James Putra did not necessarily have an aha moment with Bitcoin. Rather the concept of crypto lingered after a visit to the Massachusetts Institute of Technology (MIT) Media Lab.
“Back in 2014, we had been invited to the MIT Media lab to see projects the students were working on,” said James Putra, Director of Product Strategy at TradeStation Crypto, whose parent company Monex Group was a Consortium MIT Laboratory Member, as well as an investor in ErisX.
“MIT students presented on the idea of Bitcoin, showed us a camera that could read a book without opening the cover and a Skype call where you could shake hands with someone on the other side of the world.”
James recalls that his team was really impressed with all the projects but the Bitcoin idea festered. As a securities broker-dealer, Bitcoin presented an opportunity for TradeStation to bring a true online brokerage model to the crypto community.
Trading on a Tuesday
After his visit to the MIT Media Lab in 2014, James was inspired to create an internal innovation lab. The President of TradeStation, John Bartleman, was supportive and gave James the freedom to explore the idea that summer.
“My main goal was to do things that would help with the strategic direction of the firm,” said James. “Brokerages aren’t usually a safe place to fail but that’s what made it unique about our innovation lab. We were shooting for things that were really out there.”
James’ team built a data analysis system that came to be a foundational system for TradeStation. It leverages artificial intelligence to predict trends and provide insight into customer attrition, successful trading behaviors and trader characteristics.
“We got pretty good at analyzing the data, our goal was to get to the point where we could predict a person’s likelihood of losing a trade on a Tuesday afternoon,” said James. “As a broker we couldn’t tell them that, but we could send them education to distract them on Tuesday mornings.”
The innovation lab was called TradeStation Sandbox. They got into rapid development cycles and would operate in 6 week sprints; They worked on data analysis systems, idea generation tools and in 2017, a mining operation.
“Starting a mining operation in our own data center led to a lot more questions. How do you account for this? What about custody and security?” He said, “organically other departments got involved such as Finance and Security and we learned a lot about how to manage crypto as an asset class.”
It was also in 2017 that TradeStation’s parent company, Monex Group, was reimagining their mission statement.
“They were looking at the concept of reinventing money and one of the key things in the strategy was blockchain technology,” said James. “It blessed the effort and became clear that we needed to launch a separate entity which spawned TradeStation Crypto.”
He said that one of the challenges in launching the company was that there was not a direct path to follow.
“Every step of the way we had to make our own path forward. There was a lot of regulatory uncertainty, our internal lawyers were working with third party legal teams to figure out how we fit into the blockchain/crypto world,” he said. “We had to go with what we thought was the best approach and we leaned on our teams prior experience from the securities broker-dealer.”
James believes the lack of regulatory oversight may be holding many retail traders from getting into crypto because they know how the capital markets operate.
“At TradeStation, customers can have an equities account and a crypto account. We have forged a path as close as possible to the equity markets and this goes a long way.”
It is this shared capital markets history that brought TradeStation and ErisX to strategically align.
“It helps that ErisX comes from that regulated background. Whether it be our legal teams, our comms team, our finance people; it helps to get deals done when you speak the same language.”
Crypto and Coronavirus
As the conversation came to a close, it seemed amiss not to ask if the current pandemic was bringing more retail traders to crypto?
“The markets are volatile and have sold off, which energizes people looking for deals. It’s reasonable to say that coronavirus was a leading factor for the market sell off,” he said. “I am not sure it brought a flood of new traders to the market, but it seems to have brought a lot of market interest to the cryptocurrency asset class.”
In the midst of coronavirus, ErisX and TradeStation Crypto announced joint efforts to bring familiarity, liquidity and security to the crypto markets. ErisX shares TradeStation Crypto’s goal to make digital assets accessible to all investors and employs a central limit order book to ensure equal access for all. If you are interested in gaining regulated and transparent access to the crypto markets through familiar means, you can sign up here for a TradeStation Crypto account.