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Speaker 1: Welcome to the Bloomberg Penel podcast. I'm Paul swing you,

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Speaker 1: along with my co host Lisa Brahma wits each day

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Speaker 1: we bring you the most noteworthy and useful interviews for

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Speaker 1: you and your money. Whether at the grocery store or

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Speaker 1: the trading floor. Find a Bloomberg Penil podcast on Apple

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Speaker 1: podcast or wherever you listen to podcasts, as well as

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Speaker 1: at Bloomberg dot com. I just had a great discussion

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Speaker 1: with Elena McWilliams and chairman of the f d I

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Speaker 1: see here at the Fintech conference. We spent an hour

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Speaker 1: on stage talking about the f d i C and

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Speaker 1: its role in managing the growth of technology within the

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Speaker 1: financial services of business. Elena, thanks so much for joining us.

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Speaker 1: You know, I think one of the big things we've

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Speaker 1: talked about was, you know, certainly from your perspective, if

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Speaker 1: the f d i C is trying to balance kind

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Speaker 1: of the fostering innovation within the financial services industry through fintech,

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Speaker 1: through crypto, all those cool things that we're reading about

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Speaker 1: while at the same time protecting consumers, protecting the banks,

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Speaker 1: protecting the system. Gives us how you walk that line.

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Speaker 1: It's by the way, thank you for having me. It's

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Speaker 1: a pleasure to be here today. It's a fine balance

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Speaker 1: we have to strike as regular regulatory bodies in Washington.

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Speaker 1: You want to encourage innovation, You want to encourage entrepreneurship

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Speaker 1: with these banking entities because you want the banking activity

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Speaker 1: to take place at the banks. And at the same time,

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Speaker 1: if you overregulated, if you don't give banks certainty on

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Speaker 1: how to innovate and engage with tech companies, the banking

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Speaker 1: services and products are going to go outside of the

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Speaker 1: banks and we will have a less of an ability

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Speaker 1: to regulate them appropriately and provide for consumer protection if

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Speaker 1: those things are done outside of the of the banking

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Speaker 1: regulatory agencies sphere of influence and so there there's a

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Speaker 1: there's a dual purpose here. One is you want banks

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Speaker 1: to innovate because they have to stay competitive. Especially for

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Speaker 1: small banks, they're suffering from the economies of scale, basically

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Speaker 1: decimating their ability to attract new customers and grow UH

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Speaker 1: and competely some of their much larger counterparties. And at

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Speaker 1: the same time time you don't want so much activity

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Speaker 1: to leave the banks that that you're increasing systemic risk

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Speaker 1: outside of the banks and UH and unable to regulate

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Speaker 1: it from a federal perspective, So it's a fine blunt balance.

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Speaker 1: So which innovations are you talking about here? Is sort

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Speaker 1: of online loans and sort of underwriting standards in that way?

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Speaker 1: Is it uh bitcoin and cyber you know, different crypto assets? What? What?

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Speaker 1: What innovations are sort of the most exciting and the

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Speaker 1: most dangerous from your perspective. So among the most exciting

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Speaker 1: are the ability of banks now to reach the unbanked

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Speaker 1: and underbanked customers through some of the fintech companies and

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Speaker 1: the channels that otherwise would not would not have been

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Speaker 1: available to the banks or the customers. And so there's

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Speaker 1: a potential for this new technology and and the banking

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Speaker 1: services to be offered to millions of people that would

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Speaker 1: have been left out of the banking system but for

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Speaker 1: the fact that technology is now making the banking services

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Speaker 1: and products accessible to them. On the other hand, you

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Speaker 1: have to be careful about balancing the risk that some

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Speaker 1: of these entities and products, including crypto uh assets and

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Speaker 1: cryptox changes bring to the system. Where you want to

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Speaker 1: you want to encourage innovation, but you don't want to

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Speaker 1: introduce so much risk in the into the system that

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Speaker 1: you're unable to understand how that risk will percolate throughout

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Speaker 1: the system and what the end products will be for

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Speaker 1: the customer and financial stability as well. So how does

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Speaker 1: that come to the attention to the f d i C.

