Hiten Patel: Good morning everybody. Thank you for joining us this morning. I realize you guys have had pretty packed schedules, probably pretty tired of seeing lots of people at various drinks events, so do appreciate you squeezing us in and joining us today. We thought we'd do things a little bit differently today and try and leverage some of the experience we've benefited from running the Innovators Exchange Podcast over the last six months. So we thought we'd try and keep it informal, try and keep it fun. I think some of the things that we took away was when we do normal recordings of the show, the individual stories really matter. Often we all come here and you've got a title on your badge. It says you're from a company, it says you have a role and everyone understands that's just who you are, right? You're just Christian from Duco. You're just that guy.
And I think what we wanted to do here was hear a little bit more about the individual and the person. And the podcast has been a great way for people to tell some of their stories, who are willing to share. I think the other thing we took away was, as consultants we're guilty of always waxing lyrical about the future and trying to paint pictures about the future and what it will look like and how it'll play out. And one of the things we've really enjoyed is going over the past, the relative recent past, what really happened when all those changes played out by the people who were there, by the people who did them? And is there something for us to learn from that? So hopefully this morning we're going to tap into a little bit of that. We've very kindly got three guests who've agreed to come up and have a bit of a chat, different continents, different areas, different angles, and we thought that'd be useful way to think about, well, what's happened in innovation over the last decade across those various angles and areas, and where might it go next?
Hiten: So thank you for humoring us. Thank you for going through what might be a logistical faff as we try and record this and release it at a later date. But in any case, hopefully it's a useful conversation. There’ll be chance for Q and A at the end. So without further ado, I'd like to introduce my first guest, Lee Hodgkinson. For those of you who don't know Lee already. Lee, do you want to do a quick brief intro on yourself?
Lee Hodgkinson: Wow, where do I start? So I've been around. I was saying you depressed me because I've been around, I think July the third this year is my 35th year in the industry, which, so thanks very much for reminding me.
Hiten: Looking good for it still!
Lee: Yeah, so wow. We'll see. But so yeah, I did 10 years at the London Stock Exchange back in the nineties, pretty much 10 years at the Swiss Exchange and then into the world of NYSE Euronext, and then that became ICE, and then we spun out Euronext, and then I ran OSTC, a big prop firm for four years, and now I'm in Saudi for the last couple of years and thoroughly enjoying it.
Hiten: Excellent, excellent. Well, I wanted to start by, when you think about that journey, what were some of the key pivot points or the key inflection points that played out and what was some of, if you look back now and someone was to project onto it, oh, that was an innovation. That was an innovation back then. What was some of those key ones you'd call out from the seats that you've been in?
Lee: It was interesting because your question's got me thinking, right. So my first job in 1989 at London Stock Exchange was to carry the meeting minutes of pre-war and interwar board meetings upstairs for a historian who was working for Nicholas Goodison who was writing a book on the history of the stock exchange. And he showed me, he never really spoke to me except on one occasion, and he showed me the board agenda for the stock exchange in that year. And he showed me, I think it was 1922 maybe, and the language was different, but the topics are the same. How do we speed up settlement? How do we deal with best execution, things like that. 35 years on, we're still talking about the same. At my table, we've just been talking about best execution and fees. So in some respects, nothing has changed. And in other respects everything has changed. And so in the spirit of innovation, I asked chat GPT, what has happened from an innovation perspective in capital markets in my career, and it's told me nine things had happened, electronic training platforms, derivative explosion, securitization and financial engineering, algos and HFT, ETFs, hedge funds and alternatives, regulation, FinTech, blockchain, and crypto. It missed dematerialization. But I was saying to Paul that's because it was so long ago, the data doesn't go back that far has its limits. The origins of Crest and Euroclear and Clearstream and all that stuff. But the big thing for me personally, given my time in European cash equities was Chi-X and Chi-X changed everything. And if there's one guy I think that we should all really be looking at as a true innovator is, Peter Randall, because Chi-X came and changed everything. Everything about it was innovative - technology, pricing, jumble programs, equity, investment from the banks, just the whole mindset. And it completely turned the world of exchanges in Europe on its head.
