#833 Building Institutional Crypto Infrastructure w/ David Mercer

David Mercer is the CEO of LMAX Group. Based in Europe, they're a leading specialist in FX trading and now have LMAX Digital, a leader in institutional trading in the Crypto Industry In this conversation we discuss institutions, high frequency trading, and all of the market infrastructure needed for the Crypto markets to mature. ======================= Choice is a new self-directed IRA product that I'm really excited about. If you are listening to this, you are likely part of the 7.1 million bitcoin owners who have retirement accounts with dollars in them, but not bitcoin. I was in that situation too. Now you can actually buy real Bitcoin in your retirement account. I'm talking about owning your private keys and using tax-advantaged dollars to do it too. Absolute game changer. https://www.retirewithchoice.com/pomp ======================= Imagine coinmarketcap - decentralized. 3X in valuation is 15 billion dollars from the current price. Cryptotoday.com starts at zero, at fair launch on 7th of March. No VC. No pre-sale. Team tokens locked. For the people, by the people. For decentralized crypto. Visit cryptotoday.com and read the whitepaper for the details.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. David Mercer is the founder and chief executive officer of LMAX Exchange. They're based in Europe and they're a leading specialist in FX trading. They now have LMAX Digital, which is also a leader in institutional trading in the crypto industry. In this conversation, we talk about institutions, we talk about high-frequency trading, and we talk about all the market infrastructure that's going to be necessary for the crypto industry to continue to mature. I really enjoyed this conversation with David, and I hope that you enjoy it as well. Before we get into this episode, though, I want to quickly talk about our sponsors. This episode is brought to you by BlockFi. BlockFi provides financial advice for crypto

• 0:44Anthony Pompliano?

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• 1:26Anthony Pompliano?

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• 2:10Anthony Pompliano?

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• 2:55Anthony Pompliano?

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• 3:40Anthony Pompliano?

  site. You can read the white paper at cryptotoday.com. Again, go to cryptotoday.com to learn more. All right, let's get into this episode. I hope you guys enjoy this one.

• 3:49Speaker 01

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

• 4:12Anthony Pompliano?

  There's an event going on in Miami right now. What is this event that's going on?

• 4:16Speaker 02

  So it's just, actually, it's from one to the other. I was at Trade Tech FX. So that's my traditional business, which is all about foreign exchange, which trades $7 trillion a day. So it's traditional asset managers and the biggest banks in the world. So I've hopped across the bridge to go from FX to crypto.

• 4:33Anthony Pompliano?

  All right. Now, let's talk about the legacy FX market first. Seven trillion a day is total market, or that's what you guys do? Like, how big?

• 4:41Speaker 02

  I wish I did seven trillion.

• 4:42Anthony Pompliano?

  Okay, I was gonna say, all right. So that's the whole market a day?

• 4:45Speaker 02

  It's $7 trillion a day. So, look, the way I look at foreign exchange, and you've got a view on this, imagine that could be crypto. If you imagine, as you said to me yesterday, that fiat currency won't be around in 20 years, well, it's only going to be replaced by crypto. So that's just global trade, right? So people making things in Thailand and selling them in Home Depot in the US, right? So you got Thai baht trade or Korean won trade versus US dollar. So that can be replaced by crypto. Seven trillion dollars a day, $2 trillion is spot. So I need dollars for my Thai baht today. And then there's people going, well, hold on a second. The next tranche of the market, $2 trillion would be the swap market.

• 5:26Speaker 02

  So, hey, I'm long Thai baht today. I don't need to deliver it today, but I want to earn some interest on it overnight. So I swap that out, either overnight or on a weekly basis or a monthly basis. All the stuff also you see in crypto. Guess what? That's kind of, you know, the lending market, all the things that the SEC are looking at right now. And then you've got the forward market. Like, I know I need, so that'd be another trillion dollars. I know I need X amount of Thai baht to pay for my shovels that I'm going to sell in Home Depot in a month's time. And then you have a non-deliverable market, which is kind of, I want access to Korea, to India, to Indonesia, to Brazilian real, but I can't

• 6:10Speaker 02

  have an onshore bank account. So I just invest in the economic interest effectively of that. So that is the FX market. That's what we do. In terms of Almax, we operate six exchanges. We trade about $30 billion every day. So yeah, it's big, but you know, compared to the whole market, there's a lot more to win.

• 6:31Anthony Pompliano?

  Yeah, yeah, yeah, opportunity.

• 6:32Speaker 02

  That's it. You know, I said to you, you know, we did last year, we averaged of that 30 billion. We did one and a half billion a day in crypto. So if I follow your thesis.

• 6:43Anthony Pompliano?

  That'll get bigger and bigger over time.

• 6:44Speaker 02

  There we go.

• 6:44Anthony Pompliano?

  Yeah. So when it gets to three, it'll be 10% of your daily volume.

• 6:49Anthony Pompliano?