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Speaker 1: Is it there's some group of cool kids from Silicon

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Speaker 1: Valley come to Washington, d C. And say, Hey, we've

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Speaker 1: got this new technology. We want to deploy it across

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Speaker 1: the banking system. How does it come to the attention

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Speaker 1: of the f d i C all this technological change,

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Speaker 1: which it's a great question. Occasionally we do get folks

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Speaker 1: in in hoodies and and the broken stocks showing up

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Speaker 1: at the f d i C and and telling us

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Speaker 1: about the new technology. Um. Most often the way it

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Speaker 1: happens is that a bank will consider a partnership or

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Speaker 1: teaming up with a tech company, or they have already

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Speaker 1: done some partnering with a tech company, and they will

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Speaker 1: come to us and say, exactly, how do you want

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Speaker 1: us to position ourselves visa v this company? And how

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Speaker 1: do you how are you going to regulate our relationship

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Speaker 1: with that company. So then that's where the fda C

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Speaker 1: steps in, and we want to understand how that the

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Speaker 1: third party companies and technology companies in particular offer their

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Speaker 1: products and services and how they're teaming up with these banks,

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Speaker 1: and how banks are managing that risk. And in the end,

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Speaker 1: we have to protect the deposit insurance system, and we

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Speaker 1: have to protect consumers, and we have to make sure

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Speaker 1: their safety and soundness in the system so that the

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Speaker 1: system functions well. And so it's it's a it's a

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Speaker 1: constant find balancing act that we do as a regulatory agency.

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Speaker 1: When you're talking about catering to the unbanked, I'm thinking

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Speaker 1: about alternative measures of whether somebody's going to repay their debt,

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Speaker 1: right the idea of looking at say Facebook, or looking

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Speaker 1: at their interactions elsewhere online and using that as sort

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Speaker 1: of a metric to determine whether they're going to be

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Speaker 1: credit worthy rather than just a FICO score. How much

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Speaker 1: do you've used some of these measures as being insufficient

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Speaker 1: and leading to people being getting loans that perhaps are

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Speaker 1: not going to pay them back. It's it's it's always

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Speaker 1: an issue whether people can repay their loan. If you're

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Speaker 1: if you're getting into the alternative data and you don't

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Speaker 1: have a good credit history behind this consumer traditional credit history.

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Speaker 1: Having said that, we have We have talked to companies

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Speaker 1: that have pretty strong algorithms to analyze the ability of

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Speaker 1: these customers there that for which they're using alternative data

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Speaker 1: to respond to their credit needs and how likely are

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Speaker 1: they going to pay their bills? And so we're looking

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Speaker 1: at that the technology here as a great equalizer or

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Speaker 1: as in the past you wouldn't look at the alternative data.

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Speaker 1: You would basically not considered a reputable enough data or

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Speaker 1: not enough of a credit history per se to to

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Speaker 1: uh to to substantiate somebody's ability to pay back the

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Speaker 1: loan on its terms and and and conditions. Having said that,

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Speaker 1: I think we're now venturing into territory where technology can

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Speaker 1: bridge that gap and tell us how consumers are going

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Speaker 1: to behave And so we're looking at alternative data at

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Speaker 1: the m DA I see and making sure we understand

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Speaker 1: to the extended banks are teaming up at companies a

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Speaker 1: due alternative data lending, how how that's being done and

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Speaker 1: what's the end outcome for the consumer as well as

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Speaker 1: for the entities. Yelena McWilliams, thank you so much for

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Speaker 1: being with us. Thank you the pleasure to be here today.

