EKMH Innovators Interview Series
An interview series spotlighting global tech influencers, disruptors, visionaries, and of course, innovators.
Optimism remains central during these difficult times, and new platforms certainly provide that hope for further disruption and exciting innovation. This week we focus on two fresh faces in the digital asset ecosystem, Laurent Benayoun and Shi (Tom) Qiu, the founders of HedgeTech.
An algorithmic market maker for digital assets worldwide, the HackerNoon 2020 Most Promising Billion Dollar+ SAAS Startup nominee HedgeTech acts as a designated market maker for token issuers and digital exchanges and also as technology provider for other market makers and broker-dealers. From its offices in Cambridge, Massachusetts and Singapore, HedgeTech touts that its platform supplies “the best” exchanges integration in the industry, “the most” stable and secure trading algorithms, and also a highly scalable server infrastructure. Combined with its Strategy Catalog, a collection of sophisticated strategies to provide state-of-the-art liquidity, create efficient market environments for traders and community members and make markets meet exchanges’ requirements, HedgeTech is a Quantitative Trading firm to watch.
Co-founded in 2018 by Benayoun and Qiu with an initial $1.2K in personal seed investment, HedgeTech has since been entirely privately funded. The fintech startup recently introduced the HTClient app which is specifically curated for exchanges, other market makers and broker-dealers who seek full control over the execution and monitoring of market making, among other strategies. The application uses strategies included in HedgeTech’s service catalog such as market making, orderbook replication, and custom script options. HedgeTech’s strategies are suitable for all digital asset markets, from spot/margin to futures/perpetuals to ETFs, offering access to HedgeTech’s current exchanges’ integration and fast integration capabilities. With its highly scalable infrastructure, the HTClient app aims to allow clients to rapidly set up tens or even hundreds of markets and monitor their accounts “at just one glance” by using key market metrics. Compliant with US, California and European privacy laws, HTClient operates on a monthly subscription basis.
HedgeTech specializes in offering a range of market making strategies to clients through three different service options. The platform uniquely positions itself in the digital asset sphere by providing some of the lowest pricing in the industry for its algorithmic market making service and by integrating most exchanges on its infrastructure upon request, within 24 hours, free of charge. HedgeTech’s organization operates on any digital asset market; clients include token issuers, exchanges, and other market makers. HedgeTech already supports 30 exchanges and counting, including Binance, Huobi, CoinBase, Kraken, Bitfinex, probit and Bithumb.
I caught up with cofounders Benayoun and Qiu via email to learn more about HedgeTech’s origin and approach to problem solving, team building advice, HedgeTech’s algorithmic market making and scalability, vision for growth and work/life balance in this “new normal.” We also discussed the challenges and benefits of working with a culturally diverse team and how Benayoun and Qiu continue to grow HedgeTech during the global pandemic. Our interview follows.
EKMH: Congratulations on your launch and new HTClient app! Let’s start with introductions: how did you two meet? What led to your co-founding HedgeTech and what did you learn in the process?
Shi (Tom) Qiu: We met in June 2018 in a trading room of the Cambridge Innovation Center near MIT. We were both working for a Chinese consulting/advisory firm that decided to export its business model to the United States. That company was also conducting some basic trading activities. Laurent was a pure manual trader while I was more into algorithmic trading. Intrigued, he started asking questions about it and we bonded over technical discussions.
Laurent Benayoun: As juniors, it was hard to be heard in a very vertical environment. Besides, we were convinced that we had the technical capabilities to create algorithms that would guarantee an impeccable execution since the company for which we were working was using our strategies to make markets and generate profits. As a result, we quit our respective jobs and created HedgeTech.
Time proved us right as our CEO at the time reached out a year later to congratulate me on a pricing model for a very volatile asset that turned out to be extremely accurate. Our long-term vision is to become a successful quant hedge fund.
EKMH: How are you leading positive change within the ecosystem and your communities?
Shi (Tom) Qiu and Laurent Benayoun: We try to publish quality content for people in our industry. We also try to give our time to speak at various conferences and to incubators to "educate" innovators about secondary markets. Through sharing our vision of the industry, we hope to improve practices and to create new standards for betterment. Finally, our job consists in making markets more efficient for all actors in the industry: individual traders, institutional traders, issuers, broker/dealers and exchanges.
EKMH: Please describe your individual approaches to challenges and problem solving.
Shi (Tom) Qiu: I approach problems in a very rational way. First, I like to analyze the field of the specific problem I face. I then move on to the more general picture and start doing research on that field to finally narrow down my research and I usually come up with a solution this way. Also, I like to focus and prefer to form a strong personal opinion about all challenges on my own before potentially discussing it with others, if need be.
Laurent Benayoun: Tom and I have very different yet complementary approaches. The only thing we have in common is the logic with which we approach problems, probably due to our shared background in Mathematics. However, I like to form creative solutions to problems and to test these ideas by bringing them to the team. For example, that pricing model I designed for my employer at the time was derived from the physics of damped oscillators applied to a very volatile market.