  Explain to me the infrastructure differences in an institutional exchange versus a retail exchange. There's a lot of people who watch this, who I won't name names. They got all the retail exchanges. It's a good enough experience. For the most part, there's liquidity. They're able to buy and sell the assets they want. Sometimes there's a little bit of high fees. Sometimes there's downtime, you know, whatever. But like from a retail perspective, it gets the job done. But they're also not buying and selling $20 million worth of Bitcoin. I don't want to speak for the audience. They're very, very wealthy, obviously, but.

• 7:21Speaker 02

  Getting wealthier by the minute.

• 7:22Anthony Pompliano?

  Yeah, yeah, that's not what they're really doing, right? It might be kind of hundreds of dollars, thousands, tens of thousands of dollars. And so institutions obviously have different needs. Like, how do you think about the difference in the infrastructure from a retail exchange?

• 7:34Speaker 02

  So it's almost, I sort of see it horizontal versus vertical. So, look, I have empathy with those retail providers, right? It's a bit like after the Super Bowl ad, everyone, you know, what do you say? This was a great ad and so many people clicked on it, or you say, hey, they were down for a minute. So if you think about it, in retail, they've got to go horizontally. They've got to accommodate for, say, a million users online at any one time.

• 8:01Speaker 02

  Asking a lot of different questions. So they'll be saying, what is the price of Bitcoin? What is the price of Ethereum? Can I see my statement? Can you show me a chart? Hey, is there a news feed from the pump? You know, all of these questions, I mean, I need to be able to service that. So low latency or speed is. Is not the key prerequisite. Now, in institutional trading, there's three things that matter. Does it work? Is it fast? Is it cool? Guess what? We never get to the third bit. We never get to the cool bit, which is probably where retail is, right? So how do you compete? How does one platform compete with another in retail? And well, I should be a bit cooler or offer something a bit better.

• 8:42Speaker 02

  So what that manifests itself in is I can't have a down second. I can't have a down millisecond. So Almex Digital has been around four years. We haven't had one down millisecond on the exchange.

• 8:55Anthony Pompliano?

  Ever since creation?

• 8:57Speaker 02

  Never.

• 8:57Anthony Pompliano?

  Wow.

• 8:58Speaker 02

  And it's on my webpage, by the way. You can go to web status pages. We don't go down, right? Because you can't go down, because this was born out of an FX exchange. So the biggest banks in the world, so we've got 35 banks connected, all the largest proprietary trading firms in the world, connected. And they want to trade in response times that are now measured in microseconds, right? So response times roughly around 70 microseconds, less than a millisecond. What's a millisecond, everyone? It's the blink of an eye. Okay, so.

• 9:26Anthony Pompliano?

  Jesus.

• 9:27Speaker 02

  They want to know that response. They want to send their order in, have it acknowledged and have their trade acknowledged within microseconds. Now, if I'm down for a few micros or a few millies, they just go somewhere else and they don't come back. So very simply, that's how we architect our exchange and that's the vertical thing. I answer a few number of questions a lot in any one second. So I process through a non-farm payroll on a 1:30 on the first Friday of the month, I probably process 100,000 orders per second. And I've got to do that sustained for five minutes.

• 10:07Anthony Pompliano?

  And if I'm not. 100,000 orders per second for five straight minutes as people are trading off of data that just came out on the non-farm payroll?

• 10:15Speaker 02

  Yeah. So.

• 10:17Speaker 02

  That's probably the key difference. If you think about it, what am I offering? I'm really saying, hey, do you want to buy or do you want to sell? And what's the price now? Not just now, now, now. What's the price really now? And has it changed really now? And by the way, you must confirm to me within a microsecond that my trade is done. Because the biggest risk, and you know the terminology, the biggest risk is an out trade. And you'll see that even on the retail platforms, like, hold on a minute, I was trying to buy or I was trying to sell. Am I done or not? Your biggest risk is you're sitting there going, hold on a second, am I long 10? Or am I short 10? Where am I? And invariably, if you don't know, that price move is going to be against you. So it's a, it's just a different architecture. And I think trying to put the two together that some of the retail guys are doing is tough

• 11:02Speaker 02

  because it's just a different layout. It's just a different structure. You've got to architect it right from the beginning. You can't suddenly go to a retail platform, hey, guys, can you just do what AlMAX does and process 7 billion orders a day? Right, and make sure I've got latency and measured in microseconds? You can't do it. You've got to get it right in the first place.

• 11:22Anthony Pompliano?

  So when you think about 100,000 orders per second for five minutes, how many could you guys handle? Like, could you handle 250,000, 500,000? Like, how many is like the maximum amount that you could?

• 11:36Speaker 02

  You know what? You need to come and work at AlMAX because my CTO, I ask him that question every month. So if I say, if we see the biggest, say, I think the last one we saw, the biggest spike was about 140,000 orders.

• 11:49Anthony Pompliano?

  Wow, in a second.

• 11:51Speaker 02

  Yeah.

• 11:51Anthony Pompliano?

  What was it for?