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Speaker 1: Think about Eleni McWilliams is chair of the f d

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Speaker 1: i C which is based in Washington, d C. But

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Speaker 1: she is here with us at the Boston Fed for

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Speaker 1: opening day of Boston Fintech Week nineteen, which is powered

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Speaker 1: by Fintech Sam Box, after just having come off a

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Speaker 1: panel which might comes, which survived, and evidently she is

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Speaker 1: still speaking with him. This is good. I'm glad to

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Speaker 1: see that. I'm very happy to say. I'm being joined

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Speaker 1: right now by Brad Leavey. He is global head of

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Speaker 1: Loans and Chief executive Officer of Market Serve, which is

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Speaker 1: I h S Market UH and he normally is based

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Speaker 1: in New York, but he's here with us on site. So, Brad,

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Speaker 1: I want to get started with the concept of data

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Speaker 1: and how that is becoming intricately connected with the modernization

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Speaker 1: of markets. So when you're talking about your world, what

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Speaker 1: does it mean to have data that gives you that

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Speaker 1: kind of edge? Yeah, So in the loans market and

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Speaker 1: the derivatives market, data is tremendously important, and not just data,

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Speaker 1: but lots of different types of data, including what people

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Speaker 1: term alternative data, which for me is just data that

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Speaker 1: is not used in your traditional business day to day

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Speaker 1: but may have some insights and be interesting. So, um,

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Speaker 1: the data discussion is relative. It's relative to who you

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Speaker 1: are and what you're doing. It's relative over time, and

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Speaker 1: more importantly, it's dynamic over time where data sets combine

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Speaker 1: and create additional data sets on top of the fact

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Speaker 1: that you're consuming either base data or alternative data, and

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Speaker 1: then the combinations of those alternative data. Are you talking

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Speaker 1: about yelp reviews and things like that, and you know,

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Speaker 1: is that sort of the concept here? I mean, Yelp

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Speaker 1: reviews could be a form of alternative data for sentiment

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Speaker 1: on some consumer product, but to an equities trade or

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Speaker 1: credit the false swap might be as far as alternative data,

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Speaker 1: because an equity trader typically will not be looking at

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Speaker 1: credit derivative day to day to day. So it's i'd

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Speaker 1: say it's on the edge of what is alternative data

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Speaker 1: to that particular instrument trading day to day. Are you

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Speaker 1: trying to create data feeds that can then go into

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Speaker 1: different algorithms that can then basically be streamed different traders,

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Speaker 1: uh and and sort of submitted into their models. Is

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Speaker 1: that the idea here? Yeah, So ultimately all data will

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Speaker 1: be in feed form. A lot of data today is

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Speaker 1: used in terms of people looking at it in action,

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Speaker 1: but over time all data will become more digitized or

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Speaker 1: more accessible via feeds. When that happens, there's a lot

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Speaker 1: of analytics that you can run at the time you're

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Speaker 1: consuming that data or after or before UH. Over time,

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Speaker 1: those the modernization of the data through feeds allows you

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Speaker 1: to do a lot more with it and then action

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Speaker 1: that UH that insight that you may be gleaning from

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Speaker 1: multiple streams of data, So it's not just one stream

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Speaker 1: of data being digitized and the feed it's many streams

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Speaker 1: of data being digitized, robust analytics being created around it,

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Speaker 1: an insight that you can then action that may result

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Speaker 1: in inequity trade you're shutting down a power plant or

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Speaker 1: getting into a risk position that you didn't want to

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Speaker 1: be in the day before. So then how are people

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Speaker 1: using these different feeds and sort of synthesizing them. How

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Speaker 1: do they know how to wait all of the different

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Speaker 1: points and bring them together. Well, I guess you don't

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Speaker 1: UH at any given time, and it's relative over time.

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Speaker 1: So today there may be a certain point of data

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Speaker 1: that is not interesting at all tomorrow because it's an

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Speaker 1: event in the market that could be the most important

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Speaker 1: information that you want to get to. So I do

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Speaker 1: think there's an element of data both changes over time.

