idea of decentralized finance, did just that.

A look at retail trading

"How Small Can You Go" examined the world of retail futures trading through the eyes of Kevin Darby from CQG, TD Ameritrade’s JJ Kinahan, Linnette Lim of Phillip Capital, and Tom Sosnoff from tastytrade. Moderated by John Lothian of the JLN Newsletter, the panel challenged the assumption that retail trading is not a significant factor in futures markets and revealed interesting developments that speak to continued growth in retail trading. 

As is so often the case when he speaks, Tom Sosnoff was a passionate and outspoken advocate for his point of view. He said he sees the growth of retail interest in futures as a natural evolution as traders become educated, and said he sees smaller contacts as a natural idea that has been overlooked for too long.

Darby comes from the software trading side of the industry and said he sees natural opportunities for retail trading to grow as effective tools are put in the hands of these investors.

For her part, Lim said the capital efficiency is attractive to retail traders as they learn to move beyond equities and options. In addition, they can be cheaper and more efficient trading vehicles, she said.

Finally, Kinahan said education as a key to success and looks well positioned to grow business as TD is integrated into Charles Schwab, bringing a trading mentality to the firm now that the merger closed last month.

DeFi demystified

A glimpse of a world far removed from listed derivatives emerged from the "DeFi Demystified" panel. Short for decentralized finance, DeFi emerged as one of the hottest areas in cryptocurrencies and capital markets this year, and the panel explored how these assets and technologies might intersect with the world of listed derivatives.

Matt Leising of Bloomberg, who’s bestseller “Out of the Ether” chronicles the creation of ethereum and the $55 million dollar DAO heist, ably navigated the conversation with Soona Amhaz from Volt Capital, Rumi Morales of Outlier Ventures, Kraken’s Thomas Perfumo and CFTC Commissioner Brian Quintenz. 

Asked if everyone at FIA would be out of business in five years because of DeFi, Morales countered that it is simply what’s next for the digitization of money and assets, just as electronic trading was an evolution from trading floors.

Amhaz described the Chicago DeFi Alliance, which is bridging the DeFi divide by bringing firms like Cumberland/DRW, Jump Trading, CMT Digital and TD Ameritrade with emerging DeFi firms, and talked about the attractive features of stable coins.

Perfumo occupied a middle ground as an exchange, similar to recognized names like CME or ICE but ultimately more akin to the pure peer-to-peer DeFi companies.

Finally, Quintenz offered informed and measured responses highlighted the very best kind of regulation that is aware, informed, and not set a knee-jerk reaction or simply a quick "no!" He echoed many on the panel when he said that a CBDC (central bank digital currency) for the U.S. dollar and other fiat currencies is not a question of if, it’s a question of “when.

Chuck Mackie is a Principal at Fathom Communication. A veteran of the derivatives industry, he provides thought leadership content, marketing strategy and business development guidance for the financial services and technology industries.

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