The new image of Finalto from TradeTech Alpha, TradeTech 360 and CFH reflects the move towards full integration and assimilation of these enterprises. The name Finalto describes the vision of the company: higher level financial markets, and reflects the broad reach of the company in every part of the markets of the world. Ron Hoffman, Managing Director of Finalto, explains how the firm helps brokers manage risk in a dynamic market, and how innovation, regulatory change and consolidation are shaping the fintech industry.
For those new to Finalto, how would you describe the company and how do you position yourself in the capital markets arena?
Ron Hoffmann: Finalto is a purely fintech global financial services company, providing services to institutional and retail businesses. Marchés.com is a very well established brand that we own and one of the best platforms and services available to retail customers. In addition to this, we provide risk management services, level 1 liquidity services and cutting edge technology to institutional brokers.
Events such as the collapse of the hedge fund Archegos have raised questions about the risk management practices of prime brokers. How does your company manage this type of prime broker risk?
Ron Hoffmann: The current market conditions are very dynamic and require brokers and others in the FinTech industry to focus much more on risk management. We always see important events like Archegos, with significant impacts on the biggest banks. This shows that all participants are vulnerable to market changes and that no one is 100% resilient. As a non-bank market maker by definition, we are exposed to market risk and we pay close attention to it. Successful risk management requires knowledge and expertise, as well as technology to build on. We make sure we have the best people to manage this risk.
How do you see the changing needs of customers in today’s environment? What are the main challenges they face and how do you help them navigate this landscape more effectively?
Ron Hoffmann: Customers want to be able to start trading and seize opportunities in the market without unnecessary obstacles. They require more flexibility and control. The fintech industry is driven by innovation to deliver this to customers in a fast and intuitive way.
This is the reason why fintech companies have become increasingly relevant as competitors to big banks over the past year. Even with increasingly stringent regulation, FinTech companies are slowly gaining more and more market share. It is an opportunity for the big banks to be more creative and innovative. They need to be much more flexible and dynamic in their thinking to adapt to changing market conditions, customer demands and changing technology.
In his letter to shareholders for 2021, JP Jamie Dimon of Morgan Chase recognizes the rapid growth of fintech companies as a major competitive threat to banks, but calls for a more level playing field in areas such as regulation and market access. How do you think these issues will play out and to what extent will they hold back fintech ambitions?
Ron Hoffmann: Big banks have an advantage over fintechs in that they have the capacity, resources, and infrastructure – far above what you would see in fintech companies – to adhere to regulation and deal with more change. easily.
Fintech companies are starting to understand that they will gain more market share by investing in the infrastructure necessary to comply with leveraged trading regulations. And those bad apples of the industry that do not evolve will undoubtedly disappear.
I think at the end of the day the industry will go through some kind of consolidation, where the banks will acquire some of the fintechs to access this innovative way of thinking and this new technology. They will then enjoy the best of both worlds with flexibility and technology, in addition to the right regulatory infrastructure.
How to stimulate innovation in the company? How far are you embracing trends like artificial intelligence, cloud, and digital, and where do you see the biggest opportunities for the business over the next 10 years?
Ron Hoffmann: We are very technology driven and innovation is part of our DNA. We’re always looking for the next big thing we can provide for brokers that will give them value and differentiation from the rest. We have always sought to accelerate growth and innovation through complementary merger and acquisition transactions. So over the years we have often combined our strengths with companies that have already started something innovative, adding our distribution and technology to grow together. You don’t have to make it all up yourself – there are plenty of fintech companies out there making amazing products and deals.