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Speaker 1: What is commoditized today, alternative today is commoditized tomorrow. But

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Speaker 1: also the macro backdrop of what is going on in

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Speaker 1: the world may drive importance of data. And as we

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Speaker 1: moved to cloud, as we modernize, as we digitize, as

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Speaker 1: sensors proliferate on every device and every person and everything,

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Speaker 1: you're going to have a huge amount of data that

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Speaker 1: is fed, analyzed, and action. We are in inning three

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Speaker 1: of probably a triple header in the modernization of data

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Speaker 1: in the world, including the financial services system. It's it's

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Speaker 1: I'm smiling because I'm thinking about an article I once

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Speaker 1: write about how the US government collects a lot of

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Speaker 1: information and a lot of it could be completely useless,

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Speaker 1: but with the AI that they sort of overlay on

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Speaker 1: top of it, they can discover things. And that's a

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Speaker 1: lot of how the big discoveries have been made, and

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Speaker 1: they've been made by accident. I want to shoo gears

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Speaker 1: a little bit, because you do tabulate all of these

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Speaker 1: data points, and you do have access to so many things.

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Speaker 1: Do you have a sense of where credit quality is

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Speaker 1: kind of leaning these days. Well, I look at the

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Speaker 1: markets as a forty year bowl market in rates going down,

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Speaker 1: and I would estimate a twenty year bowl market and

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Speaker 1: credit going up. We did have an interruption in the

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Speaker 1: credit going up seven, eight and nine, or really O

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Speaker 1: eight in line um, but it really wasn't a credit event,

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Speaker 1: as it was a market event. In my view. It

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Speaker 1: definitely manifested around credit, but the reality was there wasn't

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Speaker 1: a huge wash out with the exception of several institutions

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Speaker 1: in the financial services world. But in terms of a

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Speaker 1: major credit event for the world, it felt like that,

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Speaker 1: and it seemed to move on within a couple of years.

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Speaker 1: I would argue that since the late nineties were in

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Speaker 1: that credit boom, and over time things get looser and

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Speaker 1: cycles turn, everybody's trying to predict the turn of the

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Speaker 1: credit cycle somewhat pinto a recession or some other geopolitical thing. Uh.

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Speaker 1: I'm not trying to time anything like that, but I

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Speaker 1: do think it's a bit long. I'm not sure things

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Speaker 1: are loose as much as there's a lot of financing available,

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Speaker 1: and over time those things tend to turn. The question

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Speaker 1: will be will it turn gradually or will it turn Uh?

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Speaker 1: In a volatile way, or will it be multiple volatile

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Speaker 1: turns that will add up over time to a credit event.

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Speaker 1: If you don't think that two thousand and eight and

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Speaker 1: two thousand nine was a major credit event, what would

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Speaker 1: a made or credit event look like. I think it

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Speaker 1: was an event in trust in the markets, which is

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Speaker 1: the broader concept of credit, maybe, but an actual credit

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Speaker 1: event that drives a lot of defaults beyond just a

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Speaker 1: few markets in housing, in other areas where they truly

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Speaker 1: were major credit events in that market, but in the

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Speaker 1: loans market and leverage finance, and the corporate bond markets

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Speaker 1: and the student loan markets and consumer credit generally, things

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Speaker 1: did get tight. But I personally my view, I don't

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Speaker 1: think it was the credit event that had I wash

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Speaker 1: out and a reset like the late eighties, for example,

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Speaker 1: which we could still experience at some point. Again, in

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Speaker 1: the world of physics and chemistry, you would argue that

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Speaker 1: things go up and then do come down, and that

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Speaker 1: different combinations of elements with physics drives dynamic outcomes and

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Speaker 1: that's why it's so hard to protect. Just real quick here,

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Speaker 1: we've been talking a lot about financial technologies here at

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Speaker 1: the Fintech conference and I guess h when we talk

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Speaker 1: about leverage loons, I don't think about a market that's

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Speaker 1: particularly advanced technologically. Where are we in terms of moving

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Speaker 1: away from fax machines into the modern area there? Yes,

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Speaker 1: so there is no doubt that the loans market and

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Speaker 1: all markets need an amount of digitization and modernization. UH.

