WEBVTT - Luana Lopes Lara on Kalshi’s CFTC Approval Journey 0:00:00.080 --> 0:00:06.080 M. This is Mesters in Business with Very Results on 0:00:06.240 --> 0:00:11.760 Bloomberg Radio. This week on the podcast, I have an 0:00:11.760 --> 0:00:16.360 extra special guest, Luana Lopez. Laura is a co founder 0:00:16.400 --> 0:00:21.079 of CALCI. They are a derivatives trading marketplace where you 0:00:21.120 --> 0:00:27.080 can go and trade event contracts on such disparate occurrences 0:00:27.120 --> 0:00:33.840 such as COVID nineteen, economic outcomes, interest rates, Federal Reserve, politics, 0:00:33.960 --> 0:00:39.280 climate and weather, culture, the Oscars, the Grammys, science and technology, 0:00:39.320 --> 0:00:43.720 all sorts of really fascinating places. They are the only 0:00:44.200 --> 0:00:47.600 such marketplace that has been approved for this sort of 0:00:47.640 --> 0:00:53.040 events trading by the Commodities Futures UH Trading Commission, the CFTC, 0:00:53.640 --> 0:00:57.760 which makes them both fascinating and unique. There's nothing else 0:00:57.800 --> 0:01:02.560 like them. UH. This pro vides away for individuals and 0:01:02.720 --> 0:01:08.240 institutions to hedge all sorts of really interesting events and 0:01:08.440 --> 0:01:13.039 as opposed to having think about, well, if this happens, 0:01:13.080 --> 0:01:18.560 what's the ramification in gold or oil or inflation or 0:01:18.680 --> 0:01:22.040 interest rates, you can actually bet on that exact event 0:01:22.560 --> 0:01:27.199 and hedge your business or your portfolio. It's really quite fascinating. 0:01:27.319 --> 0:01:30.880 I thought this was a really interesting conversation and I 0:01:30.920 --> 0:01:33.679 think you will also so with no further too, my 0:01:33.880 --> 0:01:40.800 conversation with cal She co founder Luana Lopez Laura. This 0:01:41.280 --> 0:01:45.720 is Mesters in Business with Very Results on Bloomberg Radio. 0:01:48.000 --> 0:01:51.120 My special guest this week is Luana Lopez Laura. She 0:01:51.440 --> 0:01:55.440 is the co founder of Calci, one of the only 0:01:55.600 --> 0:02:00.240 derivative trading marketplaces that allows the trading of a event 0:02:00.320 --> 0:02:04.640 contracts in order to hedge against major business and political events. 0:02:05.080 --> 0:02:08.680 CALCI is the only marketplace to receive approval from the 0:02:08.720 --> 0:02:15.080 Commodity Futures Trading Commission, who regulates the trillion dollar derivatives industry. 0:02:15.440 --> 0:02:19.560 Luana Lopez Laura, Welcome to Bloomberg. Thank you so much. 0:02:19.600 --> 0:02:22.520 I'm very happy to be here. So so let's start 0:02:23.040 --> 0:02:28.079 just with that unusual UM intro. You're the only CFTC 0:02:28.160 --> 0:02:33.120 approved way to trade on the outcome of events. Explain 0:02:33.160 --> 0:02:35.799 that a little bit right exactly, UM. Cal She is 0:02:35.800 --> 0:02:38.160 a financial exchange that allows people to trade on the 0:02:38.200 --> 0:02:42.000 outcome of a lot of different events. UM. So things 0:02:42.040 --> 0:02:45.400 from will inflation keep going as high as it is 0:02:45.480 --> 0:02:48.959 right now? Will the Feds raise rates to like? Will 0:02:49.000 --> 0:02:51.720 twenty twenty two be the hottest year on record? Um? 0:02:51.800 --> 0:02:53.520 And already sets us A part is that we're the 0:02:53.560 --> 0:02:57.160 only the first and only ones regulated by the CFTC 0:02:57.360 --> 0:03:00.320 to do this um in the United States. So let's 0:03:00.360 --> 0:03:03.840 talk about that, because I love this story about you guys, 0:03:04.200 --> 0:03:08.120 you and your co founder. You start calling attorneys and 0:03:08.160 --> 0:03:10.480 one day you end up calling like sixty or seventy 0:03:10.560 --> 0:03:13.720 lawyers in a single day, and pretty much every one 0:03:13.760 --> 0:03:16.160 of them said, people have been trying to do this 0:03:16.240 --> 0:03:20.360 since the nineteen eighties. It's never been approved. Just forget 0:03:20.400 --> 0:03:23.960 about it. It's not happening to tell us about that, right. So, 0:03:24.120 --> 0:03:26.400 we really wanted to