 Hi, and welcome to Bright Minds from TickMeal. I'm your host, Patrick Munley, and in this series, we're setting out to answer some of the most commonly asked questions around investments in trading through entertaining and insightful conversations with seasoned insiders. Rapidly advancing technology continues to cause disruption to almost all industries, and the world of investments and finance is no different. The internet and mobile tech has allowed access to markets and information to flourish, leading to vastly increased opportunities for retail investors. Between January 2020 and January 2021, monthly downloads of retail investment apps more than tripled, and since that initial explosion, retail investing is more popular than ever. But access to e-trading apps is not the only big tech-driven change we've seen in recent years. The AI-driven financial advisory market size is set to increase at a compound annual growth rate of 29.7% between 2022 and 2030. And with the rise of AI and so-called robo-advisors, we will undoubtedly see an increase in people entering the markets, as well as the many inevitable changes to finance law, process and regulation as financial institutions try to keep up. We take this accelerated rate of change for granted, but of course, it wasn't always this way. Before the huge advances in technology that we see today, activity and therefore power in the markets was much more concentrated in the major exchanges, such as the New York Stock Exchange and NASDAQ, and relied much more on human interaction, relationships and instinct. Our guest today, Tick Mill UK CEO Duncan Anderson, has seen all these changes firsthand. Duncan's financial training started on the old open outcry floor of life, LME and the CME in Chicago. And since then, he has gained over 30 years of experience in the financial sector. Today we'll be discussing the role that technologies such as algorithmic trading, mobile tech and high frequency trading have played in revolutionizing the way the industry works. The pros and cons of increased reliance on technology and we'll also take a look at what the future holds for tech in trading. Duncan, thanks for joining us today. Do you get things started by telling us a bit more about your career so far? So my first introduction to, I guess, the trading environment came as a sort of a very young 16-year-old working holiday shifts at an old city commodity trading house, which is based in Sugar Quay. And I think the name itself sort of, you know, sort of points to this historical But that's probably, you know, one can talk about that for ages, so I'll save that for another day. But what I do remember was, you know, on the fourth floor, they had individuals that were tasting coffee, they were tasting sugar, they were sampling other sort of commodities. So all these things were coming through. And the smell was, you know, I still can't get it out of my mind now, but it was intoxicating. And you could also hear the clatter of the Telex machine, you know, spitting out information, people running over to it and saying, oh my God, you know, there's a frost, you know, in Florida or something like that. And the noise of the individuals sort of talking and trading and explaining and, you know, all the hustle and bustle of actually sort of phone-activated voices. I actually spent quite a lot of time also licking envelopes and some of the prospectuses that were being licked, so to speak, turned out to be for the first billion-dollar futures fund. But, you know, you mentioned, you know, I worked on these exchanges and, you know, that included the old life floor and the Royal Exchange, the LME, and ultimately sort of in Chicago on the CME. And that, for sure, was a pretty noisy experience as well. I then went on to sort of set up a small little hedge fund, which ultimately became a sort of fund of funds, which very much geared towards systematic trading. And on returning to the UK, worked for a well-known CFD house on the U.S. And that led to other opportunities, which ultimately resulted in the current position where I am at Tick Mill. So just as you were running through there, Duncan, something that came to mind in terms of how technology has really shaped the development of the investing and trading world, your explanation regarding that high level intensity of human reaction or interaction, sorry, versus what you eventually got involved in terms of the trading side being systematic and obviously, I guess, highly automated. And it's somewhat of a juxtaposition between that high level of human interaction when you started out, versus that move into technology and systems and a far more, I guess, regimented approach to investing and trading. Absolutely. And I think the type of individual also makes a huge difference because what you might find on a trading floor in the old days, it's not necessarily the individual that you'll find building a quant strategy with Python today. A lot of the characters, I guess, once the migration really set in in terms of moving from that open outcry experience to the screens, I guess the industry probably shifted from a persona dynamic into that more settled environment of development as opposed to the hustle and bustle of an open outcry trading floor. Yeah, I mean, I remember certainly the old life floor on the Royal Exchange, which is opposite the Bank of England, and life stands for London International Financial Futures Exchange that, sadly, no longer exists, but it was this sort of most amazing sort of environment, so you can really sort of make it up. But it had what we all need and is an area for price discovery. And what follows on from the old days is you have exactly the same thing today, certainly futures markets will use price discovery, even though there is no pit, but there you had sort of people standing in these sort of literally pits where they were yelling at screaming at each other, banked by a whole concophony of phones and other individuals signalling into the pit, and runners like me would be hustling and bustling and trying to take orders and get back to the phone receivers. And you were constantly on your feet trying to ensure that the madness turned out to be actually something that was relatively orderly at the end of the day. What do you think in terms from your perspective over the life span of your career so far? What do you think the biggest technological change has been? I mean, you talk about the telephone. I mean, that at some point would have been a major shift for the markets when as opposed to just the exchanging of tickets moving to the telephone system. And then I guess now thinking about the internet, et cetera. What do you think has been the big game changer? I think on one side, I guess the pit to electronic was a hard for many of these older traders to adapt to. And they have by and large sort of mainly disappeared. What we have now is programmers with the ability not just able to trade one particular market, but they can trade multiple markets over different time horizons. And this is just as one singular individual. I mean, it's fascinating from that perspective, I guess from a provider perspective, in the early 2000s, there were roughly three or four main providers, but the barriers to entry were huge. I mean, the cost of building, cost of servicing was enormous. And again, this is the sort of beginning of build of platforms that you could actually electronically trade over. So the cost there was significant. The one outlier was MetaQuote's MT4 because, I mean, literally overnight, it allowed you or me or any individual who was able to code, who was able to create a trading strategy to start competing with the big boys. And what do you see as some of