Hello everyone. Good afternoon. Hope you guys had a nice lunch. I am Jacqueline Mlynarczyk. I am the founder and CEO of Strata Media, and more importantly, I have the pleasure of being on stage today with Yuvraj Singh, co-founder and CEO of Digital Asset and Canton Network, and then Chris Brummer, the Chief Product Officer at Tradeweb, Kevin Kennedy, Executive VP of North American Markets at Nasdaq, and Sandeep Kumar, the President and CEO of Customers Bank.
I think maybe let's start with a very basic straightforward question on the title of the panel. Is 24/7 trading actually inevitable? And what do you guys see in each of your respective businesses that makes you feel confident about where we're headed? Who wants to jump in?
I think it's already happening. Right. So, I think the evidence we're seeing shows that there is demand for a lot of the products. And for Tradeweb, coming from like being a large OTC institutional trading platform, we think that it's very important that the underlying cash markets can also have liquidity, and it's not just in the derivative markets above them. So, we do actually see 24/7 trading coming. We think it's kind of a table stakes, and I think there's a lot of announcements from our peers about it happening in other marketplaces. For us to see it happen successfully on weekends and off hours, a few major pieces have to happen. Like, one, we think there will be a big OTC component. You're going to have to have a lot of specialization of protocols and how you provide liquidity in those types of marketplaces. And then, I think there's a lot of components that have to come together with collateral and repo that I think we may talk about a little bit in terms of supporting like a real institutional marketplace for 3,000 institutions.
Yeah, I agree with Chris. And one thing that I will mention is we've seen crypto markets be first to 24/7 because again, if you trade derivatives, you need to manage kind of the margin to manage the risk. And you know, crypto markets came with stable coins, so it was very easy to, you know, companies like Hyperliquid and others say, "Well, we can actually manage risk 24/7. It's not just to enable price discovery, it's how do we manage the risk on the back end." I think what's even more exciting though is that 24/7 trading of assets is not just price discovery related. Later this month we'll do the first transaction together with Tradeweb where a major global corporate will actually start managing their treasury management over the weekend. So, right now you kind of go into yield products really just during trading hours and you have some latency associated with it, but if you could actually carry some of your yield products into the weekend and just be able to liquidate it because now you can trade over the weekend, you actually get a much better return on your balance sheet. So, I think we're not going to see only 24/7 usage of trading just for price discovery. I think you're also going to see a lot of other activities that can benefit from 24/7 trading.
Yeah, I would just add from our perspective at Customers Bank, you know, we have a 24/7 liquidity pool for digital asset trading and settlement, you know, here in the US and while the markets are open 24/7, most of activities happening typically Monday through Friday. You know, what you do see in the traditional capital markets is that there's a little bit of post market closing settlement that happens post 4:00. There's a bit of Asian retail. So, there's a good amount of demand that will likely increase from the 10% plus or minus from where it is today, you know, to a larger once the rails are open. But you know, I think some of the traditional market players that participate in the digital asset industry that have a small sleeve of capital with us like the Jane Streets, the HRTs, the etc. of the world that represent majority of the global trading, are not banging the table demanding 24/7 trading. But, I think 23/5 is probably here. Kevin can speak more to it and likely in December with Nasdaq and New York Stock Exchange and DTCC is already sort of tokenizing with some pilots this summer and a full launch later this year.
So, I'll go back to your original question and I thought you all, Sam and Brian made Chris made great answers, but the path is inevitable. And think about it, capital, information, and risk is there 24/7 today. But, the question's going to be is not whether it happens, it's whether it happens the correct way, the appropriate way, which is where from where I sit, just so you know what I do for a living, I oversee the traditional exchanges. So, think of that as three Canadian exchanges, three Nasdaq equities exchanges, and six options exchanges. And there's actually, and hopefully we get to it, there may be opportunities in the short run in options as well. But, the question is doing it right. The last It's really the exchanges, the current exchanges are the last thing that are still on a schedule. And come December 6th, we won't be on that schedule anymore. But, we really want to bring not just liquidity, but the right amount of liquidity. We want to bring industrial grade guardrails. We want to bring transparency, which you'll get with the securities information processor, which is called SIP. And we want to bring the TRF along, the trade report facility. So, those things combined, I think can put the institutions a lot more comfortable place to then trust, and that's the word you'll hear me say a few times today, trust the infrastructure that we're trying to build.