build Cauchi the right way, so 0:03:26.680 --> 0:03:29.440 to be that exchange that is sustainable and can be 0:03:29.440 --> 0:03:32.320 a pillar of the financial world. UM. We wanted to 0:03:32.360 --> 0:03:34.880 make this really big, get the right partners on board, 0:03:34.920 --> 0:03:36.920 and really try to build something that's gonna out last 0:03:37.200 --> 0:03:39.160 seeing me, you know, like c's around there for like 0:03:39.200 --> 0:03:41.520 a hundred fifty years. And the way to do that 0:03:41.600 --> 0:03:44.280 for us was to build a proper financial exchange, build 0:03:44.320 --> 0:03:47.080 this right. Uh. And we knew that getting regulated was 0:03:47.120 --> 0:03:49.080 the first step in like figuring out how to do 0:03:49.080 --> 0:03:51.920 it right. But obviously me and my co founder of 0:03:51.960 --> 0:03:55.360 both computer scientists, we knew nothing about regulations. So we 0:03:55.440 --> 0:03:58.680 sat down and put on a spreadsheet that names and 0:03:58.680 --> 0:04:02.000 and emails of five different lawyers that we thought maybe 0:04:02.040 --> 0:04:04.600 could be related to this, and we called one by one. 0:04:04.680 --> 0:04:07.640 I think we split who was gonna call um who, 0:04:07.680 --> 0:04:10.080 and all of them were just like, that's not gonna happen. 0:04:10.240 --> 0:04:12.920 The CFC won't allow this. It has already they already 0:04:12.920 --> 0:04:16.600 said no to this in the past. Um. But because 0:04:16.640 --> 0:04:18.520 of a friend of a friend of a friend, we 0:04:18.640 --> 0:04:21.040 ended up getting to Jeff Benman, who works with us 0:04:21.080 --> 0:04:25.520 to today. Uh, he's an ex official the CFTC, and 0:04:25.640 --> 0:04:28.719 he really understood the commission and helped us navigate started 0:04:28.960 --> 0:04:32.520 helping us start navigating the entire situation. Um. And Yeah, 0:04:32.520 --> 0:04:36.159 it was two years of of that entire engagement and 0:04:36.200 --> 0:04:39.599 iteration of the CFTC with all their core principles and 0:04:39.640 --> 0:04:42.440 concerns that they had that to address them and really 0:04:42.680 --> 0:04:47.120 end up getting regulated in November. So it sounds like 0:04:47.600 --> 0:04:50.760 it wasn't so much that the CFTC was against the 0:04:50.839 --> 0:04:56.560 idea of event contracts in order to hedge on these circumstances. 0:04:57.080 --> 0:05:01.400 They just didn't like what was um presented them previously 0:05:01.640 --> 0:05:06.240 over the previous forty years, or did something change that 0:05:06.279 --> 0:05:08.680 they suddenly said Oh, we used to think this was 0:05:08.720 --> 0:05:10.599 a bad idea, and now we think it's a good idea. 0:05:10.920 --> 0:05:12.960 I think it was it's more of the first I 0:05:13.000 --> 0:05:16.360 think it was about presenting to them why we thought 0:05:16.400 --> 0:05:19.960 event contracts were so important and how they could really 0:05:19.960 --> 0:05:23.600 be used for hedging um and every day hedging like 0:05:23.600 --> 0:05:27.279 like retail and Americans every day can hedge things like inflation, 0:05:27.400 --> 0:05:30.200 like rates, the risks that we see and read about 0:05:30.279 --> 0:05:33.240 like in the news or or on TV every day. Uh. 0:05:33.320 --> 0:05:35.479 And it was really like presenting to them and getting 0:05:35.520 --> 0:05:38.280 them to comfort with how these markets work, how they 0:05:38.279 --> 0:05:42.200 weren't easy to manipulate, how the rules could could operate. 0:05:42.240 --> 0:05:44.960 So really getting them to comfort with how the exchange, 0:05:45.000 --> 0:05:47.640 the markets, and all of our contracts could could operate. 0:05:47.680 --> 0:05:51.240 And that's what took that long. It wasn't um in 0:05:51.279 --> 0:05:53.880 my opinion. It was more like explaining what we wanted 0:05:53.920 --> 0:05:56.559 to do. They were fantastic from the beginning to really 0:05:56.560 --> 0:05:59.760 listening and working with us. UM. It wasn't that they 0:05:59.800 --> 0:06:01.640 were just like, no, wait, we're never going to do this. 0:06:02.200 --> 0:06:04.640 I think it's interesting that it took people from outside 0:06:04.640 --> 0:06:08.000 of the world to finance to bring an idea into 0:06:08.080 --> 0:06:13.640 finance from a technology perspective and say, whatever the logistical 0:06:13.720 --> 0:06:19.080 hurdles we have to meet in order to receive regulatory approval. 