Hiten: Yeah, yeah. Let me pick up on that last point there. You said in Europe, I guess you're one of the few, well I guess one of the people now who's out in the Middle East spending time out there, how does innovation look when you are sat in different regions?
Lee: So I think it's a really good question. In Saudi, there is unparalleled vision, strategic intent and capital to make things happen. The challenge for us at the moment is to bring into the country the competency, capability and capacity to deliver. So there are no limits in many respects. If you look at healthcare, if you look at tourism, it's a very, very digital nation that the levels of innovation and the acceptance of technology is far, far advanced than the West. But the challenge is we don't yet have a FinTech ecosystem. How do we get that? How do we build that? So when we are thinking about transactions and investments as the exchange group and we're talking to PIF who are our 60% shareholder, it's all about how do we get businesses that bring the capability to the kingdom or the region generally to help us really start to innovate. So that I think is the challenge.
Hiten: And looking forward, given everything you've seen over the years, I guess over those years you'll have probably, when I go through that list that you just listed, how many of those are you actually able to see able to control and influence? When you look at everything coming up now, AI, large language models, blockchain, there's a perpetual list that sticks around. Leveraging your own experience, what do you think is going to play out and what do you think in your seat and role you can do to influence either making sure you accelerate, make sure you adopt, make sure you don't get disrupt as an individual?
Lee: Yeah, I mean one of the challenges I think is is that lots and lots of entities push technology solutions because of the technology. And it's never the technology that matters, it's what you do with it. So I get a lot of banks turning up and saying, here's a blockchain solution that can give you atomic settlement. If I went to our broker community and said, we're going to solve a problem that you don't have and it's going to cost a hundred million dollars and no one needs that problem solved in a cash equity market. So the real question is what technologies are going to help us solve the big issues? And for me, that will be AI. And I think the AI revolution, whether that's robo-advisory or predictive algos, this is going to be the next stage. And the ability to deal with massive, massive data sets and turn that into actionable outcomes is really going to be important. The question is how do you control that, to your point. How do you regulate it? Because inevitably it will be regulated and how do you do that in a way that doesn't completely stifle and choke off innovation?
Hiten: Yeah. Yeah. It's something that a lot of people are wrestling with right now, right? I'm trying to figure that out.
Lee: Mean the European Union today have announced their AI regulation and some things will be banned. I doubt that a sort of cyber AI bot that's intent on killing the human race is going to worry about a bit of Brussels legislation. But I mean, why not?
Hiten: Indeed. One last one, just to wrap up one the show we always get people to share what are their personal learnings or lessons they've taken away just for the wider audience, I guess from your own journeys, there's something that you you'd draw on and be willing to share.
Lee: Yeah. So 70% of the Saudi population is under 35. What I tell all of the young people there is failure is inevitable. And don't get too excited about your successes. Don't get too depressed about your losses and your failures. You just got to roll with punches and stay in the game and value your self worth more than your net worth. There's always someone that's got a bigger boat or a faster Ferrari.
Hiten: Love it. No fiat punto out there there yet.
Lee: I must sold my sports car and got after some hefty speeding fines. I got an electric car.
Hiten: Excellent. Thank you very much for joining us. Thank you very much. Thank you. We're running a little bit of a Jonathan Ross style approach, so Lee's going to shuffle on down whilst I ask Isabelle to join us though.
Isabelle Girolami: Thank you. Hi, I'm glad I got the memo to wear trousers. This helps.
Hiten: Thank you for joining us. Isabel, do you want to just start a brief introduction for those who dunno, you in the room?
Isabelle: So I'm the CEO of LCH limited. I'm going to quote maybe something, I mean the highlight for me of the last two days has been somebody who is running a big exchange who asked me, he said, what's your deal? Where are you coming from? And I said, well, you want to know what I've done before LCH? He said, no, no, no, no, I want to know where you were born. And I said, but why? He said, because that's going to tell me who you are. The rest is just what you've done. That's it. So I thought that was interesting. So I was born in Corsica. And I've worked for the sell side for most of my career until I joined the London Stock Exchange Group four and a half years ago.