• 11:52Speaker 02

  So non-farm. So he tells me, he tells me, hey, look at that. That was, that's really good. That was our peak. And I went, okay, well, then you can imagine this market's going to expand. So you better build it for 500,000. So we're always adding. And it's back to that, does it work? Is it fast? Because they're not going to thank me. Institutions are not going to thank me. Am I suddenly, hey, guys, I did double the orders, but I also doubled or tripled the length of time, your response time. So, you know, when it comes to crypto, and we're fortunate, I'd like to say we were prescient, but, you know, we entered crypto, started building it out, 2017, launched it in, in 2018. And I just lifted an FX exchange. Because guess what? Bitcoin dollar, Ethereum dollar trades a bit like Euro dollar and a bit like cable.

• 12:37Anthony Pompliano?

  And much less of them.

• 12:40Speaker 02

  Correct. And I was like, I said, well, let's just move that infrastructure over to Bitcoin. So when we have all these spikes and you know, you've seen the liquidations in Asia, you've seen what happens on the retail platforms. I swear, everyone calls me. So investors call me, clients call me, family call me, how did you cope yesterday? I'm like, it was a blip. It wasn't even a blip for us. I mean, the day, the last time when you, you probably read, you know, all the, all the retail exchanges were down. My order rate was about 10,000 a second for Bitcoin. But remember, it's the same architecture, right? It's the same hardware as I have in my FX exchanges that can accommodate 10x.

• 13:20Speaker 02

  So I say right now, I could trade, we could execute every order in the crypto market today, bar none.

• 13:27Anthony Pompliano?

  With the current. Every single order.

• 13:28Speaker 02

  Every single order. Pipe it in now, it's done. And if anyone disagrees with that, then, you know, put them in touch, right? So.

• 13:36Anthony Pompliano?

  What, what do you think the total orders are in crypto right now?

• 13:40Speaker 02

  I don't know. You tell me. Well, the thing is actually, you can almost work it out because I do know one thing. Compared to everyone else, we're a factor quicker, which means we have like, so 10x quicker than the next best. That's just.

• 13:56Anthony Pompliano?

  From a speed standpoint.

• 13:57Speaker 02

  Speed, but it also, obviously, speed matters because what happens is it's just like, it's just plumbing.

• 14:02Anthony Pompliano?

  Yep.

• 14:03Speaker 02

  Right? How do you get it down the pipes? Because I can process it faster, I can take 10x than the pipe.

• 14:09Anthony Pompliano?

  All right. I'm going to start asking you questions. If you don't want to answer any of these, don't answer. Because I don't know what you want to talk about.

• 14:16Anthony Pompliano?

  First is,

• 14:20Anthony Pompliano?

  do trades coalesce around liquidity or performance? And that's more of like a chicken or egg question of like, does performance bring liquidity? Or does the liquidity create the infrastructure that needs performance? And then that's where all the trades come around. How do you think about that?

• 14:39Speaker 02

  Great question.

• 14:42Anthony Pompliano?

  Nice.

• 14:42Speaker 02

  Great question.

• 14:46Speaker 02

  You know what, with that, the best performance in the world, without liquidity, I'm not going to get any flow.

• 14:52Anthony Pompliano?

  Yep.

• 14:53Speaker 02

  And this is why, again, I'm not going to criticize those retail platforms out there. They have huge volumes, huge amount of customers, huge natural interest, fair play to them. So if you like, and if you're a market maker out there, you just want the most volume, the most flow. So you're going to go there, even though you're going to say, guys, the performance is a bit chunky, but I'm going to put up with that. And by the way, the way you put up with that is the pricing slightly worse.

• 15:19Anthony Pompliano?

  Yep.

• 15:20Speaker 02

  Right?

• 15:20Anthony Pompliano?

  You increase your prices because you're, because you're actually having a little bit more slippage, et cetera, that you're dealing with.

• 15:25Speaker 02

  That's what they're going, that's what they're going to do. Whereas on an institutional exchange, you would expect, you know, tighter pricing because it's more accurate, more precise. So, look, we need to be, we need to be a bit of both. We need to make sure that we can scale 10, 20x and then we're going to keep engaging with the best liquidity providers in the street. And remember, that's how we started. YZL makes digital around.

• 15:50Speaker 02

  These liquidity providers, these market makers were already in the market and they're making all the retail exchanges in Asia. Then they came to me and said, David, we need some institutional grade architecture where I can risk transfer with like-minded participants. So they came to me, they approached me, I think because of the performance, but if like number one was the only liquidity provider in there and they were the only customer, then I wouldn't have an exchange.

• 16:18Anthony Pompliano?

  When you think about this business, do you just go directly to the institutions, family offices, prop, you know, trading desk, et cetera? Or do you actually provide like, I guess like a white label or like a B to B solution to some of these other exchanges so that they can execute with your performance but through their interface?

• 16:36Speaker 02

  Not quite the white label, but I would say I'm connected to most of those retail exchanges today. And that's to help them, to help their liquidity.

