Hi Konstantin, welcome to our Fintech Interview Series. What made you start Finery in 2019?
In the depths of the financial industry, where I had spent over a decade of my career, I stumbled upon a relatively new and intriguing asset class: cryptocurrency. This discovery led me into a fascinating rabbit hole of the crypto world, unveiling a disruptive force that could reshape finance over time. It still may sound intangible to many, but I recall a captivating book called “Man of the Futures” by Leo Melamed, a prominent figure in the financial world and a longtime chairman of CME. He delves into a pivotal moment in the history of the CME exchange in late 60s-early 70s. It was a time when currency derivatives were mere figments of imagination, and the idea of electronic trading seemed far-fetched. Fast forward two decades, and the landscape had dramatically transformed. FX derivatives trading had become a global phenomenon, with market leaders emerging as pioneers of electronic trading.
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To me, it became abundantly clear that digital assets potential was immense.
From global digital payments to electronic trading, even to the tokenization of assets, the possibilities seemed huge. But, what also captivated me was the distinct structure of the rapidly evolving crypto market, unlike anything I had encountered in traditional capital markets.
It was a market fueled by a demand from a unique breed of participants: retail traders, particularly the young and tech-savvy. Their passion and excitement were so strong that you could feel it, and it was clear that this would have a ripple effect and more conservative institutional players would soon do the same. Recognizing this imminent shift, my future co-founder and I embarked on a mission to create a trading infrastructure tailored exclusively for these institutional players, ensuring we were primed for the impending wave.
And so, in the year 2019, I bid farewell to my role as a head of one of Eastern Europe’s largest broker houses, forsaking the comforts of traditional finance.
Instead, I embraced the unknown, assuming the mantle of CEO for a newborn startup we named Finery Markets. It was a leap of faith, a daring venture into uncharted territory. But I knew that the greatest rewards often lay beyond the confines of the familiar.
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How is FM Liquidity Match revolutionizing the way brokers, prime-brokers, liquidity providers, and OTC desks conduct their trading business?
I suppose that, to some extent, negative market events seemed to be the catalyst for a seismic shift in sentiment. The once-trusted bundled services provided by crypto exchanges have come under scrutiny, with concerns over potential conflicts of interest, pre-funding requirements, and a lack of transparency. Following the FTX drama, the pricing of counterparty risks has become a game of its own.
Amidst this uncertainty, market participants were flocking towards over-the-counter (OTC) liquidity and service models that prioritize efficient capital utilization, lower counter-party risks, high-quality execution, tight spreads and minimal market impact.
Recognizing this shift, our team set out to create FM Liquidity Match, a non-custodial OTC trading technology solution that offers a range of benefits.
With FM Liquidity Match, market players can enjoy enhanced capital efficiency, robust risk management, compliant reporting, and post-trade flexibility.
Our technology empowers users like brokers, OTC desks, liquidity providers and custodians to internalize customer flows, access global liquidity, or even establish their own electronic communication network (ECN). What sets us apart in the OTC space is our global liquidity with a firm order book, which comes without so-called “last look”, overnight borrowing and lending capabilities, and a streamlined on-boarding process.
Four years ago, we embarked on this journey with a traditional native crypto ECN. FM Liquidity Match represents the next evolution, providing institutions with superior services. As the crypto landscape continues to evolve, our aim is to stay ahead of the curve and deliver the tools and technology that empower market participants to thrive.
How have you leveraged AI for Price intelligence and pre-trade risk management tools?
I believe our trading clients could do so as they have a crucial need for assessing risks before making any moves. They carefully analyze factors like market volatility and liquidity to make informed decisions. Some professional electronic traders even go a step further and create artificial intelligence models that predict future price movements based on historical data and market trends.
However, that’s their side of operations.
On our end, everything comes down to providing our customers with a dependable and sturdy infrastructure for their pre-trade, trade, and post-trade activities, allowing them to effectively utilize AI in their trading strategies.
What are some of your thoughts on how the current world situation will impact the use of the fintech segment?
This year proved to be quite a challenge for the global fintech industry.