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Speaker 1: There are some faxes in the industry that are utilized

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Speaker 1: to distribute information around. That's been going on for thirty years. UH.

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Speaker 1: In the last several years, we've moved dramatically away from

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Speaker 1: faxes into proprietary feeds or more structured feeds that are

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Speaker 1: not facts based. But I would argue that there's many

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Speaker 1: elements that need to modernize in the loan markets, whether

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Speaker 1: it's the documents themselves, facts is being utilized, more direct connectivity,

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Speaker 1: it's an heavier asset class that isn't um as digitized.

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Speaker 1: But there have been major advances in the last five

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Speaker 1: or ten years on incremental digitization that have taken some

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Speaker 1: faxes out of our life, have moved more automations from

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Speaker 1: documents to a feed. More importantly, have combined many processes

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Speaker 1: to take settlement times down from something that may have

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Speaker 1: been in the mid twenties to be honest, in terms

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Speaker 1: of days and parlans in the US down plus percent

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Speaker 1: in the last couple of years, so we've made a

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Speaker 1: lot of progress, post Dodd, Frank brad Levy, thank you

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Speaker 1: so much for being with it with me today. Brad

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Speaker 1: Levy is a global head of loans and chief executive

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Speaker 1: Officer of Market Serve of I h S. Market Today.

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Speaker 1: We are so lucky to have Dr ellen Wald, President

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Speaker 1: of Transversal Consulting. She does contribute also Bloomberg opinion columns.

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Speaker 1: Uh and Ellen, you know, I want to start with

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Speaker 1: this news that uh, well really frankly, that Saudi a

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Speaker 1: Ramco is looking at the richest people in Saudi Arabia

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Speaker 1: to basically provide a lynch pin of financing for its

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Speaker 1: initial public offering. There seems to be a spate of

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Speaker 1: news about this i P. Are we getting closer now, well,

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Speaker 1: don't say that we're getting closer. And this is really

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Speaker 1: a bombshell of an announcement. Um this report that um

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Speaker 1: that Saudi Arabia is looking for rich families essentially in

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Speaker 1: the Kingdom to buy into this i P O either

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Speaker 1: before or even even possibly after, but probably before it

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Speaker 1: goes on on the local Saudi exchange and UM, what's

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Speaker 1: what's really intriguing about the report is that some of

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Speaker 1: these UM families, in these family businesses, had individuals who

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Speaker 1: were arrested and held in the ritz UH in ri

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Speaker 1: odd just just they think a few years ago. So

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Speaker 1: they say that they're not being pressured. But UM, in

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Speaker 1: a country where UM the government is an absolute monarchy,

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Speaker 1: can you really say that there's no no pressure there?

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Speaker 1: And UH, it would seem to be a sign at

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Speaker 1: least to me that international UH, any regulator for an

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Speaker 1: international exchange needs to pay very close attention to this,

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Speaker 1: because UM international exchange should not be party to anyone

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Speaker 1: being coerced in any way to invest. This does seem

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Speaker 1: to be a potentially an attempt to maybe artificially prop

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Speaker 1: up prices, and we do know that the Saudi's have

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Speaker 1: definitely tried to prop up their exchange at certain times.

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Speaker 1: I would certainly say that a regulator should be very

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Speaker 1: wary of allowing a listing of a business that engages

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Speaker 1: in UM kind of a coercive type practices. So you

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Speaker 1: raise a really interesting point, which is that it would

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Speaker 1: seem that Saudi Arabia engages in practices that don't seem

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Speaker 1: necessarily consistent with publicly traded exchanges in developed markets, which

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Speaker 1: raises a question would any exchange actually push back on

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Speaker 1: Saudi Aramical IPO given the fact that it's a huge

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Speaker 1: boon to them to get it listed on their exchange,

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Speaker 1: And this is an issue and we do we have

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Speaker 1: seen report. We do have reports that UM managers and

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Speaker 1: funds in Saudi Arabia have been pressured to buy at

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Speaker 1: times to help lift the to double the Saudi exchange.