Before Sam mentioned 23/5, which is definitely in the play right now. We're talking about 24/7, too. but would you say that 24/7 trading is actually being demanded by institutions and retail investors or is it being more pushed from infrastructure firms that like want to see this go forward? And if so, on the former, then like what is the overnight volume really looking like in those late hours where we're seeing traction perhaps?
Happy to jump in. We've had 23/5 for 15 or 20 years now in the Treasury market. And so, there is demand from institutions. And we do see that overnight and we've spent a lot of time even trying to get to that. We still do need a window and we're working on closing that to get to really 24 by 5. And then we've built a 24/7 trading system already. It's just not rolled out for our core institutional clients on the major asset classes. So, I'm with you. I think we really need to make sure this works at scale. Meaning you need to bring liquidity providers and their services need to be, you know, of the quality of the liquidity that our largest institutional clients are going to need. But to your point, like the risk is there, the geopolitical events are there, and every proof point we see, I actually don't really agree with this characterization that like everything's retail. I think, you know, when we saw Iran crisis blow up, you know, it was actually we heard bank desks trading oil perpetual futures on Hyperliquid, as well as a lot of other clients. So, I think if you have the risk, which you do, and our clients manage many trillions of dollars, then they do need these capabilities. So, the demand is kind of inherently there. I think the derivatives markets are amazing and there's a lot of great information that comes from derivatives markets that are really valuable. And it's always interesting to me, you don't need that full institutional liquidity for it to provide the information value, but as the world keeps moving on and we get to agentic AI, you're going to need to have an open marketplace at all times and be able to move material risk. Like we're talking about the swaps market, we're talking about, you know, a billion of Treasuries in 10 minutes are the types of things that we're really aiming for and preparing for. And I guess the last piece there is like we're trying to figure out what are the pieces behind just liquidity. I think the collateral, the repo market, that's really what we've been trying to work on. How do you get to that? Because it doesn't happen overnight. So we've been at the, you know, digital repo piece intraday and on weekends for a little over a year now working with you all on Canton, working with DTCC, working with non-bank liquidity providers that market make crypto. Because we see like we try to build around people's real needs and the intraday repo is building around someone's real needs to fund their crypto market making, but with a view to well, okay, the rest of the institutional client base can use that.
Yeah. I think what Chris said is spot on, but just to put it in perspective. I mean, when you look at the equity markets today, 80% of the volume is in the opening and closing auction. That doesn't mean that equity markets should be closed at noon, right? I think that you know, Iran is a good example of not having that capability will draw people to go to other venues. So I think liquidity profiles will be smaller over the weekend on average, but you're going to have these events that do happen over the weekend and you do see that in Treasury markets and commodities that are open in different hours than equity markets that now suddenly if there's an event happening in after hours, there is significant volume. And I think that the biggest challenge is how to get the large institutional players that for example in Treasuries have been wired to provide liquidity. I remember when I was at Citadel and DRW, there was a trading desk for the Treasuries in the after hours and everybody knew how to manage their risk in the after hours. You're just going to keep on adding more and more of these asset classes that will now be available 24/7. It doesn't have to be as good after hours or on the weekend. As long as it has the capacity to scale up when it needs to. And I think you also can't have just a bunch of derivatives markets with no liquidity in the underlying market for too long. Right? So, that's important, I think, as well.
Is there anyone against this? Like maybe the people who don't want to monitor this or work on the weekends, but anyone else like executive level or companies that are like, "No, thanks. We don't want this."