the challenges specifically for yourself as the CEO of a major platform provider? What are some of the challenges in terms of addressing the potential pitfalls for first-time investors, first-time traders? How are Tick Mill using their technology to guide traders or potential investors to make better decisions? This is a really key question. And I think from a company perspective, any trader, the very first thing you do is you want to find a provider. So you look at balance sheet, you look at longevity. You look at the relationships that the provider has with liquidity providers. So all-round structure, is it an entity that's going to last? Obviously, with being a UK entity, Tick Mill UK has pretty rigid and resilient environments purely because we're regulated by one of the largest regulators in the world or most well-known regulators in the world that in many respects, it's quite painful. But at the same time, if you're investing your money, you want to actually ensure that that company is going to be around and the regulator does a very good job of ensuring that that actually happens. But I guess once you've found their provider, the fact that you can trade like a pro, like a quant, like an institutional player is that it actually then comes down to you. So first, you've really got to understand exactly what you want to get out of this trading opportunity, this business and you've got to treat it like a business and you can't bullshit yourself, excuse my French, but you have to know what you are getting yourself into and you want to have to know what you're getting yourself into. You've got to create a strategy, you've got to then test it. And of course, we're talking about technology. These are all very, very sort of easy things to do as well. You want to ensure that you protect your capital. So when you actually come to trading, you've only got a finite amount of it, and you've got to know what's a risk and what not to risk and not deviate from that. And I think probably for me anyway, though, so the most important thing is that you don't think that you're God on day one because you will get cut down. It's as simple as that. You know, it trading can be brutal, but at the same time, it can be the most beautiful sort of exercise as well. So I always try and sort of act like I know nothing and research, research, research. And by by by acting like you know nothing, it actually puts you on a sort of, I think, on a better footfall than than actually thinking you know everything. One of the the fantastic aspects about the platform access is like you say, that some that focus initially on back testing and stress testing strategies and systems that in in previous decades would have taken a huge amount of resource and man hours to to execute. Whereas now over, like you say, the M.T. 4 platform that the technical have or the M.T. 5 platform or even through these futures platforms, you can back test a strategy within minutes and get feedback on the performance potential of that strategy and and also understand the dynamics in terms of execution and what you know how that impacts the strategy going forward. And then you have the ability through the platform, obviously to forward test it with a reduced potentially reduced amount of capital before applying more meaningful, meaningful assets to a strategy. Yeah. So I think the use of demo accounts are vital. The use of starting small and seeing how it goes, tweaking and it's a back test forward test, perhaps not try to optimize too much from a sort of back testing perspective. You create a strategy, whether it's in your head or a paper or whatever. And if you then have to program it or even if you don't have to program it, you can still utilize an Excel spreadsheet. And the concept of the back test allows you to see how your strategy may have performed in the past. And by doing that, you can cut out a significant amount of potential error when it actually comes to trading real money. So it's a very valuable tool to help a trader refine a strategy that has some resilience and robustness going forward. And you made a couple of great points, actually, Duncan, that I personally, when I work with traders, I really try and underpin in terms of when you're looking at automation and back testing. Is this idea of optimization and curve fitting? I guess the uninitiated trader wants to make this strategy as perfect as possible. Whereas, as I guess you know and I know that really simplification is the key to performance and reducing the amount of optimization often produces a better strategy. Yes, and you build a strategy and then there is technology out there that allows you to say, well, if I did this and I did that, then I can maybe get a slightly better result over here. But of course, it tends to only work for a limited amount of time, if at all, in fact, because you end up building something that never really would work in the real world. I don't know if there's a better way of explaining that. No, I think that's a great way of explaining it, because I mean, ultimately, with any strategy that you backtest, it as every financial outlet tells you past performance doesn't necessarily imply future results. And so you are ultimately confined by historical data. And as we've lived through just in recent times, a pandemic and inflation spiraling, no one knows what the next market cycle is going to be. So you can only rely to a degree upon that historical data. And if there has been decent performance, then you can anticipate, I guess, decent performance in the future. Whereas if you try to optimise the strategy too much to the historical data, the future data can really send things right. And that's a really good point, because the future will always throw up something that you've never experienced in the past, maybe apart from a war. But trading through these environments, if you've never actually traded through them, it becomes significantly more difficult. And of course, the temptation to fiddle around is constantly there. Are there any other downsides that you see that can broadly impact investors who are using technology to a greater extent? I guess there are some points where, you know, tech has sort of heightened the herd mentality of traders. We've seen some of these sort of flash US crashes, US stocks going through the moon because the herd mentality is dictated that a hedge fund is not looking after them properly or trying to push the market down. But I've always believed that in general the market itself will find some sort of equilibrium. But getting to that point, definitely, tech has created these sort of these inflection points that a trader really needs to be wary of. So, you know, interpreting what the market is going to do probably has become more difficult as there are a number of new variables that you need to process. HFT, high frequency trading is, I mean, that's away from the sort of normal sort of capability of traders like yourself and I, Patrick. But again, we have to be aware of them, you know, especially if you're starting out and you're wondering why on earth, you know, something major, I mean, the market's moved in the way it had. You we absolutely need to be aware of these things that do happen. Duncan, thank you so much for your time today. Just for the audience and listeners, is there anywhere that they can go online, maybe to follow you? I have a LinkedIn profile. I'm also on the sort of on the tickmail blog in some shape or form and very happy to take and speak to anyone from an email perspective. I know it's old school. I'll even pick up the phone for someone as well. So fantastic. Thanks, everyone, for listening. And once again, Duncan, thanks for your time today. Many thanks, indeed.