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Speaker 1: So so we do have have some evidence that this

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Speaker 1: has occurred in the past, So don't not the only exchange.

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Speaker 1: We We've also gotten similar reports from China as well.

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Speaker 1: So it really begs the question of whether New York

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Speaker 1: Stock Exchange or London Stock Exchange can really legitimately list

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Speaker 1: Saudia opponent. It seems almost that UM the Saudis are

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Speaker 1: realizing that perhaps a big exchange like New York or

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Speaker 1: London is really not the place for them. We do

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Speaker 1: now see that they're potentially turning to Tokyo. But this

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Speaker 1: issue of where to list and can they list, and

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Speaker 1: are they willing to let go of the power that

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Speaker 1: they want to have in order to get a listing

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Speaker 1: on New York or London. It really seems like perhaps

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Speaker 1: this is not meant to be. Yeah, well, and there

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Speaker 1: have been a lot of signs of that over time.

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Speaker 1: One of them has been the drop in oil prices

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Speaker 1: and sort of leads to another development overnight that came out,

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Speaker 1: which is that Saudia Saudi Energy Minister uh Prince Abdulaziz

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Speaker 1: bin Salmon, he is the new Saudi energy minister. The

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Speaker 1: other one was basically pushed out. Can you give us

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Speaker 1: some context to this? Well, I wouldn't. I would be

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Speaker 1: hesitant to say that he was pushed out. We don't

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Speaker 1: really know the reason why um Folly is no longer

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Speaker 1: than energy minister either. He could have been pushed out.

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Speaker 1: He may have desired to step down at this point

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Speaker 1: given what's been going on. So just because we don't

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Speaker 1: know for sure what went down there, UM the way

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Speaker 1: that they do this inside way was they just issue

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Speaker 1: a decree. So it might look like he's been ousted,

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Speaker 1: but we we don't really know the details there. But

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Speaker 1: it does seem that UM the Saudis were potentially moving

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Speaker 1: in this direction. They did remove all Folly as chairman

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Speaker 1: of the board of Saudi Aramco and they did um

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Speaker 1: divide the Ministry of used to be the Ministry of Energy,

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Speaker 1: Industry and Economy just before this, so um it does

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Speaker 1: seem like they were making changes in this area. One

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Speaker 1: of the reasons I've I've heard is that they want

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Speaker 1: to make more of a separation between the oil company

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Speaker 1: and the ministry before uh they move on and move

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Speaker 1: forward with this i p O. But people have also

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Speaker 1: said that, you know, there's a problem with oil prices,

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Speaker 1: there's been problems with this i p O. It would

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Speaker 1: seem to me that Holida Folly is not to be

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Speaker 1: blamed for this. This is an oil market that's been

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Speaker 1: ruled by speculation over demand, weakening demand, global economic data

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Speaker 1: that is not positive, and the US China trade talks,

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Speaker 1: and we look at oil climbing today. Well, there are

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Speaker 1: a lot of reasons for it, but one of them

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Speaker 1: is that there's some good news on the U S

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Speaker 1: China trade talks that they're setting talks for October. So

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Speaker 1: I wouldn't be surprised if oil is rising more as

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Speaker 1: a result of this than the result of anything that

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Speaker 1: Saudi Arabia is saying or doing. It's really good perspective

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Speaker 1: on especially because I'm looking at the wording of a

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Speaker 1: lot of the stories and it's that that King Salmon

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Speaker 1: dismissed the former energy minister and put in uh, this

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Speaker 1: heir to the throne. So I mean, I think that

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Speaker 1: I think it's important to be cautious about that and

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Speaker 1: basically say, we don't know what happened, we don't know

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Speaker 1: what the implications are, and that the price moves that

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Speaker 1: we're seeing today are not necessarily reflective of this change.