Hiten: Excellent, excellent. And what changed? When you flick over to the sell side, you join a big infrastructure, any big changes in how it feels, what you do?
Isabelle: It's massively different. I mean, it's like walking to the other side of the mirror in a way because FMIs, when you work for a bank, but you don't really realize what an FMI is when you work for an FMI. So we are extremely regulated. My head regulator is just here, and we are very key to the functioning of the financial markets. So we have a sense of purpose and a sense of being resilient and being good at what we're doing, which the banks have also, I'm not saying they don't, but to some extent the banks tend to do the same thing all of them. So they compete along the same way. We have very distinct niches where we are very, very large and we don't really have a huge amount of competition in the niches that we operate in, which makes us carry more responsibility, I would say, and definitely more pressure.
Hiten: So that's an interesting angle to jump in on then, because I guess I'd invite you to opine then on what does it mean to innovate when you have such a core structural role to play in the market?
Isabelle: So we don't innovate for the sake of innovating. That's the first thing I would say. For me, innovation is interesting for the outcomes and what I can get from it, not really to have a tagline about the fact that we innovate. And what I'm looking for is what can make us more resilient, what can make us stronger, more efficient, deliver more value for our members and the financial community? And I'll give you a couple of examples. So we use AI, we use AI in cyber protection. We are starting to use AI to provide better access. We have a very complicated rule book as a CCP and to provide better access and faster access for our member community to look for things within the rule book. We use AI, being on the public cloud for us is innovative. It might not be innovative for a lot of market participants, but for us it is because it means working with a third party for a big part of what we do, which is the whole management of the infrastructure of the business. So it's quite significant for us and it's a journey we've been on for the last two years, and it's going to take a few more years before we complete what we want to achieve there.
Hiten: Yeah, I think what you said at the start of that is so powerful, right? Don't innovate for the sake of innovating, and I suspect there are many people in the ecosystem, who ought to probably adopt a similar philosophy
Isabelle: For sure. I mean, we definitely can't afford to be leading from an innovation perspective. I don't think we should. Again, it should be driven by what we want to get out of it and by the outcomes and definitely not by being a trailblazer on the innovation side.
Hiten: Yeah, it links back to what Lee said, right? When you look at those board records from 1929 or wherever, the core function and the purpose remains beautifully consistent, right? Execute, settle, stability, and sometimes there can be a distraction around, oh, there's something new and shiny. Let's do it for the sake of doing it rather than, as you say, to enable the objective that you're setting out to do
Isabelle: With a scale that's different though. I mean, I would say that I'm sure there's lots of similarities to the twenties or the 1920s.
Lee: I wasn't there, not that old.
Isabelle: But we are much, much bigger. I mean, the rate of expansion is phenomenal. So we need to be in a position to again, safely process a gigantic amount of transaction, which keeps increasing every day.
Hiten: Just given relatively recently, we went through Covid and all of the various lockdowns and restrictions, what did you learn through that period running such a critical and scaled infrastructure? What was some of the things that kind of stood up and worked that people may have historically beforehand thought weren't possible in that situation?
Isabelle: So what was amazing for me was how much people got together to make it work. We had the lowest level of tech incidents ever during the whole of the Covid period. Wow. All working from home because, and people were working endless hours to really make sure that everything was ticking as it should. And so there was a sense of a community and again, a sense of responsibility of making sure that everything continued to work as it should. And it was remarkable. I mean, it was the most incident free period of operating ever, and we don't tend to have incidents, so it's very rare anyway, but there was absolutely nothing for a year. So that was really impressive.
Hiten: Enlightening. Thank you for sharing. Wrapping up with your own personal biggest learning through your career, something that you'd want to share for a bit of people to benefit from.
Isabelle: I liked what you said about the young people and the fact that they have to learn to fail. And I think that's definitely, I think very, very key. And I talk to young people a lot and very often I find them a little bit too concerned about the career path and how to go to the next level, the next level and what they should do. And there's a sort of almost huge worry that they have that they might not be able to break through. And so I think my first advice, just to continue along what you said, is to tell them not to worry so much that things will happen if they're good at what they're doing, and it's okay to do lateral moves. They shouldn't be always obsessed with doing the next level up and take it as it come and learn from people around them, but be a bit more relaxed. I think I see so much anxiety among the young people. Maybe it's more competitive and the environment is a little bit more competitive than when I was young, for example. But I don't think that having that huge fire to be promoted every year necessarily is the right goal to pursue.