• 16:48Speaker 02

  And if you just, if I step out of crypto for one second, if you'll allow me, in the FX world, I have 200 brokers as customers, right? Now, they're effectively like the retail crypto exchange in FX. They're selling to the smaller customers. They're onboarding a billion customers a month through a year. That's not my forte. That's not what we do, so I don't compete with those brokers. What I do give them is efficient, precise execution and scalable architecture. So in crypto, you see a lot of these guys, they've been very successful and they are all things to all men and women. They are the best brokers, they're the best tech firms,

• 17:31Speaker 02

  and they're the best exchanges. But I think maybe now they're realizing that at times they need help with liquidity and execution, and that's where they're opening with us. So I like to think, look, I'd love us to just be the utility exchange going forward for crypto. So all the names you talk about, all the guys that are advertising at the Super Bowl, connect, right? And they source a lot of liquidity from Almex Digital.

• 17:56Anthony Pompliano?

  How do you think about what tokens or assets to list and allow people to trade? Is it just like go wild and put as many as possible? Is it just the ones that meet a certain like liquidity or volume threshold?

• 18:09Speaker 02

  I ask you what's hot, and then you talk to me about Barbell. No, look, it's a couple of things. The easiest thing in the world for an exchange to do is list a new token, list a new asset. Very simple. When I go back to FX, you know, we list 100 currency pairs in FX, you need to have more candy in the candy store. I need more candy in my Almex Digital crypto store. But in order to list it, I need to be able to store it effectively, right? So, and the next big step for us is the storage of ERC22 tokens. So then that will open up maybe 100 coins that potentially I can list and people want to trade. But, and you know this better than most, and I'm sure your viewers will.

• 18:54Speaker 02

  In the institutional land, they don't thank me if I list a coin and then I'm not offering two-way liquidity 24 hours a day after that. So if it's illiquid and it's long only, it's not an exchange product. So first of all, can I store it? Are my customers secure? Are they happy that their money is safe with us? Yes, that's number one. Number two is, do I have liquidity? So if an institution wants to trade $5 million at any time of the day, they can do that. So that's probably how we make the decision. You know, we launched only really with Bitcoin, Ethereum, added Bitcoin Cash, Litecoin, XRP, just added USDC and Solana. Hopefully, within six months, we'll extend that, probably

• 19:39Speaker 02

  the top 20. But I'm not going to say top 100 at this stage.

• 19:43Anthony Pompliano?

  Joe, what questions you got? From like an institutional standpoint, what are the conversations you're having, right? Like, are people fully on board with developing this market similar to other markets you guys exist in now in FX and others? Or is there still some skepticism around kind of how big this market could be?

• 19:58Speaker 02

  There's a bit of the latter.

• 19:59Anthony Pompliano?

  Yeah.

• 19:59Speaker 02

  I mean, Anthony would have seen it last night. He came to, you know, an event we had with some institutional investors. This, look, I said to you before, you know, 34, 34 banks traded me on FX. Four years ago, zero of them took our market data feed or said they're interested in crypto. Now 14 of them take our market data for price discovery. So that's, they might be a little bit skeptical, but they know they're going to have to do something. And I think if you just follow your thesis, which is, look, over time, cryptocurrencies are going to replace fiat and inflation hedge, et cetera, then their customers, the customers are asking banks how to access this. And if you don't give

• 20:43Speaker 02

  me access, I'm going to just open an account with the retail exchanges. That's happening today. So they might still be skeptical. But the biggest banks all have a strategy for it. Now, I've just come from an asset manager conference. Right. These are guys that manage trillion dollar funds. The biggest one there today manages an 11 trillion dollar fund. They're not rushing into it, right? But they're gonna have a small part of their portfolio. And some of them are just saying it's too risky. And when you push them on it, like, what do you mean too risky? It's just risks they don't understand. So it might be they're coming up against credit risk that they don't see in traditional markets.

• 21:24Speaker 02

  Like, they don't have a CCP. They don't have a prime broker. They can't just go to the bank. So it's like, I don't really understand this credit risk. If I move into DeFi, I don't really understand this software or technology risk or this hacking risk that I don't have to deal with if I buy Tesla. Or if I buy euros or if I invest in in gold. So I'd say they're being cautious. The thing that you'll see changing is just the increase overall in the size of crypto. So two trillion dollars valuation today is good. Three trillion was better. When you get it to 10 trillion, i.e. about the market cap of gold, then it's in their face.

• 22:05Speaker 02

  And skeptical or not, they're gonna have to offer this to their investors and to their to the stakeholders.

• 22:11Anthony Pompliano?

  Are there a lot of customers that you guys have or partners that have multiple entities? So for example, a lot of hedge fund managers also have family offices or something like that. I'm assuming if it's good enough for their institutional asset manager, they're probably, hey, let's just replicate the same infrastructure of a family office. If that is true, do you see some of them being, yeah, we're not yet, we are not yet ready at the hedge fund, but they're personally buying and selling or smirking. So I'm assuming that's happening a lot.

• 22:39Speaker 02

  A hundred percent, yes.

• 22:42Speaker 02

  You know, sometimes I think we paint the wrong picture of institutions, right? It's like they're faceless institutions. You saw some of the people in those institutions last night.

• 22:50Anthony Pompliano?

  Yes.

• 22:51Speaker 02

  I guarantee you, all of them owned Bitcoin.