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Speaker 1: Dr ellen Wald, thank you again for being with us,

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Speaker 1: President of Transversal Consulting. She's also a nonresident Senior Fellow

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Speaker 1: at the Atlantic Council's Global Energy Center and a Bloomberg

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Speaker 1: Opinion contributor. We are broadcasting live from Fintech Week. We

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Speaker 1: are currently in Boston at the Boston Federal Reserve. It

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Speaker 1: is being hosted powered by the Fintech Sandbox, and I

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Speaker 1: am so happy to say we have with us Dadine Shikar,

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Speaker 1: she has head of Global Markets for State Street. Here

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Speaker 1: on site. We are going to be doing a panel

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Speaker 1: together about human versus Machine in this evolving era of

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Speaker 1: technologically fueled markets. And I was left with the question

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Speaker 1: when I was really looking into this. Do humans matter

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Speaker 1: in public markets anymore? Ultimately, well, machines, what the algorithms?

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Speaker 1: Will the artificial intelligence sort of take over when it

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Speaker 1: comes to decision making? First of all, good morning and Lisa,

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Speaker 1: and thank you for having us to answer your question.

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Speaker 1: I think there's always going to be a role for humans,

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Speaker 1: uh in the process. And um, you know, when I

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Speaker 1: was preparing for this panel, I'm not creature. It's really

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Speaker 1: man versus machine. Oh come on, but it's it's it's

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Speaker 1: really gonna be. I think it's man plus machine because

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Speaker 1: they compliment each other a lot better. Maybe beyond our

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Speaker 1: combined lifetime, well we'll see humans being sidelined. But right now,

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Speaker 1: you know, the big debate continues to be is artificial

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Speaker 1: intelligence really going to replace humans? Or will it augment

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Speaker 1: human thinking? And from my perspective and what we look at,

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Speaker 1: I think right now it's an augmentation says more than

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Speaker 1: anything else. So I believe humans will continue to drive

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Speaker 1: butt machines will make the process a lot better and

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Speaker 1: faster and hopefully cheaper. All I know is when I

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Speaker 1: walk out on a trading floor of any of the

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Speaker 1: big New York investment banks, I see a lot fewer

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Speaker 1: people than I used to see. There used to be

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Speaker 1: a hundred people trading corporate bonds, government bonds, and now

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Speaker 1: there's a handful. So do you think technology So that's

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Speaker 1: obviously one side effect, but just from the markets, the

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Speaker 1: operation of the markets, do you think technology has generally

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Speaker 1: been positive for the capital markets? I think it has.

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Speaker 1: There's definitely been a convergence between technology and in humans

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Speaker 1: when it comes to trading electrific electronification has helped quite

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Speaker 1: quite a bit, but you still need humans to write

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Speaker 1: those algals to power those machines. And what we're seeing,

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Speaker 1: especially at State Street, is what we look for now

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Speaker 1: are traders that can code and quoders that can trade,

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Speaker 1: and that's where you're really seeing that convergence coming through.

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Speaker 1: So yes, less humans manning the phones and more more

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Speaker 1: algos taking over, but you still need humans to power

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Speaker 1: that that acknowledging that thought process. I love this, the

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Speaker 1: sort of Kumbaya moment between humans and machines, arm and

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Speaker 1: arm singing, you know exactly. I'm kind of thinking that

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Speaker 1: it might be a little more terminator than Kumbaya, But indeed,

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Speaker 1: I want to wonder I'm wondering about price discovery in

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Speaker 1: this era of algorithms and artificial intelligence and a lot

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Speaker 1: of the recent mark of volatility has raising risen questions

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Speaker 1: about how smart it is. Right when we talk about

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Speaker 1: the humans, at least on our show, they say they're

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Speaker 1: long and they're just holding their positions. They're not trading

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Speaker 1: on every Trump tweet or every headline. Do you think

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Speaker 1: the algorithmic trading has changed the idea of price discovery

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Speaker 1: a little bit more? It has, I mean, it's still

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Speaker 1: driven by the biases of the people that that that that, right,

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Speaker 1: So there's that cognitant bias that's that's dear um. The

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Speaker 1: machines make them a lot faster, right, so it helps

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Speaker 1: us swift through peg up lots of lots of data

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Speaker 1: at the same time, and and and assist with that.