Hiten: Very wisely put and something that feels very topical right now as people try and manage their talent groups. But thank you so much for being with us this morning, Isabel. Finally, I'd like Mark to come and join us. Do you want to give a quick, quick intro on what you're up to now before we go into mini history on you?
Mark Beeston: Yeah. Following in the footsteps of giants. I've got to pick up on something Lee said at the start. I didn't feel old when I turned 50. I definitely think turning 50 is better than not turning 50, but when I turned 30 years in financial markets, then I felt it. Yeah, exactly. So I’m Mark Beeston. I'm the managing partner and founder of Illuminate Financial Management. We are a purely financial services technology focused VC, currently operating out of three different funds and very much in partnership with the industry. We have nine strategic LPs, some of whom are in this room, invested in our most recent fund. And over my 30 years in financial markets, I spent 13 years at Deutsche Bank where I was a fixed income derivative trader and COO of their global rates and global credit businesses. I was very fortunate to be there in Deutsche.
Massive trading expansion, a rising tide floats all boats. So right place, right time is definitely an important lesson along the way. And I left Deutsche and went to the entrepreneurial side of the fence. I joined the EXCO of Credit X at the same time that TA Associates invested in them giving me my first exposure to the financial sponsor side of the business, and I set up their post-trade processing business, which at the time was T-Zero, now ICE link credit. Learned a few lessons there, which we'll come back to no doubt. We sold that to Jeff at ICE in 2009, and then I went to ICAP where I ran post-trade and information for four years, led their first round investment into a small company called Arcadia and did the acquisition of Trial Optima, which I was chair of for four years, set up their CVC before leaving to launch Illuminate.
Hiten: Wonderful. What a journey. So let's pick up on that life at Deutsche versus life now being at the heart of a VC fund. What does innovation look like When you were sat in the middle of a trading floor versus now you're working with I guess a bunch of solution providers who are trying to sell into that side?
Mark: Yeah, it's really funny. I've changed all my answers, so get ready for this. Again, standing on the shoulders of giants and just listening to what went before. I think the industry rhetoric around innovation for the last few years has been totally flawed. So much is kind of driven by what do we tell the board we're doing about innovation? Oh, we've got a lab, we've got a blockchain thing, we've got this. And I'm actually very pleased about what's going on in the innovation landscape today is much more about applied innovation rather than what I would call ivory tower innovation. If I go back to those times, you don't necessarily realize how important the stuff that is going to turn out to be innovation actually is when it's happening right in front of you.
Mark: I'm old enough to, I started running the cross currency swap work at Deutsche on Lotus 1, 2, 3 Wizzywig, and then we had Excel and then we had a c plus plus library DB analytics, those changes were the fundamental drivers of being able to massively expand the derivatives market. What's the single biggest innovation that I've seen? I think actually it was when I walked over to Aldgate sometime around 2000 and signed a piece of paper signing Deutsche up to be one of the first institutions into Swap Clear. I don't think any of us, we thought it was important at the time, but I don't think any of us could have looked forward 25 years and been like, oh my goodness, how important was that going to be?
Hiten: That's really interesting, isn't it? So I'd pick up on that. It sounds what you're describing is just through the immediate course of business, you're making some of these changes and decisions to fulfill the objective, and then when you're looking back and storytelling, then you'll say, oh, that was innovative. That was a change. But at the time it feels like you might not even know you're innovating. And if you're innovating for the sake of, as you say, it's a bit of a potential distraction rather than staying on course or what the business needs you to.
Mark: Yeah, I think it comes back to what you were saying, Isabel, about careers, right? I think we're all of a generation where you look behind you and a career is what you see in your wake rather than you look in front of you and you're always kind of fully positioning for it. And I think the same is true of some of these innovations and changes. I remember when I was first out raising our first fund and you go and talk to professional investors and they say, if I'm going to back you as an emerging manager, how long is this problem going to exist for? Right.