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Rising interest rates, high inflation, depressed valuations and regulatory shifts for the private sector all played a role. However, as with any market, there are ups and downs. If you have a clear market niche and a product that fits well with that niche, you can weather the storm and be prepared for the next upward trend.
In the world of fintech, we continue to see a growing embrace of digital technology. Electronic trading, innovative payment methods, and a focus on financial inclusion are all on the rise. And much of this progress is driven by the development of digital assets. While institutional adoption may be slower in this challenging environment, there are still signs of progress.
For example, Blackrock’s recent application for a Bitcoin Spot ETF and PayPal’s introduction of a stablecoin are both significant developments. These moves could serve as catalysts for wider adoption of digital assets in the future.
Currently, we can see volatility in cryptocurrencies like Bitcoin, Ethereum, and Dogecoin. The market has also seen a rise in the number of altcoins. What are your comments?
We’re not exactly experts in analyzing price fluctuations and making market predictions. The amplitude of ups and downs in the crypto market is higher compared to that of most traditional assets and entails greater risks for investors, but it also holds the potential for substantial rewards.
What really matters to us in terms of our organizational development is a consistent and growing interest in digital assets over the long run. Some of the latest developments in the market serve as validation of an increasing institutional interest in this asset class. Then again, we would have to observe whether businesses manage to swiftly navigate the challenging and evolving regulatory landscape. Yet, we understand that the foundation of our progress lies in the consistent growth of interest and engagement with these innovative forms of value exchange.
What is your smartest work related shortcut or productivity hack?
I wouldn’t over-complicate things here.
Consider what truly excites you and aligns with your aspirations.
When you genuinely enjoy your work, it becomes easier to excel and find fulfillment.
Focus on finding happiness in your career, and success will naturally follow.
What are some of the biggest challenges in fintech that innovators and other startups often face?
What are your top best practices that you would like to share to help future fintech entrepreneurs in this space?
Don’t limit yourself to a narrow scope of knowledge or expertise.
Be open-minded and explore interdisciplinary approaches for your business.
Simply seek opportunities to collaborate with professionals from different backgrounds and industries.
Embracing diverse perspectives and ideas can lead to really innovative solutions, so stay curious and keep learning.
Revenue in the Cryptocurrencies market is projected to reach US$37.87 billion in 2023. What are your predictions for 2024-25?
Predicting the future can be a daunting task. However, I anticipate that the trajectory of the crypto market will continue its upward climb in the long run. As the industry becomes more mainstream and gains wider acceptance, both retail and institutional players will become more acquainted with the advantages and possibilities offered by the web3.0 world.
Nevertheless, the industry is still relatively young and developing; consequently, the distribution of revenue across projects may not be even, so aggregate numbers might not be very illustrative.
Businesses that persistently dedicate their efforts and resources during the market’s low points are likely to experience substantial growth and reap the rewards when the market turns bullish.
While it remains uncertain whether the market will become bullish within the next two years, we firmly believe that our endeavors align perfectly with the demands of the market.
Recently, we have been focusing on new partnerships, strengthening the system architecture, and developing promising features to complement our existing post-trade offering, including the settlement process and risk management. Therefore, I have great confidence that our business will witness robust growth and effectively capitalize on the promising opportunities that lie ahead in the next 2-3 years.
Your favorite digital asset industry quote:
I am particularly fond of a quote by Matsuo Bashō, a 17th-century Japanese poet, as it emphasizes the importance of innovation and thinking outside the box in business.
The quote goes, “Do not seek to follow in the footsteps of the wise. Seek what they sought.”
It serves as a constant reminder that the key lies in comprehending the fundamental principles and applying them in a unique way.
Thank you, Konstantin! That was fun and we hope to see you back on Global Fintech Interview Series.
[To share your insights with us, please write to psen@martechseries.com]
Konstantin has over 13 years of institutional financial markets experience across major asset classes from equities to FX & derivatives. He had Business Development roles at major brokerage houses to also becoming a Managing Director, Electronic Trading at the largest Eastern European bank. He was nominated by Forbes 30 under 30 in 2020 and joined Finery Markets as a CEO & Co-founder in 2021.
Finery Markets is a leading OTC multi-dealer electronic marketplace for crypto businesses & institutions and a trading solutions provider for crypto markets.