0:06:19.760 --> 0:06:25.040 That wasn't like an ideological problem to you, was a well, 0:06:25.080 --> 0:06:27.040 this is a logistical problem that we have to solve, 0:06:27.080 --> 0:06:29.640 and once we solve it, we can get this going. 0:06:29.880 --> 0:06:31.600 So how long did the back and forth with the 0:06:31.680 --> 0:06:36.200 CFTC take to get approval? Yeah, it was two years 0:06:36.279 --> 0:06:38.560 or two years and a half. Um. And yeah, we 0:06:38.640 --> 0:06:41.040 used to say, it's like we were climbing a very 0:06:41.120 --> 0:06:44.320 high mountain, and then as we would started climbing more, 0:06:44.360 --> 0:06:46.640 we would see it's actually so, I says high, and 0:06:46.680 --> 0:06:49.560 we would keep and it would keep multiplying. Because the 0:06:49.560 --> 0:06:51.440 thing is we would go to them and they would 0:06:51.440 --> 0:06:54.039 have concerns and issues, so we would go back and 0:06:54.080 --> 0:06:55.800 solve the issues. A lot of it, as you mentioned, 0:06:56.320 --> 0:06:59.919 was related to technology really doing analysis and similar markets, 0:07:00.080 --> 0:07:02.599 what we could do and view the surveillance systems and 0:07:02.600 --> 0:07:04.640 all of those things, and going back to them and 0:07:04.640 --> 0:07:06.599 then they're like, okay, that's fine, but we have all 0:07:06.600 --> 0:07:08.440 these other issues now, and then we would go back 0:07:08.480 --> 0:07:12.440 and and figure them out and do that one by one. Um. 0:07:12.560 --> 0:07:14.400 It was like walking in the desert a little bit. 0:07:14.440 --> 0:07:16.800 We didn't know where where the end was, but it 0:07:16.920 --> 0:07:18.880 ended up working out. So so let's talk a little 0:07:18.880 --> 0:07:22.560 bit about your platform. This is unlike futures, and it's 0:07:22.640 --> 0:07:27.280 unlike derivatives in that when you are purchasing a contract, 0:07:27.960 --> 0:07:30.360 you're putting up the full dollar amount. It's not like 0:07:30.480 --> 0:07:33.680 where you're putting up ten cents on the dollar or 0:07:33.880 --> 0:07:36.239 one cent on the dollar. If you're making a thousand 0:07:36.280 --> 0:07:40.000 dollar bet, you were posting a thousand dollars. How much 0:07:40.320 --> 0:07:45.160 did that factor influence the CFTC that this wasn't just 0:07:45.200 --> 0:07:49.800 going to be reckless speculation and people um falling around. 0:07:49.800 --> 0:07:53.160 This was really hedging right. So we are fully cash collateralized. 0:07:53.200 --> 0:07:56.720 So every as you said, every dollar that you can lose, 0:07:56.840 --> 0:07:58.760 every dollar that you your trade, you have to have 0:07:58.800 --> 0:08:01.200 it with us before UM. And I think this really 0:08:01.240 --> 0:08:03.280 helps with the safety off the platform, and it really 0:08:03.280 --> 0:08:06.160 started from us. UM. We really want to start in 0:08:06.200 --> 0:08:07.920 a way that it's very safe for everyone and we 0:08:07.920 --> 0:08:12.880 can really understand the system before going like too far ahead. UM, 0:08:12.920 --> 0:08:15.080 and we really see this as very important. So all 0:08:15.120 --> 0:08:18.040 the funds are fully cash collatalized, but obviously from from 0:08:18.080 --> 0:08:20.680 the CFTC perspective. It adds to their comfort to the 0:08:20.720 --> 0:08:23.720 fact that there can be like leverage or marginal more 0:08:24.040 --> 0:08:27.040 risk added to the system that all the money's collatalized 0:08:27.040 --> 0:08:30.240 and the retail is protected because of that. So equities 0:08:30.320 --> 0:08:33.600 you can put up half the dollar amount. Two to 0:08:33.679 --> 0:08:37.920 one futures are something like ten to one options. If 0:08:37.960 --> 0:08:40.440 you go out of out of the money and far 0:08:40.640 --> 0:08:43.760 enough into the future, it's it's a hundred to one. 