Outlook 2018: Kyle Tuskey, Deep Systems
Kyle Tuskey is the COO at financial services operations and technology platform provider Deep Systems.
What do you see as the next watershed moment for the industry?
The combination of low volatility, increased regulation, and increased fees will have broad implications across the entire financial industry. We expect these forces to increase demand for new innovative models born out of the fervor surrounding cryptocurrencies, the blockchain, and ICOs. Raising capital, securitization, custody, and clearing are all subject to potential seismic change. We also expect increasing technical sophistication in investment advisory and wealth management including artificial intelligence. This will greatly increase pressure on the status quo. Most importantly, regulators are increasingly showing a willingness to find a path forward with these new innovations.
The new year will be known as ‘The Year of… ?’”
I believe this will be “The Year of the Moonshot”. For the last few years, significant innovation has been happening outside of traditional finance, at small fintech companies, and in groups within larger institutions. While it’s unclear which big innovations will be successful, we expect these new models and projects to increasingly show up in 2018.
What do you view as the most important lesson of 2017?
Regulation is a double-edged sword. The costs of supporting the ever-increasing regulatory requirements have forced small players out and medium-to-large players to consolidate. The trading and market-making communities have been particularly affected by this which could have implications later if and when volatility returns to the markets.
Which 2017 hot topics/hype should be retired?
Low latency. Our team has spent years designing ultra-low latency systems, but increasingly sees it as a requirement and not a major source of innovation. For a small number of constituents, every nanosecond will still matter, but as a broader topic, the attention should be reduced.
Which market structure changes should take place in 2018?
Regulation NMS should be re-evaluated. While the initial intent was noble, it was passed in 2005. Nearly 13 years later, the markets have proliferated and changed significantly, but the regulation has not. It prevents true competition by mandating that everyone trading must interact with every venue and conflates the value of small liquidity pools.
Which market structure changes do you expect to take place in 2018?
We expect incremental increases in regulation in traditional asset classes. Regulators will be required to focus increasingly on the ascent of new asset classes and technologies like cryptocurrencies and ICOs due to their rapid ascent. We also expect that cybersecurity will become an increasing focus for regulators due to the systemic risk it presents.
Industry utility eyes reducing operational risk via expedited trade settlement.
A joint study with the Bank of Canada found little adverse effects.
The SEC should beware what it wishes.
Technological change permeates all trading in the coming year.
Market structure reform to take center stage.