EKMH: You lead a team with expertise in optimization, risk management and machine learning. What are your recommended best practices to lead and incentivize your team toward HedgeTech’s mission while also fomenting disruption and growth?
Shi (Tom) Qiu: Hiring was a challenge from an intellectual property standpoint, much like in every trading firm out there. However, the biggest challenge is that talented hires for a quant trading firm tend to be innovators, and so nothing really prevents them from leaving the company and be successful on their own or somewhere else. We made a decision to hire innovators knowingly, because they will bring the most value to HedgeTech; we are well aware that they may decide to leave the company after a few years. It follows that this boosts our growth and allows us to be at the forefront of our niche. That said, in the light of our previous professional experiences, and given that we want to foster a true team spirit, we designed the company to have more of a horizontal structure. We value everyone’s opinion as much as our own and encourage personal initiatives. Work hours are fully customizable according to everyone’s preferences and remote working was an option since the inception of the company – way before the Covid outbreak.
EKMH: What are some of the challenges and benefits of working with a culturally diverse team? What shared experiences helped enable you to “break the ice” and align and strengthen the HedgeTech team?
Laurent Benayoun: At this time, seven nationalities are represented at HedgeTech. This diversity allows our team to bring different perspectives to the table on all aspects of the job, from strategy design to client interactions. With regard to client relations, for the HedgeTech team to be able to speak more than 10 languages and to share cultural similarities with most of our clients worldwide, is a true advantage when trading on markets that never close.
Despite the team’s diversity, we all have certain things in common. Some of us come from the same universities, others have a language in common other than English and yet others shared the same challenges to come study and work in the US as foreigners. But what brings us all together for sure is how passionate we are about being at the forefront of technological innovation in finance and providing an impeccable service to all of our clients.
EKMH: Regarding the digital asset markets, you recently wrote “Who are the Cryptocurrency Market Makers?” and “The Key to Organic Crypto Markets Growth.” What advice do you have for potential clients (issuers, exchanges, other market makers) ready to onboard HedgeTech and its suite of innovative proprietary systems, including market making, orderbook replication, statistical arbitrage and more?
Shi (Tom) Qiu: The best advice we can give is simply to ask questions. Let’s take the example of issuers who go through fundraising and who do not necessarily plan ahead for designated market making inventory and fees. This turns into a permanent struggle for those projects who not only cannot support their markets after secondary market listings, but also lose the confidence of traders and investors in the process. Listing is just the beginning of an asset’s long journey as a traded instrument. With lack of preparedness also comes misconceptions and unrealistic expectations. That’s why we try our best to be as didactical, as transparent and as upfront as possible with all clients. Prospects are usually extremely surprised with the amount of details in our answers and our integrity when they reach out with questions. No matter for what service you are looking, you always want to be able to speak to someone and ask questions whenever they come up. Clients are amazed by the fact that we answer questions in no time, day and night (regardless of timezone).
EKMH: What problems in digital assets market making continue to keep you engaged in the sector (and awake at night)?
Laurent Benayoun: A number of things. First, misconceptions about what market making is. Unfortunately, a number of ill-intentioned people used to do all kinds of illegal or immoral things on the markets under the umbrella of market making. Actually, a few days ago, we found out that a major exchange had very recently partnered with a person boosting traded volumes artificially, a practice that we thought had disappeared due to introduction of real metrics by data reporting sites such as CoinMarketCap and CoinGecko. Until this very day we have clients who refuse to tell their community that they hired a market maker, while it would in fact boost the confidence in their markets.
Second, with misconceptions come unrealistic expectations, as Tom mentioned previously. Some misunderstand the verb “making” in market making and come to us hoping that we can push their price up, as if we could do anything and everything on the markets. In fact, market maker simply means making markets more efficient by placing “maker” orders which provide opportunities for other traders to buy and sell immediately (as opposed to “taker” orders which take such opportunities).
Third, poor API (what allows us to connect to exchanges’ servers to trade algorithmically) standards. We advocate for better API practices when it comes to API request formats and values, as well as rate limits. Also, some top exchanges out there lack server infrastructure scalability which causes them to return outdated information at times. The latter is a huge problem when passing orders with an order of magnitude under a millisecond (the best that can be achieved with centralized digital assets exchanges).
In order to contribute to the global effort to improve these markets, we talk at conferences around the world to share our technical expertise and give time to incubators to help raise awareness about what true market making is. We strive to fulfill our mission to improve market efficiency for all market participants, whether they are exchanges, issuers or individual traders.
EKMH: In a series of instructive videos, you explain the HTClient app and sustainable strategies regarding HedgeTech’s Liquidity Providing & Spread Narrowing Strategies and Buy-back & Sell-off Strategies. What makes HedgeTech’s algorithmic market making unique? How will HedgeTech continue to address the complexity of scalability and evolve its all-in-one liquidity provision system with varied market applications/ flexible use?