0:08:44.360 --> 0:08:46.760 Is there ever a plan to move away from the 0:08:46.880 --> 0:08:50.720 one to one dollar for dollar Maybe not option hundreds 0:08:50.720 --> 0:08:53.880 on one, but certainly margin and equity market seems to 0:08:53.920 --> 0:08:56.720 be pretty reasonable at two to one UM. At the moment, 0:08:56.760 --> 0:08:59.960 we really focused on retail and fully cash collateralization fullick 0:09:00.120 --> 0:09:03.360 being fully cash colatalized UM. But at in the future, 0:09:03.360 --> 0:09:05.280 as think, our goal is to be like the New 0:09:05.320 --> 0:09:08.480 York Stock Exchange for events, so having being really the 0:09:08.800 --> 0:09:12.440 central place of the ecosystem and having like different brokers 0:09:12.440 --> 0:09:16.240 and institutions, hedge funds, market makers plugged into us the exchange. 0:09:16.480 --> 0:09:19.000 At that point it would make sense to start considering 0:09:19.440 --> 0:09:21.960 UM something like that, But right now we're completely focused 0:09:21.960 --> 0:09:24.800 on retail and UM having a fully cash glatalized stuff. 0:09:25.120 --> 0:09:28.440 Once it becomes a big institutional exchange, then then you 0:09:28.480 --> 0:09:31.679 can explore that. So since it's retail, let's talk a 0:09:31.679 --> 0:09:35.480 little bit about retail. Gamification is a real big issue. 0:09:35.520 --> 0:09:37.520 We've seen robin Hood do this, We've seen a number 0:09:37.600 --> 0:09:41.400 of other UH sports gambling platforms doing this. What are 0:09:41.440 --> 0:09:45.840 your thoughts about gamification when it comes to events trading. Yeah, 0:09:45.880 --> 0:09:48.480 I think the gamification question is a very interesting one 0:09:48.520 --> 0:09:50.720 because I think it's less about the asset class and 0:09:50.760 --> 0:09:54.280 more about the actual platform and the mechanics. So, for example, 0:09:54.360 --> 0:09:57.520 you can trade equities on robin Hood or Charles shob Um. 0:09:57.559 --> 0:10:00.640 The conversation about gamification is a lot more on Robin 0:10:00.640 --> 0:10:03.520 hood Um then Altarl shrob even though the underlying like 0:10:04.000 --> 0:10:06.760 it's the same, you're trading equities. So we really believe 0:10:06.840 --> 0:10:10.839 event contracts are have a very big economic purpose and 0:10:11.120 --> 0:10:13.320 can be used for hedging and all of those things 0:10:13.360 --> 0:10:16.839 that we talked about, and the gamification would come only 0:10:16.840 --> 0:10:20.080 in the platform. But we're very, very um focused on 0:10:20.200 --> 0:10:23.000 beauting a platform that's safe, easy to understand and to use, 0:10:23.080 --> 0:10:26.520 but not not gamified. So let's go over some of 0:10:26.559 --> 0:10:30.120 the type of events that you guys trade. You could 0:10:30.280 --> 0:10:35.319 you can make bets on COVID nineteen and vaccination, on economics, inflation, 0:10:35.520 --> 0:10:40.959 mortgage rates, politics, climate and weather, world culture, science and technology. 0:10:41.400 --> 0:10:44.439 Let's let's uh, let's take some examples from this. I 0:10:44.559 --> 0:10:48.040 love the idea, will the thirty year fixed rate mortgage 0:10:48.080 --> 0:10:52.079 be above three point nine percent on April fift In 0:10:52.200 --> 0:10:55.720 other words, if I'm buying a house and closing on 0:10:55.760 --> 0:10:59.640 it and concerned that rates might rise, I could take 0:10:59.640 --> 0:11:03.760 a trade against that and hedge that position. And I 0:11:03.800 --> 0:11:07.160 don't have to be a billion dollar hedge fund. I 0:11:07.200 --> 0:11:10.120 could just be someone buying a house exactly. I think 0:11:10.160 --> 0:11:13.760 all of our contracts UM have economics purpose and they 0:11:13.760 --> 0:11:16.520 can really be used for hedging. UM. For example, all 0:11:16.520 --> 0:11:19.320 of our COVID markets during the omicron wave, you could 0:11:19.360 --> 0:11:22.040 really see, like even before the news started reporting it 0:11:22.520 --> 0:11:24.719 UM the amount that it was ticking up, and then 0:11:24.720 --> 0:11:26.880 we would talk to the users and there, oh wow, 0:11:26.960 --> 0:11:28.959 like I might not be able to go back to school. 