• 22:55Anthony Pompliano?

  Yep.

• 22:55Speaker 02

  I'd be surprised if it wasn't 95%.

• 22:57Anthony Pompliano?

  Yep.

• 22:58Speaker 02

  Put it that way. It's just that they work in an institution that hasn't yet accepted it.

• 23:02Anthony Pompliano?

  Got there yet.

• 23:03Speaker 02

  Likewise, in fund world, they're sort of, just imagine you run a billion dollar fund. They go, hey, here's 20 bucks. They allocate that off to a smaller fund, a feeder fund, to a family office, and they see the performance there. If you like, they're testing it there. And that's probably, from a fund perspective, how I would describe our sort of fund customer base right now. So you're not getting the trillion dollar fund trading it yet. I hope they come. It's the smaller feeder funds or test case.

• 23:36Anthony Pompliano?

  You're based in the UK, which has a different kind of regulatory jurisdiction. How are you guys thinking about, we have customers all over the world, we service this global liquidity. The US has one regulatory jurisdiction, UK obviously is different, and then you go around the world. I'm assuming there's some differences in the FX world, but it feels like crypto, there's more bifurcation, there's more uncertainty, there's more, we're figuring it out. Like, how are you guys dealing with that right now?

• 24:05Speaker 02

  So I think that's fair. We're just gonna make a choice, right? So I've got clients in 100 countries. So if you imagine, look at FX land. I'm regulated in the UK by the FCA. I'm regulated in Europe under ESMA. I'm regulated by the MAS in Singapore. I've got registration in New Zealand. I've got regulation for crypto in Gibraltar. Now you're gonna say, why Gibraltar, David? Well, the UK didn't have a crypto framework. But so I wanted to have regulation. We think it's a good thing. Plus, some of my customers, they just want to see that stamp of approval. So you end up with, they had a digital ledger framework. The UK didn't.

• 24:49Speaker 02

  I approached my home regulator, which was the FCA. They said, you know, carry on, David, but we haven't got a framework. We'll let you know when we do. It's difficult in capital markets, but let's step back a little bit and remember why, why we have regulation. Mostly, it's trying to protect investors. Now, you and I can sit there and complain about them and say, you know, it's a pain in the ass. Look at all these regulations. Look at all these rules. But mostly, it's to protect, actually, private investors mostly. That's what's there. We have to adapt to it. I think what's different in crypto is there's a difference of opinion amongst global regulators, what these assets or what these products are. I think everyone's almost accepted that Bitcoin is not a security.

• 25:33Speaker 02

  That's different when you move into the token world. And I think that's the big debate in the US right now. So I'd have to be very careful. If I launched a token and I offered that for sale to a US customer, I'd be very nervous about that because I do think the SEC would say that's a security and you need to be regulated over here. But generally, when you come from an institutional standpoint, they've got entities all around the world themselves. So they go, you know what, we're not regulate, and they're not doing anything wrong. We're not regulated to trade this from our US entity. We're going to onboard you from our Asian entity where we are permission to do it. Like in Singapore, for example, there's permission to do it.

• 26:09Anthony Pompliano?

  Yeah, game on. One of the other things that you probably have a unique perspective on is, I keep coming back to this idea that regulators will be able to write law into code. And, you know, I use kind of a very simplistic example, which is, let's say that you're a credit investor, I'm not. You're going to trade me a security. I'm not allowed to buy it. And historically, they spent enormous amounts of money, time and energy to go figure out, hey, what happened? Who are the parties? Let's build a case and let's go prosecute these people. And it's very reactive and that's why it's so time consuming and cost consuming. If they can simply just write software that enforces the rules, they become proactive.

• 26:53Anthony Pompliano?

  And so just on that alone, if all of a sudden regulators could basically save a bunch of time, money and energy, and also create a more efficient, safer, you know, kind of better executed market, I think they're interested in it. Now, how do they do it? How long does it take? All that's up for debate, we'll see. But let's say that that does start to occur.

• 27:09Speaker 02

  Yeah.

• 27:10Anthony Pompliano?

  Along that path, you start to get the digitization of other assets as well. So it's not just fiat currencies that now are being traded. It's not just cryptocurrencies that are trying to either be currencies or commodities, if you will. Now mortgages, now, you know, other types of assets get digitized. Is there a thought process where like you guys will also have to, similar to the banks and others, like kind of navigate some of this stuff? Or do you think of it as just like, no, we haven't really gone into other markets outside of what we do in the legacy world? Like, we know what we do and we know what we don't do. And so you'd take a similar approach in crypto as well?

• 27:45Speaker 02

  I love it. I think it's a great idea. And I think, you know, that we've discussed it vaguely, you know, back at the headquarters, if you like, but a compliance coin, an onboarding coin. You know, if you think about the whole premise of crypto, a lot of people like the anonymity. Like, global anti-money laundering rules is you can't have ultimate anonymity, right? And comply with global laws. But would you accept it that it's inbuilt to your coin? It's inbuilt to your token and you can see who accessed it? So it's not accessed for all, right?