I don't think at an executive level. I mean, listen, I think to some extent, I mean, are banks against moving money in real time? To some extent, you know, it was very convenient where to do a run on a bank, you had to go to the bank physically and take your money out in physical form, and it made it easier now that you have electronic money. So, I think that there's always going to be this, you know, push and shove. I mean, like pull and shove. But at the end of the day, I think that when you talk to most executives, they understand that this is where it's going. So, for the most part, it's not kind of are they going to do it? It's where is it falling currently in the priority versus AI, geopolitics, interest rates. So, it's happening. I think most institutional clients right now are just trying to figure out again, like I said, if you were at one of the trading shops, they know very well how to horizontally scale costs across the organization. I think large institutions are less better at that. So, they need to figure out because the revenue the volume profile is going to be weaker over the weekend, I can't build a vertical offering on every asset class. They'll need to figure out how to horizontally scale that capability within an organization.
Kevin, I see you speaking up. Yeah, so Jacqueline, you know me a little bit, but my two favorite things are talking about the markets and using metaphors. And to your exact question, you know, is anyone still against this? I don't think so at the executive level. But what I'd say, the metaphor I like is I think it's a bit of a stop order. I think it says institutions have been looking away and saying, "Okay, what you know, 2018, 2022." it stop? right to not do anything. Now it's different. It's not about Bitcoin. It's about tokenization. It's about the plumbing. It's not even just tokenization. It's about what tokenization is going to unlock. And I think we're at that point where like the stop orders are starting to get triggered.
Sam, how important is the banking layer here?
The banking layer is critical. I mean, you heard you've all talking about sort of the changes in the banking layer that has resulted in sort of the changes from the physical run of the bank to needing sort of wire rooms that could be open. You know, we have a 24/7 network. We sort of move, you know, as a $26 billion bank, we move billions of dollars over a weekend. We, you know, over a year, we do about $2 trillion of volume. Probably up to 2 and 1/2 trillion or so this year. So, we're really turning our balance sheet a lot, you know, through sort of our payments capabilities. The digital asset industry in the US could not really have operated over the past couple of years without having Customers Bank and sort of the global liquidity pool and the network that we have. We have the, you know, the exchanges, the stablecoin providers, the market makers, the investors, the custodians, the banks are, you know, all sort of on the network and able to sort of do interesting things. We also indirectly help, you know, the collateral move either form of the, you know, sort of proxy, you know, atomic settlement in the sense that a custodian can be moving the asset at the same time as the dollar is moving. So, we are, you know, have an ability to do that. That's not sort of necessarily possible on an interbank basis, but an intrabank basis we can do some pretty interesting things. So, I think 24/7 can move. You've all touched on it. You know, there's the banks like sticky deposit. Sticky deposit means friction. Friction creates franchise value. And that really and there's a lot of complexity plus you have banks that typically don't have the tech capability to even think about how can we sort of build those rails and how can we manage those rails? It's one thing to send a dollar or receive a dollar on a weekend. But what happens to that dollar? If it's doing the same thing as sending your Venmo to, you know, to Kevin, he doesn't actually have access that dollar unless he's sending another Venmo onwards, it's not really that useful. Yeah. Who ultimately gets the dollar?
Maybe to something that Chris was talking about before, too, on the front of repos is like one issue that keeps coming up is collateral mobility. And if institutions are going to trade 24/7, does that mean the cash and collateral also need to become 24/7? And how do we kind of think about that when it comes to things like repo markets or something else?
Must. Must. It must be. You won't have liquidity unless both trade. People wouldn't touch it, either, right? No, I mean again, I think take the simplest example, if you don't have collateral mobility, you can't have derivative markets. I mean, it's just if you don't have the spot market being able to move in real time, you won't have a lot of liquidity in these assets. And again, then you go into the world of credit and then financing activity becomes critical and that's where repo markets kind of play. So, all of these things feed each other. At the end of the day, you know, there has been multiple attempts in the US, for example, to create equity markets that were natural buyers against natural sellers. And we've seen they've never succeeded. You really need to have all of these intermediaries, all of these different instruments, all of them playing nicely with one another and that's how you really build large-scale activity. We, for example, now are close to half a trillion dollars of repo a day. We're already seeing that the customers are seeing the benefits. I think within the next 12 months, we're going to cross the $1 trillion a day in notionally in the repo market. I think you're going to see pretty much every major platform from TradeWeb, Bloomberg, you know, BrokerTec, you know, Broadridge, all driving repo activity. And you're going to see that repo activity will start becoming much shorter timelines and that will actually allow to new product new products, on-chain products to exist. So, I just think that we're going to see within the next two to three years securities lending, repo, and a lot to do with collateral. I think that collateral mobility will be one of the best use cases for this technology.