Hiten: You tell 'em Lee’s story now, right?
Mark: No, exactly. Well, this is actually really important and as a younger version of myself raising a first fund, I didn't really have a particularly good answer to that, but my answer really was, look, the mess we're in today, if we're allowed to call it a mess, is a function of the expansion of the derivatives industry since the very first PC was put under some derivative trader’s desk in the mid eighties, and here we are 35 years later and the PCs have gotten faster. And then we went to big gray boxes from Hewlett Packard and then we went to on-Prem Cloud, and now we've gone to, this is not 10 years to fix, right? This generational refresh of infrastructure in our highly regulated, mission critical, hugely compliance aware world. It is a generation, it's a 25, 30 year journey.
Hiten: But bringing it back to now, given that you must have a bunch of early stage solution providers coming pitching to you for funds, I guess, what are the themes that you see given what we just talked about, not innovating for the sake of innovating, what themes do you see that get you excited when some of these new companies are coming to see you?
Mark: Yeah. Well, so apologies for those people in the room that have heard me say this before, but having bet my career on what I saw as a need for generational change in financial markets infrastructure. Again, to Lee's point, driven by macro, the macro operating environment, post-crisis rather than technology for technology's sake, here I am 10 years later and I'm more excited about it than I ever was because what we've seen is these other massive generational change imperatives that you're all dealing with every day. So there's no new information here. The institutionalization of digital assets is coming doesn't mean everything. Tradify is going on to digital asset rails, but there's a lot of stuff going on to those rails over the next decade and it's really exciting. ESG and carbon transition like finance, institutional finance sits at the absolute heart of that. Consumer industries are expecting the financial system to be leaders and change agents in that space. The rise in importance of private markets, alternative assets, wealth, the infrastructure that supports that, and then those are sort our four macro themes that we get really excited about. And then across all of that, of course you have enterprise technology as its targeting financial services. Obviously AI is the current most buzzy one. I think it is a whole separate conversation. Adoptability is very, very different to blockchain. It doesn't require a wholesale jump of the institution onto it. We can start using it individually. So there's just a huge amount of exciting stuff going on.
Hiten: Sounds awesome. Excellent. Great seat to be in and see that all happening. Before I move to q and a, I guess Mark your biggest personal learning across that journey that you'd want to share?
Mark: Yeah. I'll pick up on the young person, but the young person I'll refer to is myself. When I went from being at Deutsche bank to being a very small vendor, bringing a whole new solution to space in the post-trade processing space, that really kind of defines everything that we do at Illuminate because I learned two really important lessons. And the first one is a horrible moment of self-realization, politely described over breakfast. I have a bar version if people want to hear it. Oh my goodness. I said to myself, oh my goodness, was it really this difficult to sell me something I desperately needed when I was that managing director at a bank? And the answer is yes. It was the answer to those of you that are small vendors in the room, it's still is. The second lesson was the thing that actually made us successful along the way was nothing to do with cutting edge tech, everything to do with having fit for purpose technology, but an industry network to take it to with warmth and credibility to give it a chance of becoming an adoptable solution. And so that really underpins our industry long-term relationship and partnership approach. And were lessons hard won or hard learnt?
Hiten: Sounds like lessons that will stand people in good test of time for the decades to come as well. Thank you for sharing. I'm going to move to q and a. I’ll take questions from the floor for what are any of them fire away.
Brad Levy: For anybody? Mark, maybe first, if you weren't doing what you were doing right now, illuminate tenure, what would you be doing? It can't be just a different fund. Fund one with a different name.
Mark: I think those of you me know I'd probably be working for my car dealership in Northamptonshire, which is actually the first business I founded that's still going some sort of 25 years, some 25 years later.
Hiten: Anyone else want to pick on that
Isabelle: I would run a restaurant. I love to cook.
Hiten: Would it be French?
Isabelle: No. Too rich. I think it would definitely be more Italian than French, I think.
