The TRADE sits down with Joshua Barraclough, chief executive of One Trading to unpack how the retail trading sphere is shaping up across Europe, how the two worlds of traditional trading and digital assets can work together for mutual benefit, and the future outlook for the space.
What should be the priority for Europe as it seeks to increase retail trading across the region?
I think it comes down to offering better products that are in the interest of the end customer.
In many instances, the way our industry is set up makes it very difficult for customers to actually make money trading certain products. The market has a bloated old infrastructure where lots of different people have to be fed - whether it's the brokers, the exchanges, the clearing houses, the product issuers, they all need to get paid every year and typically have a vast array of people. But ultimately, when you break all of that down, where's the rub, how are participants making money and how much value is being added?
At One Trading what we want is to stop customers getting ripped off because they don't understand the whole picture. We care about their interests, giving them the confidence and making it fair. In a nutshell transparency - where there's no hiding it, you can see all the prices and where the liquidity is and who's trading and see the entire picture.
Are traditional trading practices being affected by the presence of digital assets?
It's a very interesting question and you need to look at what traditional is really focused on, which is basically tokenization. Most people like tokenization in large part because it's an easy thing for people to conceptually get their head around. But I think that the bigger innovation is going be the perpetual of everything, which allows people to easily go long or short on any asset, whether it is a digital asset, or an equity, a bond or commodity. Once you move to more perpetual markets you solve for a lot of settlement issues, capital efficiency and reduce overall complexity. People are taking note of how innovations in the digital assets space can be translated and learnt from for even more efficient processes.
We can then have more infrastructure based impacts. For example, CME recently announced that they're setting up a broker. I think that's a really interesting development, because in essence it's a cut and paste crypto model: they've clearly assessed 'if we've got the clearing element and we've got the trading element, why don't we own the broker piece as well and compete more directly with their end clients'? And that's been proven to be successful in the digital asset world already. They're repositioning themselves - to some outcry from their customers - but that's how innovation works.
How can these two worlds work together for mutual benefit?
In the traditional finance world you have customer protections through regulation and mass institutional adoption. In the digital asset world there's huge amounts of product innovation, new retail adoption and market efficiency that has been driven by lack of regulation and controls.
The line between innovation and control is where I see the two worlds colliding - and where indeed we've positioned ourselves. The mutual benefit has to come from driving innovation on the regulatory landscape and also driving innovation in technology and product offerings.
We have worked with regulators for over three years to build a completely new way of trading, settlement and risk management, that can be appealing for both retail and institutional customers but provide all of the necessary protections. In doing so we have developed cutting edge technology which is 10,000 times more scalable than anything that the traditional world has right now and built simple products where you can go long or short anything. There are going to be winners and losers across the board in terms of who is leveraging those things most effectively and actually bringing the two sides together. Unregulated venues will increasingly disappear and regulated traditional venues will innovate more on products and structures. We are in the consolidation phase.
What will be the biggest trend over the next 12 months when it comes to digital assets [digital asset exchanges]?
A big topic right now is Trump's putting Bitcoin back in the world again and so we're probably going to be seeing a lot more global treasury being allocated which is interesting. That's one trend that I expect to be dominating global news, certainly the first six months of the new President's office.
That's one piece and then of course is the world of perpetuals where everything is coming to fruition - that's the other big one.