0:11:29.280 --> 0:11:32.720 I want to hedge like that that situation and all 0:11:32.760 --> 0:11:35.000 of that UM. SO a lot of the contracts I'm 0:11:35.080 --> 0:11:38.120 very interested in. For example, is the half point rate 0:11:38.200 --> 0:11:40.680 hike for for March. I think it's it's a market 0:11:40.679 --> 0:11:43.280 that went up a lot to during I think one 0:11:43.320 --> 0:11:45.400 of the there was some news that that he was 0:11:45.400 --> 0:11:47.520 going to go up by that and then he went 0:11:47.920 --> 0:11:51.880 down again, and and um. Other ones are GDP and inflation. 0:11:51.960 --> 0:11:54.480 Really just getting into the economic situation we have in 0:11:54.520 --> 0:11:57.560 nowadays number of Americas. So these are all yes or 0:11:57.679 --> 0:12:03.360 no contracts, pretty clearly determined. It's black and white. Will 0:12:03.400 --> 0:12:06.559 two hundred and fifty four million Americans be vascinated by 0:12:06.600 --> 0:12:11.160 May one? But I saw a contract will America achieve 0:12:11.280 --> 0:12:16.280 her immunity by September one? Who is the determiner of 0:12:16.600 --> 0:12:20.360 whether or not her immunely? How do you define those terms? Yeah, 0:12:20.400 --> 0:12:22.679 that's a great question. All of our markets are like 0:12:22.920 --> 0:12:27.080 legal binding documents, so they're like forty pages determining what 0:12:27.160 --> 0:12:30.120 the real rules are, uh to really make sure that 0:12:30.160 --> 0:12:33.559 there's no room for indeterminacy or anything of the sort. 0:12:33.960 --> 0:12:36.680 Uh So this market specifically, I'm not exactly sure. I 0:12:36.679 --> 0:12:39.040 think it's definitely the CDC or some number around there. 0:12:39.360 --> 0:12:41.559 But if you like all of our rules, if you 0:12:41.600 --> 0:12:44.439 go to our rule book, it has very specifically defining 0:12:44.920 --> 0:12:48.480 um where which number we're using, how we're using, which target, 0:12:48.520 --> 0:12:50.000 if it has to be above or below a certain 0:12:50.080 --> 0:12:52.920 number and it ends up being very determined. But for 0:12:52.960 --> 0:12:56.480 COVID markets, we're using CDC numbers for settlement sources. So 0:12:56.520 --> 0:13:00.240 I mentioned world culture. Um, that's kind of interest thing. 0:13:00.800 --> 0:13:03.079 Is there a lot of activity in who's gonna win 0:13:03.160 --> 0:13:05.679 Best Picture or who's going to be the best actress 0:13:05.679 --> 0:13:09.040 at the oscars? How is that a seasonal thing when 0:13:09.080 --> 0:13:12.360 each year or how does that trade? Yeah, the launching 0:13:12.360 --> 0:13:15.319 the oscar markets were was very important for us because 0:13:15.360 --> 0:13:19.000 they were the very very first regulated derivatives I guess 0:13:19.040 --> 0:13:22.840 in the entertainment industry and in academy awards. Um. We 0:13:22.920 --> 0:13:25.920 have traded more than a hundred and fifty thousand contracts 0:13:26.240 --> 0:13:27.920 in the oscars so far, and it's only been a 0:13:27.960 --> 0:13:30.760 couple of weeks, and we really expect the trading there 0:13:30.800 --> 0:13:33.480 to to be a lot higher closer to to the 0:13:33.520 --> 0:13:36.679 ceremony or during the ceremony. UM. But it's interesting a 0:13:36.720 --> 0:13:38.560 lot of people say that the oscars are are dead 0:13:38.640 --> 0:13:42.760 or irrelevant, but the movie industry is so big to 0:13:42.880 --> 0:13:45.480 nowadays that there's so much so many people that are 0:13:45.520 --> 0:13:48.120 so impacted by the results of these awards and things 0:13:48.160 --> 0:13:50.960 of the sort. Um. And yeah, well this is analogy point. 