WHERE NO DERIVATIVES COMPANY HAS GONE BEFORE: RUMI MORALES AND THE FUTURE OF FINTECH

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“When you think about a bank, or when you Google one, what’s the image that comes up?”

“Usually a Greco-Roman temple. But when’s the last time you went to a bank that looks like that?”

Ripples of laughter move through the audience before she moves to her true question: “When’s the last time you went to a bank?”

In a talk delivered to the MarketsWiki Education (MWE) World of Opportunity Education Series, Rumi Morales demonstrated a charge to rethink ways in which the Chicago Mercantile Exchange (CME) Group has engaged with the financial ecosystem of the future, and to go where no derivatives company has gone before.

While speaking to the audience of young professionals in Chicago, Morales established the trajectory of financial technology, or fintech, through its early and most well-known iconography.

As Executive Director of CME Ventures, Rumi Morales is charged with the execution of venture investment in emerging technology worldwide, so she knows a thing or two about the history and trajectory of fintech. Morales graduated magna cum laude from Wellesley College and has an MBA from NYU. She’s worked with personnel and portfolio companies around the world, including the Global Markets Institute at Goldman Sachs, and international corporate development strategy with the CME Group. Morales is such a mover and shaker in her industry that she was named to Crain’s Chicago Business 2014 Tech 50, Institutional Investor’s 2015 Fintech Finance 35, and Crain’s Chicago Business 2015 40 Under 40 lists.

r2Rumi Morales knows banking. She knows fintech. And according to Morales, the growth of online banking and mobile transactions are just two of the factors relegating brick-and-mortar banks to relics of the past.

Even the most iconic trading ecosystems are giving way to new technologies and digital renovations: “If you go here today,” Morales begins, showing an image of a massive floor at Stamford UBS teeming with trades, “most of this is shuttered for a number of reasons – whether it’s the increase in regulations, the pretty banal trading environment we’ve seen so far, but also because of this.” She switches to a slide featuring a mosaic of different financial services apps displaying trending projections rising and falling on a digital dash. “You don’t need all the hardware since we’re becoming increasingly mobile.”

In thinking about the future, Morales isolates the importance of recognizing the origins and importance of a basic need when considering the future of a solution. The trajectory of the futures market through history is no stranger to this concept: the world’s first recorded futures exchange was organized in Japan in 1697. The process behind such a market has undoubtedly grown in complexity throughout the last three hundred years, but the concept itself – much like the best ideas, Morales asserts – harkened to a need, and that need was to protect and manage capital.

Digitization, advanced security systems, and the next generation of big data are the three areas that Morales believes have the power to transform the financial services industry landscape.

“We feel that these are the three things that not only keep us up at night because we’re scared,” she says with a smile, “but
they keep us up at night because we’re excited.” Fintech, like many major industries today, is an amalgamation of many elements combined to create a well-running machine.

The interest that CME Ventures keeps in mind while seeking out new areas of innovation parallels the mission of emerging technologies themselves: how might one improve an existing system to better address a need and allow for more accessible future innovation? In an industry built on change, Morales sees each of CME Ventures’ partner groups as an opportunity to propel fintech into a more secure future; but most of all, one that channels more effective communication between people, finance, and technology.

New technologies have historically ushered in change. In an increasingly digital age, this change happens with more haste and expanse than ever before. Morales pauses at a point in her timeline to examine the transformation of CME Group’s famed Merc Club into an Innovation Lab, designed to foster collaboration and the exchange of ideas. “You think about the evolution of finance over time and how things continued growing, and you can become humbled because things can change.”

But the changes don’t stop there. One of the most pervasive technologies of the day is artificial intelligence, and it’s quickly making its way into the financial industry.

Morales highlights artificial intelligence as a key player in the future of the derivatives market, since a change to automation could usher in new potential for growth, resources, and development. She gives an example from SparkCognition’s CEO, Amir Husain, in understanding the intersection of a trader’s feel for the market and a computer’s ability to recognize patterns. Posing a question to the audience, Morales challenges the group to consider what comprises the expertise within the overlap: “If you’re a really good trader and have a feel for the market, where does that feel come from?”

The answer that Husain offers, Morales says, is multifaceted: experience, a knack for recognizing patterns, and the ability to process what’s happening around you. Much like a seasoned trader, a computer is able to achieve each of these prerequisites to effectively learn the markets and offer predictive analysis to rival human experts, while still mitigating human error and completing onerous tasks in a fragment of the time.

“We’re at a stage today where computers have access to far more historical data and analysis than we can hold in our
heads,” Morales explains. “Computers are getting a feel of the market now.” And much like the neural network of a human being, the “feeling” computer is able to problem-solve in ways previously unimaginable. This level of critical thinking is “not about machines becoming better machines,” the executive director concludes, “but instead about machines becoming better brains.”

An ongoing dialogue between the needs of corporations and the solutions of the startup world has occurred on a resoundingly silent level. Rumi Morales believes that establishing a dialogue will allow more solutions like artificial intelligence and machine learning to affect the derivatives industry in focused, pertinent areas that will drive the financial services sector into the digital age, full speed ahead.

Last modified: October 26, 2017