January 2018: Getting Your Bitcoin’s Worth

There are two things that sparked my suspicions: first, the fact that so many market participants would have fallen short of complying that pan-European regulator the European Securities and Markets Authority needed to institute a six-month “grace period” for compliance with the Legal Entity Identifier requirements of the new rules; and second, Bitcoin.

Many are reporting 2017 as the year that cryptocurrencies came of age, gaining legitimacy and investor trust. I would suggest that in fact, 2017 will be remembered as the year that institutional investors and trading firms that had previously shunned the then-risky digital currency world began to not only take interest in it, but to start figuring out how they could urgently gain exposure to this space. The reason, I’d wager, is that firms caught themselves salivating over those massive price swings, and believe there’s plenty more volatility yet to play out, which they have the expertise to exploit.

But here’s the catch: When entering any new market, you first want to thoroughly test your hypotheses and models—painstakingly developed and honed using various historical datasets—against live market data before putting them live. The problem is, market data in the way we understand it for other markets and asset classes simply doesn’t exist to the same extent (yet) for cryptocurrencies, while historical data is short-lived and volatile. Call me over-cautious, but that sounds like diving into a murky pool without first checking how deep it is, or whether you can actually swim.

Of course, others have noticed this, and in some cases, it has led them to create new data vendors focused on crypto data to address this new market opportunity.

From an area woefully under-regulated to one that many argue is over-regulated, this issue of Inside Data Management contains two features examining the early impacts of Mifid II in practice, including the challenges posed by its trade reporting requirements, a deep dive into the latest trials and tribulations affecting the US Consolidated Audit Trail, and a look at how FPGA cards are being exploited in the capital markets, a decade after they were first introduced to slash latency and boost processing power of feed handlers. With all these topics up for review, you can be sure you’re getting your Bitcoin’s worth.