• 28:25Speaker 02

  All your KYC information is locked up in a token. And only if the law enforcement agencies want to look at it, will that be open? Would you permit that? So I think, you know, you could maybe, look, I'm not sure it'll ever happen. Regulators tend to be, they're going to be five to 10 years behind the market, quite rightly, by the way, because not every new thing works.

• 28:49Anthony Pompliano?

  Mm hmm.

• 28:50Speaker 02

  Right? Whoever launches a new coin today, why should they create regulation for that? It might be gone tomorrow.

• 28:55Anthony Pompliano?

  Yep.

• 28:55Speaker 02

  So now it's probably the right size for them to be assessing crypto.

• 28:59Anthony Pompliano?

  Start looking at it.

• 29:00Speaker 02

  But yeah, look, I think it's, I think that's, you know, you're back into probably above my pay grade, but you know, what can blockchain technology be used for? I think it's possible and I think it can create what you want, what I want, what all your viewers want. It could create a more frictionless market. The biggest problem we all have with every market right now is friction. I it's hard to access it.

• 29:25Anthony Pompliano?

  Now, don't tell me anything you're not supposed to tell me.

• 29:31Anthony Pompliano?

  Talk to me about like the brain drain from legacy finance, legacy tech. It feels like a lot of folks who, especially the people who are paying attention to crypto, like, oh, this is exciting. You know, I want to go to the frontier in various forms. Some want to go work at centralized equity based exchanges. Some want to go build in decentralized finance. Some want to build protocol. There's a whole bunch of stuff to do. You're unique because you actually have a crypto component to what you do. Right? Are there trends that you notice internally of like people wanting to shift into the crypto unit, maybe people who go there and want to shift back and like, hey, just screw these people? Do you see that it's become easier or harder to recruit? Just talk to me kind of like how crypto is impacting talent and kind of recruiting process.

• 30:15Speaker 02

  Thank goodness we have a crypto arm. Thank goodness we have Almex Digital. I like to think our technologists are amongst the best in the world.

• 30:25Speaker 02

  They're the modern day rock star, right? So I'm old enough, I started on trading floors and the traders were, the traders were the rock stars. Now it's the technologists.

• 30:34Speaker 02

  If we, more than money, like more than flexing, more than the brand, it's give them challenging problems to solve. The blockchain and crypto is full of challenging problems that haven't been solved yet. And no one's around to tell you, you're wrong. Or it's been done before because it hasn't. So my attrition rate in technology department last year was 0%.

• 31:03Anthony Pompliano?

  Wow.

• 31:03Speaker 02

  In the company, it's around 15% lower than normal. I'd expect 20% because people are young and they move on. Because of the pandemic, etc., people are moving less. But I don't think, A, I'd be able to keep my talented crew. We also increased the tech crew by 40% last year, looking to increase it again by 50% this year. If I wasn't doing crypto, if I wasn't offering challenging problems, I think it'd go elsewhere.

• 31:33Anthony Pompliano?

  Intellectual curiosity keeps people interested.

• 31:35Speaker 02

  These are engine, you know, think about it, you know, yourself that they're engineers and they just, they can't turn that off.

• 31:41Anthony Pompliano?

  And how many of? Them are, uh, I want to work on not crypto or I want to work exclusively on crypto. Or are they like straddling, straddling both sides? Like, what are you seeing there?

• 31:50Speaker 02

  Okay. So I'm gonna, you, you don't like me sitting on the fence, but I'm gonna say they straddle both sides. But I can tell there's some who love crypto and see that being what they do for the next 20 years.

• 32:01Anthony Pompliano?

  Yep.

• 32:02Speaker 02

  But actually beneath it all, I'd say all of them just love the technical challenge. It's something new. How do I store it? You know, we looked at custody, for example. They never looked at HSMs before. They're, they never looked at the makeup, the computational power within those. So they ended up talking to, um, nuclear, you know, guys who are in nuclear energy. They talked to people who were advising the German military to try and understand HSM. So that sold, if you like, their intellectual curiosity. So most of them are interested in that, but like the rest of the planet, you could probably go to my technology department. And I'm going to say 40% of them don't believe in crypto, but they do like the challenges.

• 32:44Anthony Pompliano?

  I mean, that's a pretty big number.

• 32:46Speaker 02

  Yeah, but they're cynics. Do you know like engineers, techies? They're cynics and they're always looking, they might believe in Bitcoin, but do they believe in DeFi and all those other altcoins? All they see is potential software bugs, right? All software has bugs. So if all you're selling them is

• 33:07Anthony Pompliano?

  Fix the bugs. Yeah.

• 33:08Speaker 02

  A new, a new wrapped.

• 33:09Anthony Pompliano?

  Yeah. They want innovation. They don't want the evolutionary, uh,

• 33:13Speaker 02

  Bingo.

• 33:13Anthony Pompliano?