Yeah, I think interestingly some people ask, do you need blockchain or digital asset rails for 24/7 trading? Because in theory you don't. You could just settle on a Monday and keep doing what we're doing, but in reality you absolutely do and it's because of the repo markets and because of needing programmable collateral. And we're still it's taking a little bit of time still, but like the banking layer for cash, but then all the prime services above that, that's where the funding comes from in our marketplaces institutionally. It's not people getting leverage on perps. It's people having billions and billions of treasuries with their prime broker that they can then repo out when they need liquidity, but they can also earn yield when they want to earn yield. And then they can apply as much leverage as they need and the system provides them leverage. So, right now that system works pretty well, but it's not programmable at all. And so, if you do want, you know, large-scale institutional trading on weekends, your prime broker is probably going to need to have your collateral be programmable and accessible.
I actually would say that it's not really working well. It's working. Just to give context, I mean there's about $40 trillion of what I would call eligible collateral that is unused in the world right now. So, I mean just think about what does that number can mean for markets if you can now have access to 40 trillion dollars that can now can be used all over the world. Yeah, but how do you get it to be active? Well, that's the reason why it's not active is if you're a trading firm or if you're a bank or if you're a global corporate, you need to think about your operation globally. And right now if you know that getting one asset class from the US to Japan is taking you X amount of time, you're saying I cannot really use this collateral in Japan right now for my trading activity in the US even though that's where I should really use it because right now there's a lot of volume, there's a lot of stuff that is happening in the US. That is what we call, you know, eligible collateral that is effectively sitting idle in a lot of jurisdictions. So, right now the estimate is that there's 40 trillion dollars of what you would call eligible collateral that is sitting in all kinds of jurisdictions that you could actually use it elsewhere but because of the lack of mobility of collateral, it's really sitting idle. So, the idea behind doing the project with DTCC around tokenizing US Treasuries and US equities we just recently announced with Mizuho MUFG and JSCC on JGBs is really how to create this mobilization of collateral that would really allow much more trading to take place because now if you are a customer, you're saying I have this balance sheet in Japan and now I can bring it to the US to do some trading activity in the US and when the US closes, I can move it all back to Japan to do my trading in Japan.
Mhm. No, and that's fair. If it's even worked well enough to get us to here, it absolutely isn't sufficient to get us to where we need to go. I think there's a little bit of an analogy with what's happening with the energy infrastructure around AI and that's a little bit like programmable collateral for financial markets, right? Is we need many X the demand I think to really have a 24/7 marketplace that works institutionally, and I think there's a massive multi-billion dollar unlock every day and be able to use, you know, the yield, the risk efficiently. And then that will go flow into these other things where you need to invest that collateral and up your trading velocity. So, you're right.
Where do you all see digital cash and tokenized deposits playing a role in this? Could that ultimately be like what helps with 24/7 settlement practicality?
I think that I'd go back to the comment I made before, like a tokenized deposit as an example is really just it in some ways it feels like, you know, a sledgehammer using a sledgehammer to open up a nut, right? Like at the end of the day it's complicated. It can't be fully programmable. It requires banks to really cooperate, etc. Cash is digital, and, you know, we have an ability intra-bank, because that's the only solution we could really solve, to allow customers to have extreme programmability and bespoke customization really like SaaS-like features. The rails in the industry do need to change broadly for there to be broad adoption, or at a minimum there need to be sort of good last mile rails like FedNow, RTP that allow the inter-bank to sort of work where the receiver's also settling real time as well, not just sort of showing up in an omnibus and, you know, pending.