Lee: Well, I would say I'd be annoying my wife because she was the biggest proponent of getting people back to the office in Covid after having me at home for a while.
Hiten: Thanks guys. Thanks Brad.
Pete: Thanks. Yeah, it's not as fun a question as Brad's, sorry, but it's a simple question about competition. Isabelle had some wise words about competition in the job market. Mark, you alluded to some of it, but just pushing a bit further. In my job, I'm always being asked by clients to forecast competitive structure over a three or five year time period. Nothing new about that. But with a much longer lens, the 30 year viewpoint, are things getting more competitive in FinTech? Where is competitive structure going to end up in a few years time? It's really difficult for people like me on the ground to sometimes see which way things are trending. But if we're here in five or 10 years time, which I hope we are, or maybe, how are things going to look different specifically I guess in the world of FMI and to the service providers, to the broker dealer and asset manager community?
Mark: Can I jump in on that? So I think when we think about the FinTech space, if you go back a decade ago, if you thought FinTech, you actually thought consumer, right? We had all these companies that we can now kind of consider in incumbent fintechs or consortia fintechs or what have you. But when people thought early stage FinTech, they were really thinking about Revolut or Monzo or payment rails for remittances. They weren't thinking next generation market infrastructure. I think what's really remarkable is over 10 years, the enterprise side of FinTech has kind of gotten larger, but here's a truly terrifying statistic in terms of how much kind of competition for time and attention there is out there before we move back to the bigger organizations. We've made 40 investments, we've seen 7,400 companies and the pace of our pipeline, if we'd had this conversation three years ago before the market reset, I'd have said we'd see 150 companies a quarter, six to 700 companies a year. We saw 900 companies in the last half of last year. So competition for time and attention funding is like nothing I've ever seen.
Lee: I would add a geographic dimension to the competitive dynamic. Our world, particularly in capital markets and financial markets generally is still largely a US centered world. But I think that's changing. And I think that if you look, a lot of the innovations and a lot of good innovators have come out of China, they've come out of India, they're coming out of the Middle East now. And I think we have to as an industry get much better and more tuned into what is coming out of what would traditionally be described as emerging markets because these things operate at scale. I mean, I think the FIA released something the other day about equity options, volumes in India. I mean, exponential isn't the word for it. And I mean look at things like TikTok. So I think we are undergoing a shift in the competitive landscape, which is enabled by the advances of technology in markets that are huge. And I think that's going to have an increasing effect on those competitive dynamics. And in Saudi, we see as many Chinese and Indian firms competing with firms like yours and others and they're superb and they've got scale. So I think there is a bigger picture dynamic coming and the world is going to look very, very different, much quicker than it has done in the past, in my opinion.
Isabelle: I have a slightly different view. I think that the barrier to entry to a lot of what we do is very high, very high. And I don't think it's getting any lower and rightly so because there's a concentration of actors in the FMI space, which means that they need to be immensely regulated and they need to be very protected or they need to protect their business and the business of their members. So I see, and maybe I'm being complacent, I don't know. So it's interesting for me to hear both your views, but I don't see somebody coming in and just taking the space of one of the major FMIs and revolutionizing everything at scale. But I see a lot of the innovation coming into the space and helping the FMIs be better, what they're doing, delivering more value, integrating some of the solutions that are being proposed. But we saw also with FTX, a couple of years ago, it was going to revolutionize the whole of the industry and at least created a lot of angst amongst some of the exchanges. We saw what happened with that. But I don't know, maybe it's a view which is a bit complacent.
Lee: I mean I don't think it's complacent. I think the point I'm making is lots of these competitive dynamics don't want to participate in Europe. So our fastest growing set of geopolitical relationships with China and with India, Brazil, we're not interested in replicating or participating in what's going on in Europe in cash equities in Europe. No one's made any money for 15 years. So I understand what you're saying in agree in the context of competing it within the European dynamic, but I think it's a bigger play that's cutting that out. And I think my big challenge in my career in Europe was always trying to convince the authorities in Brussels to think about the debate that America got, right? Do you want a European champion or a champion of Europe? It's still all about the DG market and internal. And whilst that's going on, there's a whole world out there that's just bypassing it. People who want to raise money coming to Riyad now, they're not going as much to London in my view.