0:13:51.000 --> 0:13:54.599 I think The interesting thing about the entertainment industry is 0:13:54.640 --> 0:13:56.760 that you have awards, for example, like the Oscars or 0:13:56.800 --> 0:13:59.120 the Grammys, that we also have markets on. But you 0:13:59.200 --> 0:14:04.560 have weekly things, for example, album sales numbers, UM billboards, 0:14:04.760 --> 0:14:07.200 charts and things like that that that we offer markets 0:14:07.200 --> 0:14:08.800 on every week and have a lot of room for 0:14:08.880 --> 0:14:11.200 like modeling and aupha and things of the sort. So 0:14:11.200 --> 0:14:14.280 so I know, studios spend a lot of money on 0:14:14.880 --> 0:14:18.880 marketing and promoting leading up to the Oscars, because if 0:14:19.160 --> 0:14:23.840 let's say a small independent film wins Best Oscar, it 0:14:23.960 --> 0:14:27.120 seems a you it gets a huge uptick in subsequent 0:14:27.640 --> 0:14:33.000 box office and other sales or streaming rights. I'm wondering 0:14:33.040 --> 0:14:35.479 if part of their marketing plan is going to include 0:14:36.120 --> 0:14:40.320 hedging on Best Oscar. They can not only spend you know, 0:14:40.360 --> 0:14:43.400 a million dollars on promotion, they could buy a contract 0:14:43.440 --> 0:14:47.840 that offsets not winning Best Oscar. Yeah, that's our goal. 0:14:48.000 --> 0:14:50.200 Let's forget all of them to come and really hedge 0:14:50.240 --> 0:14:52.880 all this risk that they have. So so where's the 0:14:53.000 --> 0:14:57.560 volume today? Where are you seeing the most amount of activity? 0:14:57.600 --> 0:15:01.560 Is it? Is it inflation and fed activity? Is a GDP? 0:15:02.160 --> 0:15:06.040 What where where's all the money flowing? On your platform. Right. 0:15:06.160 --> 0:15:09.680 It's actually interesting because when we launched, we really expected 0:15:09.680 --> 0:15:13.560 it to be categories specific or concentrated in specific UM 0:15:13.960 --> 0:15:18.800 categories or economics, UM, entertainment, transportation, technology, But it really 0:15:18.880 --> 0:15:21.760 is about what what the news are, So what's top 0:15:21.800 --> 0:15:24.240 of the New York Times, what's in the newspaper the 0:15:24.240 --> 0:15:27.600 whole day? Uh, what's in the news? And right now, 0:15:27.680 --> 0:15:31.880 as you mentioned the Fed March meetings, is is very 0:15:32.080 --> 0:15:34.440 is a very uh is a market with a lot 0:15:34.440 --> 0:15:38.800 of right, it's very hot, yeah, for sure. But for us, 0:15:38.920 --> 0:15:41.920 we've we've seen this like news based activity, a lot 0:15:42.000 --> 0:15:44.320 like the onm ground wave um as like Dojo and 0:15:44.360 --> 0:15:46.480 the infrastructure bill was passing, there was a lot of 0:15:46.520 --> 0:15:49.640 activity over there, or when j. Powell was going to 0:15:49.720 --> 0:15:52.240 get renominated, there was a lot of activity in that market. 0:15:52.560 --> 0:15:54.120 So it's really about what's in the news and what 0:15:54.200 --> 0:15:56.880 people see UM there was associated with and and where 0:15:56.920 --> 0:15:59.960 they can they think there's most room to make money. 0:16:00.000 --> 0:16:03.280 And right now the Federates UM people are really disagreeing 0:16:03.280 --> 0:16:05.280 on that and there's a lot of volume of volatively 0:16:05.280 --> 0:16:08.000 on that market. So so you guys didn't exist when 0:16:08.080 --> 0:16:11.800 Brexit had come up. That was before your time. But 0:16:12.040 --> 0:16:15.720 you have been around with Russia and Ukraine and I 0:16:15.840 --> 0:16:18.960 noticed there's not a lot of activity there. Why not 0:16:19.160 --> 0:16:22.720 do a futures contract on will Russia. It's obviously too 0:16:22.800 --> 0:16:26.160 late today, but in January or December you could have 0:16:26.200 --> 0:16:30.720 done a will Russia invade Ukraine by February one, March 0:16:30.800 --> 0:16:34.320 first April one. Right, we avoid any contract that's related 0:16:34.360 --> 0:16:38.760 to war, terrorism, assassination, or violence of any kind. Um. 0:16:38.960 --> 0:16:42.680 We don't want to have those those markets on our platform. Um. 0:16:42.720 --> 0:16:45.960 But we do have markets there are adjacent to that. 0:16:46.080 --> 0:16:48.480 So for example, markets on the price of ruble or 0:16:48.600 --> 0:16:51.320 or the price of oil natural gas in the US 0:16:51.360 --> 0:16:53.720 and Europe, So we have markets that adjacent. We just 0:16:53.720 --> 0:16:57.680 don't want to have markets directly related to war, terrorism, assassination, 0:16:57.760 --> 0:17:01.040 or makes sense, you don't want to incentivize anybody misbehave. 