Shi (Tom) Qiu: Our strengths are our sophisticated strategy catalog and technology as per our motto: “brain power, computer efficiency.” On top of market making, we also provide orderbook replication and statistical arbitrage algorithms, along with smart market entry/liquidation strategies. We also create custom scripts tailored to our clients’ needs. These scripts run a secure and scalable server infrastructure and are designed to reduce/eliminate market inefficiencies. Our extreme scalability even allowed us to onboard competitors as clients which is quite unique: they take care of their clients’ relations while we focus on the tech aspect, thus establishing a win-win situation.
A major step toward scalability was the design of a new internal execution infrastructure that we made available to the public in the first quarter of 2020 via HTClient. This allows one trader to run and monitor hundreds of scripts in a very easy and efficient way, thus replacing an entire trading team. In order to stay at the forefront of innovation, we closely monitor new technologies that may be of use to us, either on the strategy side or on the infrastructure side. Besides, we face changing market environments and challenging situations that lead us to constantly refine our strategy design, security mechanisms and execution techniques to always keep the markets we trade on manipulation proof and our clients’ assets safe.
EKMH: What is your shared vision for global digital assets’ future? How do you expect HedgeTech to evolve within the next years?
Laurent Benayoun: I think that digital assets markets are moving in the right direction. First, regulations enhance KYC/AML practices, thus excluding people with bad intentions, making markets safer for traders and investors. Second, exchanges, issuers and data reporting sites have already started to realize that certain metrics such as spread and liquidity - almost impossible to fake - prevail over other ones such as daily traded volume – often manipulated. Third, markets have become increasingly sophisticated. When I started trading on these markets 6 years ago, only spot trading (basic buy and sell) was available. Then came margin, “perpetuals” (futures with no expiration date), futures, options, swaps and now even ETFs.
In terms of evolution for HedgeTech, I think that we will keep improving our strategies and technology. Looking back at when we started two years ago, I find our initial market making algorithm to be extremely basic. I expect that there will be a huge gap between now and a few years down the road on all aspects. Besides, now that we are satisfied with the designated market making side of the company, we intend to focus more on alpha generating strategies on stocks, forex and futures for the hedge fund. It is still a debate as to whether to open the fund to investors outside of HedgeTech members or not.
EKMH: Your firm works around the clock and on markets worldwide, what decisions did you make prior to the pandemic that helped HedgeTech thrive during the Covid crisis?
Shi (Tom) Qiu: To have the possibility to work remotely. When Covid hit, companies were forced to move their operations online. Twitter even announced that they were considering offering remote work options for all employees, even after the pandemic. At HedgeTech, we already had the infrastructure that allowed employees to deploy strategies, run and monitor scripts and communicate with clients effectively entirely online. We have never met a vast majority of our clients in person since they are scattered on all continents. Other than that, our risk management practices on financial markets helped a lot in corporate finance for example in terms of efficient allocation of funds. In fact, we even hired during the pandemic.
EKMH: What advice do you have for those who intend to join the asset management and/or fintech industry?
Laurent Benayoun: To always be curious and be application oriented. Universities furnish great opportunities for people to be exposed to new concepts and provide amazing tools to help continue education through self-teaching after leaving the institution. However, most of the concepts learned may only be theoretical or applied to overly simplified environments. Besides, professors have no interest in teaching something that can be applicable as is. Let’s imagine that a financial engineering teacher was to present a strategy that had the potential to generate good profits to a few dozen students, year after year, to every new class. Well, most students would jump on this opportunity and profits will shrink for everyone as more people use that specific strategy. This example illustrates that what matters most includes the curiosity and ability to learn on one’s own, creativity, and the capability to apply knowledge on concrete problems.
EKMH: Work/life balance has never been more important, as working in the “new normal” feels more like living from work than working from home. Tom, what advice do you have for maintaining a productive work culture and positive social/home life?
Shi (Tom) Qiu: I would recommend that people recognize that everyone needs breaks. I once had an amazing Maths teacher who gave me this precious advice when I was going through an overloaded semester. He said that I needed an escape to externalize pressure. He was entirely right; I follow his advice to this day and make sure that my breaks are just as efficient and relaxing as work time is productive in order to create a virtuous cycle. Singing pop music was my escape during these quarantining times. During normal times, I also enjoy playing strategy games such as Go and Poker, as well as spending time with friends.
EKMH: Laurent, how does your background as a classical violinist influence your business acumen and overall MO?
Laurent Benayoun: The 15 years curriculum I completed at the Conservatoire in France taught by a Bolshoi orchestra violinist was very intense. It first taught me “multitasking” as I followed two paths simultaneously: I went through a scientific curriculum throughout school and higher education, and through a professional music education. This experience definitely helped when it came to being both an algorithmic trader and co-founder of a company.
In addition, I was taught to always anticipate and to aim at perfection. These two characteristics are particularly useful in the markets. When it comes to offering a service to clients, I try to anticipate all problems that may arise, no matter how extreme they are, but I cannot sleep at night if I know that something is off at work. That said, music also helps me to enjoy some time off, whether it is by listening to music or playing the violin.
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