Mark: I think you can look at, again, at the world of real world infrastructure where we all kind of know that there are countries that kind of were considered behind, but totally bypassed one generation or multiple generations of telecommunications infrastructure to jump straight to 5G with none of the legacy baggage. And so I think you, you're right in terms of the asteroid is not coming tomorrow, nobody's about to launch a new OTC derivative clearing platform that's highly regulated and is going to have critical mass tomorrow. But I think there are an awful lot of changes going on around the FinTech universe coming out the world of digital assets of blockchain infrastructure. I remember when I did my first FCA qualifications and I don’t know what it is today, but you had to remember when is the Hong Kong stock exchange open? I was a fixed income derivative trader. I've, I've never needed to know when the Hong Kong stock exchange was open, but I do know now why it was only open a certain amount of time and it was because as with all of these groups, it's because you need time to settle the trades, but you don't need time to settle the trades anymore if you're on the next generation of infrastructure. So I am not saying death by a thousand cuts, but there's a thousand changes coming that aren't going to end up with either. They'll either enable the incumbents or they will change the incumbents over time.
Lee: That's a great point. Amazingly, at the Saudi exchange we had to move to T three settlement. We had to slow it down from T two to be accepted into the international environment only to now be told we're going to speed up again to T two. So I think you're right. There's a lot of change
Hiten: There. Look, it's a great debate to have and I think Mark needs to shout out for dropping a Taylor Swift line in his response. You'll figure out which it is later. Any other questions for the rest of the group?
Lee: Don't ask us a Taylor Swift question. Paul,
Hiten: Can you spot the quote?
Paul: I can't actually. I'm still thinking about that. I guess my questions around innovation across the entire industry. I think Warren Buffet once famously said, the problem with banks and financial services firm is often they're too big for their management. And Isabelle made the point about big firms getting bigger. Are we nimble enough as an industry? You mentioned Mark about how it doesn't get any easier to sell into larger firms. And as these firms get larger and larger and more concentrated as an industry and we're all participants in it, it would be a worry if we weren't nimble enough as an industry to be innovative. Does that concern you at all?
Mark: I think it used to concern me and what I realized over time was actually it's okay. As long as the actual actions of the industry match the rhetoric. I think we got in a position in the innovation landscape where the rhetoric was just out of sync with the reality of operating in this market. I tell my team much to their annoyance all the time that they're not technology investors, which is obviously farcical statement. Everything we invest in is technology, but it comes back to Lee's earlier point. We are old fashioned business problem collectors and old fashioned business solution investors. It just happens that everything is technology. The technologies that we take for granted as consumers are necessarily going to be way slower to be adopted in institutional finance. They have to be, we have to be up a hundred percent of the time. We have to be compliant a hundred percent of the time. And I was meeting with one of the heads of the big cloud companies yesterday and I said, where are we on our industry cloud journey? This is not exciting new technology. Are we generously 20% of the way through that journey? And he said, I don't think we're double digits and it's okay. It's okay as long as we keep moving forwards. But not just kidding ourselves with this innovation theater, the labs, the west coast corporate tourism, et cetera, et cetera. Don't get me started.
Lee: I mean there's a lot of nonsense spoken, right? I think the problem with measuring agility is it's relative. So I think it can feel at times we're not agile as an industry, but actually when you look at that compared to times gone by, we are, and it is being enabled I think by the new technologies. So I mean BMLL is a great case in point. What you can do in the cloud with that level three data now wouldn't have been possible three years ago and the agility that brings, but I think it's such a fast paced world. We've all got so many priorities, so many demands, it can actually still feel quite stodgy. But I think generally, and again, it's been fantastic being here I think in this conference and today because you realize how much brilliance and drive and dynamism there is in our industry and that will keep propelling it forward I think.
Hiten: Super. Any other final questions for the group?