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Speaker 1: On the flip side, though, it doesn't understand the subtleness

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Speaker 1: of the tweets, if you will, right, So it is

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Speaker 1: really the uncertainty that's causing people to sit on the sidelines,

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Speaker 1: less of up price discovering and the machines. I've never

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Speaker 1: really heard of the tweets described as subtle. Yeah, I

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Speaker 1: mean that's not really normally the way that I would

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Speaker 1: I'm not quite sure that tweets are subtle, but I

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Speaker 1: think the machines being able to distinguish the subtlety of

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Speaker 1: the effect of those markets. But that's that's a good

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Speaker 1: one with technology is certainly technology nating is certainly accelerated.

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Speaker 1: I would say to some extent the you know, the

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Speaker 1: passive management active management, the debate, I mean, kind of

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Speaker 1: where do you think this is all going to shake

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Speaker 1: that we've had, you know, relatively you know, strong market

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Speaker 1: of the last ten plus years. Uh, you know the

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Speaker 1: passive strategies worked well. Is that the future? Is it

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Speaker 1: the future? I don't believe so. Obviously passive A lot

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Speaker 1: a lot of the flows aren't going into passive investments,

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Speaker 1: and uh, there was a there's a debate other active

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Speaker 1: investment is dead or not. But there's still um a

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Speaker 1: lot of managers that that are making do out of it.

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Speaker 1: Obviously State three is a big index index shop, and uh,

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Speaker 1: we strive to achieve you know, our returns by doing

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Speaker 1: things better, faster and cheaper for for our clients. But

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Speaker 1: I do believe that there's still room for for for

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Speaker 1: both in the process. Do you feel like a therapist

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Speaker 1: in chief when people are saying do humans matter? Do

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Speaker 1: I matter? Humans do matter? Humans matter? But I think

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Speaker 1: the the the the skill sets that we're gonna be

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Speaker 1: looking for in the future are going to be a

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Speaker 1: lot different. But humans definitely do matter, and we we

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Speaker 1: treat them, you know, very very nicely. It's important. But

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Speaker 1: you know, you're in Boston, the head of the mutual

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Speaker 1: fun home of you know, the world, and so it's

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Speaker 1: been the biggest, one of the biggest employers. So humans

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Speaker 1: really matter big enough. I'm strong enough in gosh, started matter.

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Speaker 1: They do you with that Again, as I said earlier,

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Speaker 1: without without humans, you can't you can't power the machinery,

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Speaker 1: right exactly. Natie Shakar, thank you so much for joining us.

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Speaker 1: We appreciate it. Nadina's head of Global Markets at State Street.

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Speaker 1: Just talking a little bit about the kind of the

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Speaker 1: confluence of technology here in the financial services industry. It's

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Speaker 1: obviously a big theme here at the Federal Reserve Bank

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Speaker 1: of Boston here for this Boston uh Fintech Week ten

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Speaker 1: powered by the Fintech Sandbox. You know, a lot of

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00:26:24,920 --> 00:26:28,960
Speaker 1: folks here thinking about the convergence of technology and finance,

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Speaker 1: both at the corporate level and at the personal level

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Speaker 1: as well. Thanks for listening to the Bloomberg P and

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Speaker 1: L podcast. You can subscribe and listen to interviews at

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00:26:36,440 --> 00:26:40,119
Speaker 1: Apple Podcasts or whatever podcast platform you prefer. Paul Sweeney,

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00:26:40,200 --> 00:26:42,919
Speaker 1: I'm on Twitter at pt Sweeney. I'm Lisa Abram Woyds.

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Speaker 1: I'm on Twitter at Lisa Abram Woyds. One before the podcast,

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Speaker 1: you can always catch us worldwide. I'm Bloomberg Radio