0:17:02.160 --> 0:17:05.280 In the past, I've heard futures described as a marriage 0:17:05.359 --> 0:17:09.760 between hedgers and speculators. So if you're an airline, you 0:17:09.800 --> 0:17:13.160 want to hedge the price of oil, but someone's got 0:17:13.160 --> 0:17:15.040 to be on the other side of that trade, so 0:17:15.480 --> 0:17:19.000 incomes the speculators. Are you seeing that same sort of 0:17:19.040 --> 0:17:23.639 relationship amongst CALCI clients. Yeah, I think she is one 0:17:23.640 --> 0:17:26.520 of the most pure forms of exactly this hedging and 0:17:26.560 --> 0:17:30.240 speculation UM match. I think one a very simple example 0:17:30.280 --> 0:17:32.680 to understand this. If you think of rain in New 0:17:32.720 --> 0:17:35.360 York City right like you can have like an ice 0:17:35.400 --> 0:17:38.800 cream truck buying. UH. An ice cream truck will be 0:17:38.840 --> 0:17:41.720 ready really hit if if it rains for like a 0:17:41.720 --> 0:17:44.480 lot of days, because people will buy less ice cream, 0:17:44.720 --> 0:17:46.879 so they can buy a guess contract to really hedge 0:17:47.119 --> 0:17:50.240 that offset that they have UM. On the other side, 0:17:50.240 --> 0:17:52.760 there can be someone that is going to speculate and 0:17:52.800 --> 0:17:56.720 seeing there's a forecast of for rain UM in the 0:17:56.800 --> 0:18:00.200 next couple of days, and they're willing to take UM 0:18:00.640 --> 0:18:03.480 the no side because they think that there's only twenty 0:18:03.480 --> 0:18:05.600 percentages it's going to rain, and it seems like they 0:18:05.600 --> 0:18:07.520 can make money. So then you can really have a 0:18:07.560 --> 0:18:09.560 match of like people that actually need to have a 0:18:09.600 --> 0:18:12.920 contract for hedging almost like insurance, and people who who 0:18:12.960 --> 0:18:16.040 because of forecasting and probability and what they think the 0:18:16.080 --> 0:18:18.200 fair value is, is going to take the other side. 0:18:18.480 --> 0:18:20.840 And then at the settlement, for example, if it does rain, 0:18:21.160 --> 0:18:23.000 it ends up being that everyone is happy because the 0:18:23.040 --> 0:18:27.400 speculator makes money because they work correct. UH. The head 0:18:27.800 --> 0:18:31.520 is protected against and the speculator on the trade right 0:18:31.600 --> 0:18:35.199 exactly and exactly, you got it totally right. So let 0:18:35.480 --> 0:18:39.000 that raises a really interesting question, who are your clients? 0:18:39.040 --> 0:18:43.159 Are they hedge funds and institutions, are they retail investors 0:18:43.280 --> 0:18:45.399 or is it a whole spectrum of people. Um, we 0:18:45.520 --> 0:18:48.879 really focused now on on retail, and our our biggest 0:18:48.920 --> 0:18:51.560 amount of users right now is the traditional option trader, 0:18:51.720 --> 0:18:55.960 like informed retail option traders. UM. But the way that 0:18:56.000 --> 0:18:59.000 we see this this growing is we want to keep 0:18:59.040 --> 0:19:02.080 growing within the so trading an options trading community. And 0:19:02.119 --> 0:19:05.280 then our next steps getting brokerages on board so that 0:19:05.320 --> 0:19:08.159 you can now go and trade on event contracts for 0:19:08.280 --> 0:19:11.280 your interactive brokers or each trade account um. And then 0:19:11.320 --> 0:19:14.560 after debuting enough liquidity to start bringing more prop shops 0:19:14.560 --> 0:19:18.600 in and smaller firms, and then hedge funds and and 0:19:18.640 --> 0:19:22.840 then institutions and mimic can have maybe um burger king hedging, UM, 0:19:23.000 --> 0:19:25.439 I don't know, price of plastic draws or something like that. 0:19:25.520 --> 0:19:29.840 So so the platform eventually becomes an exchange exactly exactly. 