  Type thing. Yeah. It's a, what about you? Like, how, how much fun is the crypto stuff? Like, and has this like, I was talking to a, a recent hedge fund manager, uh, who's quite large. And they were like, it's re-energized our entire team, right? Like it's similar to, it feels like a little bit like the technical challenge stuff, right? Of like new markets, lots of market share up for grabs. Like people feel differently about this than they do of like, oh, we're just doing the same thing we've been doing for 15 years. Is that similar to kind of how you're thinking about it?

• 33:48Speaker 02

  It's very energizing. And again,

• 33:52Speaker 02

  You don't know everything. Like sometimes, look, I've been in FX markets a long time. And you think, you know, what's new? So you stay up all night or you spend your whole year coming, coming up trying to come up with a new product. In crypto, there's just these new challenges all the time. But more importantly, so what do I run? I run an FX exchange, I run an FX broker, and I run a crypto broker and exchange. I go and speak to the biggest banks in the world about the FX exchange. I can tell you, you know, last time I was in New York City, I met the, sat down for lunch with the global head of FX at one of the largest banks in the world to talk about foreign exchange. And of course, I'm trying to get more business from him. It's

• 34:32Speaker 02

  always the case. We spend 10 minutes discussing how that might happen. The next 50 minutes, talking about crypto.

• 34:40Anthony Pompliano?

  Really?

• 34:40Speaker 02

  Talking about Almex Digital. Now, he does not trade with me today, right?

• 34:44Anthony Pompliano?

  Do they trade?

• 34:45Speaker 02

  Eh, they trade the future, right? The centrally, they will definitely trade the spot, and they will definitely trade the future. Don't ask me who it is.

• 34:57Speaker 02

  I can see, I can see that look on your face, right? No, but all that, I don't think even I'd be letting the cat out of the bag. What I'd say to you there is that.

• 35:05Anthony Pompliano?

  They're all gonna do it.

• 35:05Speaker 02

  Every bank's gonna do it. They've all got a strategy.

• 35:08Anthony Pompliano?

  Yeah.

• 35:08Speaker 02

  But look, I just think it's that variety. I've just come from what would be quite a blue chip staid type conference. You know, it's not a Bitcoin conference. There's no rah rah rah. But I'm talking to these guys who trade FX for a living, like trillions of dollars of the stuff daily. And I said, you know, for you guys, you don't have to necessarily be a believer. Just trade it, invest in it. BTC USD, the way you do EUR USD. Just start there. So now, when you start talking like that, and I said, within the Almex Group last year, BTC USD was my eighth biggest currency pair.

• 35:46Anthony Pompliano?

  Wow.

• 35:47Speaker 02

  They wouldn't have thought that four years ago. So now I'm saying, just think about that. And they go, okay. So all of a sudden, then they go, how do you store it? How do you access it? What's the credit makeup? Talk me through multi-sig. What do you think of these other coins? What about DeFi? Can I get into DeFi? And it just, it makes everything I do better. For example, Anthony.

• 36:08Speaker 02

  We trade foreign exchange seven days a week now. No one else in the market does it. Why do we do that? Well, because you list Bitcoin dollar, Bitcoin yen, Bitcoin euro. So guess what? You have the triangle. So I've got euro-dollar, dollar-yen, euro-yen. So we have weekend FX markets. And I said to them, guys,

• 36:26Anthony Pompliano?

  Wow.

• 36:27Speaker 02

  if you own this, if you, you know, you run, you work for a big fund, you run the FX desk. If you own Bitcoin, mentally at least, you own seven day a week currency markets.

• 36:38Anthony Pompliano?

  Mm hmm.

• 36:38Speaker 02

  That's 27% more opportunity for you guys to produce returns.

• 36:42Anthony Pompliano?

  Yeah, if you're good.

• 36:43Speaker 02

  That's it.

• 36:45Anthony Pompliano?

  And they've got to be super receptive to this.

• 36:47Speaker 02

  I hope so. I don't get the reception that you might get.

• 36:50Anthony Pompliano?

  Yeah.

• 36:50Speaker 02

  Because you're thinking about it and they need the approvals internally. But they see that coming. The first, the first point is they're human beings. And human beings say, hold on a minute, I work hard enough five days a week.

• 37:03Anthony Pompliano?

  Mm hmm.

• 37:03Speaker 02

  I said, it's okay. There's 27% more opportunity for your department. You can employ more youngsters, more young engineers. And guess what? The technology is going to do a lot of it for you.

• 37:13Anthony Pompliano?

  Mm hmm.

• 37:14Speaker 02

  Right? But ultimately, who tells you that you can't buy Tesla on other stocks are available? You can't buy Tesla on a Saturday? Who tells you that I've got to wait until the bank's open to send my euros?

• 37:28Anthony Pompliano?

  Mm hmm.

• 37:28Speaker 02

  Or to hedge my Vodafone stock into dollars? Why have I got to wait from Friday to Monday to do that?

• 37:34Anthony Pompliano?

  Mm hmm.

• 37:35Speaker 02

  Right? People sometimes have time at the weekend. So look, they're a bit worried about losing the weekend. I just think it's a great opportunity for the whole of capital markets and really for the world at large. Because we're going to need to, as much as you expect to do your, your clothes shopping on a Sunday or change your car insurance on a Sunday, you're going to expect to remodel your investment portfolio, rebalance your investment portfolio at seven days a week, not just five days a week.

