Adam Sussman is head of market structure and liquidity partnerships at Liquidnet.
What do you see as the next major industry watershed?
A lot of entrepreneurs and innovators in our industry are so enamored with their idea or product that they completely fail to take the user into account. People tend to adopt the mantra “People don’t know what they want,” but the reality is no one ever asked.
Innovations within our industry often fail because it requires the user to change their workflow to accommodate this “new, new” thing. Fintech startups have realized this and are in the process of lowering their products’ “switching costs.”
In 2019, this new attitude will help drive adoption rates of new technologies, analytics, and data sets not seen since the advent of electronic trading. Although our industry will always change gradually, 2019 will mark the beginning of a new phase.
Will innovation drive alpha in 2019?
The buy-side shift in spending from traditional brokerage research to DIY data-driven insights will increase dramatically in 2019. The asset management industry is focused on using new techniques and data sets to improve fund performance and increase operational efficiency. Even Jack Bogle, who publicly bemoaned, “Too much money is in too few hands,” is probably rooting for the active manager right now.
The ability to use emerging and existing data to craft proprietary insights is the best chance for institutional capital markets to stage a rebound. Hot topics such as machine learning and alternative data will play a part in this overhaul, but so will simpler tasks such as automating manual data collection processes.
Will the new year finally be “The Year of Institutional Crypto?”
“The Year of Institutional Crypto” always felt like a somewhat ironic term. Part of crypto’s value proposition, whether you buy into it or not, is to remove intermediaries from the system.
So other than hedge funds making short-term bets on price swings and market makers offering liquidity solutions, I don’t see much long-term use cases for Institutional Crypto. There needs to be a broader adoption in the use of cryptos to fund real parts of the economy for it to make sense for institutions to get involved. Until that happens, I believe it will remain a retail-dominated casino-like atmosphere.