0:19:29.840 --> 0:19:31.439 I think we see it as a beaut up of 0:19:31.520 --> 0:19:35.639 liquidity from from retail. That's like smaller amounts, but but 0:19:35.640 --> 0:19:39.720 but higher velocity to to higher bigger and bigger institutions 0:19:39.920 --> 0:19:43.199 all the way to become like a full flash financial 0:19:43.240 --> 0:19:45.159 exchange like the New York Stock Exchange or seeing me. 0:19:45.480 --> 0:19:48.240 So let's talk a little bit about how you guys, 0:19:48.320 --> 0:19:53.000 you and your co founder created Calci. You kind of 0:19:53.040 --> 0:19:57.040 were the opposite of Facebook. You know, Mark Zuckerberg famously 0:19:57.119 --> 0:20:01.760 said move fast and break things. Companies like you and 0:20:02.040 --> 0:20:05.359 coin base and block fi spent a lot of time 0:20:05.600 --> 0:20:09.720 getting approval from the regulators. Tell us a bit about 0:20:09.840 --> 0:20:13.520 why you took that approach as opposed to moving fast 0:20:13.520 --> 0:20:16.040 and breaking things. Yeah. I think a lot of times 0:20:16.240 --> 0:20:19.280 UM people are making the short term trade off for speed. 0:20:19.640 --> 0:20:22.440 UM and in finance, I think it's different. You can, 0:20:22.440 --> 0:20:24.760 obviously you go to market faster if you choose the 0:20:24.800 --> 0:20:27.840 unregulated route, but with financed there's been like a lot 0:20:27.880 --> 0:20:32.439 of historical examples of unregulated platforms getting meaningful volume and 0:20:32.440 --> 0:20:35.119 then being shut down by regulators because they weren't properly 0:20:35.160 --> 0:20:38.080 regulated and doing things right from the start. UM. We 0:20:38.119 --> 0:20:41.080 really think that the opportunity really shrinks if if you 0:20:41.080 --> 0:20:43.680 don't take regulation into account, because then you can't get 0:20:43.920 --> 0:20:47.040 real money in the platform, you can't get real good partners, 0:20:47.080 --> 0:20:50.760 as we just talked about brokers, market makers, hedge funds 0:20:50.760 --> 0:20:53.440 on board. Sometimes you can't even offer products to you 0:20:53.560 --> 0:20:57.399 ask customers. You really boxes into something small very quickly. 0:20:57.440 --> 0:20:59.600 And and that's for us to be the New York 0:20:59.680 --> 0:21:02.240 chockics change for events, because that's our goal. The only 0:21:02.240 --> 0:21:04.440 way to do that was to do uh A right 0:21:04.520 --> 0:21:07.800 from the start, going through the regulated path and and 0:21:08.000 --> 0:21:09.600 eating on the cost of the two years and a 0:21:09.640 --> 0:21:13.200 half waiting, but but making sure that we're set for success. 0:21:13.440 --> 0:21:16.800 So you're your co founder, Turek Monsour. He was an 0:21:16.880 --> 0:21:21.960 equity derivatives intern at Goldman Sachs in the same year 0:21:22.000 --> 0:21:25.800 you were a quantitative trader at Citadel Securities. So you 0:21:25.840 --> 0:21:29.439 guys both had a pretty bright career path had you 0:21:29.520 --> 0:21:32.960 not decided to go out and launch this whole new platform. 0:21:33.119 --> 0:21:37.679 Tell us what motivated you to say, Goldman Citadel, that 0:21:37.720 --> 0:21:41.119 looks too easy, let's let's launch a new startup. Well 0:21:41.280 --> 0:21:44.520 that that's funny because actually most of our M I 0:21:44.520 --> 0:21:46.800 T time we were both very focused on just getting 0:21:46.800 --> 0:21:50.320 finance jobs and never even thought about um starting a company. 0:21:50.359 --> 0:21:53.359 But yeah, we were both very interested in math, financial 0:21:53.400 --> 0:21:58.000 history finance from from the very start of our school years, 0:21:58.040 --> 0:22:00.600 and and we worked at various finding show firms as 0:22:00.600 --> 0:22:03.159 you Man Shtaric worked at Goldman UM, I worked at 0:22:03.200 --> 0:22:06.399 Bridgewater UM, Five Rings Capital, which is a small prop shop, 0:22:06.440 --> 0:22:10.640 and then Citadel Securities UM. At the internships, we really 0:22:10.680 --> 0:22:13.240 saw the behavior that we say is the cowship behavior 0:22:13.600 --> 0:22:17.119 over and over again. It's like firms making trading decisions 0:22:17.400 --> 0:22:20.040 based on events. As we think the European Central Bank 0:22:20.080 --> 0:22:22.760 is gonna raise rates, Let's take this massive position already 0:22:22.960 --> 0:22:25.800 find the structure to make that work. But the idea 0:22:25.840 --> 0:22:28.960