• 38:00Anthony Pompliano?

  How many, Joe, how many of your friends trade versus they just buy and hold stuff? Uh, most buy and hold. Buy and hold. And then what about like all like the wealth management at the banks and stuff? Most of those guys are trading or they're just buying and holding? Uh, I think it depends, right? There's obviously some strategic things. Part of the job of the wealth manager is to bring ideas to the table, right? And see what they're interested in, but there's definitely more strategic buying and trading and more trading in general versus buying and selling. Then just long-term holding for sure. Yeah. It just feels like the whole world's moving this way.

• 38:35Speaker 02

  I hope so.

• 38:36Anthony Pompliano?

  It's great for you.

• 38:38Speaker 02

  But that's, look, that's one thing, you know, people always say, what's your view on Bitcoin? No one's ever asked me what my view on Euro is or dollars or pounds or gold. I don't have, I don't have to care. I'm just trying to create an efficient marketplace. Genuinely, that's what we want to also do in crypto land. I happen to be a believer in the asset class. I happen to be a believer in Bitcoin, but it shouldn't matter. I'm just matching buyers and sellers.

• 39:01Anthony Pompliano?

  That's all you do.

• 39:02Speaker 02

  To Joe's point, that's it. It doesn't really matter. If you want to buy and hold, you can access it at LMAX Digital. If you want to speculate, day trade it, do it at LMAX Digital.

• 39:11Anthony Pompliano?

  Joe, should we have a trading competition?

• 39:14Speaker 02

  Oh dear.

• 39:15Anthony Pompliano?

  Sure, if you want to. I mean, I probably won't be very good at it. I think that you might lose. That's what I'm saying.

• 39:21Speaker 02

  I think I might lose. Hold on. I'm just the exchange guy.

• 39:26Anthony Pompliano?

  All right. Where can we send people, especially the institutions that want to learn more about what you guys are doing? Where, where can we send them?

• 39:31Speaker 02

  Very easy. Almaxdigital.com or almax.com if you want to see the group.

• 39:36Anthony Pompliano?

  Almax.com or Almaxdigital.com.

• 39:38Speaker 02

  Correct.

• 39:38Anthony Pompliano?

  Pretty simple. Fastest trading around.

• 39:41Speaker 02

  Fastest, most scalable.

• 39:42Anthony Pompliano?

  I feel like there's a commercial in here that's just like, you know, fastest, cheapest, no downtime.

• 39:47Speaker 02

  When you say, no one wants to be cheap. You want to be cost efficient. Right?

• 39:52Anthony Pompliano?

  You write the script.

• 39:55Anthony Pompliano?

  The, the, the, the most gangster thing that you could say is like, yeah, everyone else goes down. We never go down.

• 40:01Speaker 02

  That's it.

• 40:01Anthony Pompliano?

  Cause ultimately if you go, okay, fine. I probably should have an account there.

• 40:04Speaker 02

  Web status on the homepage. You'll see it.

• 40:08Anthony Pompliano?

  Putting on my homepage, that is one of those things, right? If it's on the homepage, you're gonna make sure you stay up.

• 40:11Speaker 02

  Correct. But, you know, look, again, I'm gonna take my, my hat off to, to the, the guys in retail land who've done it. Just like the Super Bowl ad again, sorry to get back to it, they didn't know they're gonna be so successful. And they're victims of their own success, right? I didn't have to scale for a million concurrent users. Yes, I scaled for a million concurrent messages, perhaps, but not users asking another hundred different questions. So they'll get there and I think they're providing, you know, good service to the private investor market.

• 40:43Anthony Pompliano?

  Literally, the web status is right there.

• 40:45Speaker 02

  You found it? You're checking me out?

• 40:49Anthony Pompliano?

  Make sure it's up right now. I mean, how crazy would that be if you were down at the one second that you're on here?

• 40:54Speaker 02

  It's true. It's me thinking, oh, live again, you can't go, you can't go on here and BS.

• 40:58Anthony Pompliano?

  Awesome. Well, listen, thank you so much for taking the time to do this. I, I've been a big fan of what you guys are doing for a long time now and, and generally think people are just waking up to the fact that institutions have a lot of money, right? It's much bigger than obviously than the, the retail exchanges, but infrastructure matters and you guys got some pretty good infrastructure, so I appreciate it.

• 41:17Speaker 02

  Good to be here. Thanks for having me.

• 41:19Anthony Pompliano?

  Thanks so much for listening to today's episode. I really hope you guys enjoyed this one. Make sure you subscribe on Apple, Spotify, or your favorite podcast player. And if you're looking to try to transition to get a new job in the Bitcoin or crypto industry, we've got you covered. Head over to pompscryptocourse.com. We've developed a curriculum with the top teams across the industry. It's a three-week intensive training program with over 50 events packed into that three-week time period. Go to pompscryptocourse.com to learn more and I'll meet you guys for the next episode.