Brad: I just think we've talked around something. I'm curious. I've been here 20 years at this conference. We all go way back, Google, AWS and Microsoft were not here at all for a decade and a half. There's a mega tech play here, Sean Parks video in 2005 if you can find it on eBay and Amazon and all these things coming together. Now, the differences today I would say are these big network effects and these connections where Ripple, there just butterflies around the world. So competitively, the mega techs are in our world, I compete with them pretty head to head on a day-to-day. And while a natural monopoly like a clearinghouse where there's only one, that's a totally different competitive dynamic, but most of this conference does not exist in a high walled, highly regulated. And the mega techs themselves are a huge hyperscaler play for all of us, but they're definitely a competitive threat. If you take a 10, 20, 30 year generational view of things. Three years ago wasn't possible, five years ago it is, there's many gatekeepers. Europe is definitely on their front foot trying to control given they have very few assets in the large technology space and they're taking lawsuits and regulations basically at it. So how do you think about the large mega techs and competitively, what does that dynamic look like? Not in three years, but in 10 or 15. Are we seeding too much ground?
Mark: I think you're setting Hiten up for a really great subject for a whole other podcast. I don't think you can consider all three of the mega techs around the space the same. You definitely compete head on with at least one of them because they are a product company that just happens to have a massive cloud business. Whereas the others are actually massive cloud businesses rather than product companies. So they're not all created equally. I don't think they actually want to be in, for the most part, they don't want to be in highly regulated businesses. The wallet share here is so enormous. I think the stat is something around 280 billion of cloud enableable wallet share for the three of them to go after. It actually makes an awful lot of the businesses that we do look subscale. So I don't think they actually want to eat that lunch. There's so much going on at the foundational level, but never say never. I look forward to hearing that podcast.
Brad: 20% of my opex is cloud. Cost. Competitive.
Hiten: I think the thing that we observe is just there's a bit of this uncertainty. Everyone wants to talk about having conversations with 'em, hanging out with 'em, enabling elements, but I don't think anyone can fully understand that balance of co, I can't pronounce it co-opertition, right? There's that moment, oh, it's great that we can announce a big tech partner because it shows we're at the forefront of the element. But if you follow that logic too far forward, some questions we see some of the boardrooms be like, well, do we then have our own tech organization that can operate independently? To Lee's point, when I'm traveling the world and you speak to people outside of Europe and North America, so hang on a minute, our whole critical infrastructure is going to run on something, run by the Americans. How does that feel in a geopolitical environment? And so there is suddenly, I think the realizations aren't fully through and I don't know, Lee, given where you sit in the world now, how you respond to that.
Lee: Yeah, I mean my general feeling is as we've seen in the last 20 years, the boundaries will blur and we will have these multidimensional relationships once upon a time the exchanges would never compete with Goldman. And now I think you're partners on one hand, competitors on another service providers. And I think we'll probably shift to that dynamic. But there is a very good point you make it and about the element of control in these areas. And I think in the developing world, there are more concerns today than there were in years gone by about some of these services because years ago there were servers and you can control those so you can switch 'em off and people can be arrested by regulators. And there was sort of tangible things that the authorities could do. When that's in cyberspace, those controls are less clear. So I think there will be a control dynamic in a lot of these things as well.
But there is an area of inevitability that we are entering a new era of enabled by technology that would just perpetually blur the boundaries. I think crypto was a fascinating example when I was at OSTC I made, and in fact I bumped into some of the traders that used to work for me a little while ago, thanked me from barring them from trading in Bitcoin a few years back, that's now whatever it is, $45,000. So that was one of my better decisions. And we were worried at the time of not losing traders to other firms, we were worried about losing them to their own personal account trading because easier for them to trade in Bitcoin and make money than it was to stay and work with us to trade unregulated markets. That was a problem we didn't have five, 10 years ago. And if I look in Saudi, everybody trades Bitcoin on their phones at every dinner party you're at. So there's a whole new, I mean it's just a whole new world and a whole new environment that has broken those traditional relationships and boundaries. And I think more of that will continue.
Hiten: Great question, Brad. Anyone else? Alright, well look, thank you very much.
Hiten: Thank you all for joining us, making the time. Thank you to Mark, thank you to Lee for coming on and we'll catch you around. Thank you so much.
