Bridging TradFi and DeFi: How Talos is Transforming Institutional Trading

I'm Vince Molinari and welcome back to FinTech TV.

I'd like to welcome Anton Katz, who is the co-founder and CEO of Tauss, and Anton, I'd be remiss if I didn't say it.

Happy birthday.

I don't want to break out into song.

We may lose all of our audience at that point, but delighted to have you here on your birthday and celebrating this special day at the New York Stock Exchange.

Well, thank you very, very much.

I really appreciate it and the lack of song and, and hopefully a little embarrassment in there, but I've never got to start an interview that way, so thank you.

Well, thank you, thank you.

Thank you so much for having me.

Delighted on a very serious note.

Taus heard so much about what you're doing.

Love to hear firsthand and share with our audience what talus is, what you're doing, and what's the mission.

Well, thank you very much.

Um, so Telos provides, uh, Telos is an institutional trading platform at its core.

We connect our clients who are institutions, whether on the buy side or on the sell side to digital assets.

Our focus is of course cryptocurrencies, but we have been expanding more and more into into other asset classes as well, especially as we're seeing digitization of the asset classes.

In essence, what we do is we, you know, we're a technology platform that allows our institutional clients to come in and through one platform through a one stop shop to access all these markets underneath.

So we are connecting to all the different. crypto exchanges we're connecting to OTCs, market makers, dealers, we're connected to the centralized markets, decentralized markets, and then beyond that, Talos provides pre-trade and post-trade services as well, so we connect to all the custodians in digital assets.

We provide settlement services.

So really our clients come in and are able to effectively enact their entire investment life cycle from the beginning, from portfolio management into trading, including algorithmic trading.

Into reconciliation, into settlement, and so on and so forth.

That's the that's the service.

So truly the epitome sounds like vertically integrated and horizontally integrated at this point.

Well, the interesting thing is that it's a little bit of pick your journey, right?

The integration is there.

You're absolutely right, right?

But we are not very, you know, it's not all or nothing for our clients.

We have clients that are coming in for portfolio management.

We have clients coming in for portfolio implementation, which is, you know, rebalancing optimization.

Uh, we have clients quite a lot of clients that are coming in for trading, and then we have a separate group of clients that are using us on a white label basis, so they are providing their own services to their clients.

So we power quite a lot of institutional brokers, retail brokers.

So think about the people that are providing their clients with the ability to trade cryptocurrencies.

A lot of that is powered by the Teest platform globally today.

I love it.

It sounds like making other people relevant to their clients to keep them in the new game.

Hey, I wanted to ask you, you know, we hear so much about institutional adoption.

It's here, it's coming.

What do you see as the barriers or the challenges for institutions to be engaged in digital assets or to manage digital assets?

Well, you know, first of all, institutions are obviously, you know, it's a pretty diverse creature.

What we see and what we've seen in the past 6.5 years that has been has been running is that.

In the very beginning we see institutions that are very, you know, they're risk friendly.

They can come in.

They are happy to take the risk.

They can interact with new technology.

They can interact with new emerging markets.

They can work through the volatility, and that's kind of like some of the barriers for large institutions to come in regulation.

Up until recently has been a huge barrier for the United States to come in, right?

The tool set has always been a part of it as well, you know, when we started building Talos, the idea behind TLOS was to get institutions the same type of tool sets, the familiar interactions that they use in capital markets, right.

It's one thing for a person to trade cryptocurrencies and go on exchange and buy something for dollars, quite another for institutions that demands things that are up 24/7, have redundancy, you know, connect through institutional rails, provide you with the safety, provide you with the kind of reporting, best execution.

So the tooling was also not there.

A lot of that has been addressed through our platform or our partners that are addressing this and so we are seeing more and more of those barriers removed.

Some of the barriers are still around, you know, like just generally adoption and time.

Institutions, especially the larger ones, don't move on a dime, right?

You kind of need to go through the paces they need to become familiar with the technology.

You also need to build the kind of technology that Doesn't mandate them to move all their operations immediately and to change everything.

We think that that's a very, very losing proposition.

So a lot of what we do right now is, you know, especially today as we work with a very, very large group of institutions, we are the largest one of what we do.

We are trying to make digital assets and crypto more specifically more approachable and look very, very familiar to those institutions so they can interact with them using the same rails they interact with every other asset class.

Yeah, and I want to pull on that thread a little bit because I think that's a massive point that you're making, and I'll put it in the bucket of tremendous amounts of legacy technology that our institutional participants are accustomed.

To working on so they're not just going to move off of that.

So that ability to integrate or use a portion of what you're bringing to bear, I think makes tremendous sense.

You have to do that and actually, you know, so just to give you a quick, you know, a quick example of this, right, we have clients from the very, very traditional institution just to give you in numbers over the past 10 months we onboarded traditional institutions just on the asset management side alone that total about $18 trillion in AUN.

How that pause.

18 trillion, not 18 billion.

That's incredible.

Not all of those 18 trillion are in crypto.

Ah, but I'll take $18 trillion way you want to pack it up for me.

But that just basically tells you that you know, 3 years ago, and I mean I'm honestly like I'm guilty of the same thing.

3 years ago, 4 years ago, people were asking like, are institutions here?

And I was like, yes, they're absolutely here, you know, they're coming and unfortunately the reality is that that was just not the case.

They are still not fully here today.

But 100% they are aligned with the vision of digital assets.

They are building in digital assets and they are now migrating the rails.

But to back to your point.

We have customers that are coming in today and basically saying like look.

There's generally what we see is we see two modes.

We have customers who are saying, can you plug into our legacy infrastructure and make this appear to us as other asset classes or make it appear as crypto but still fit into the risk engines that we have, the reporting functionality that we have maybe into the even the order management or the execution systems, and that's one side of the customers and then we have another side of the customers again on the asset management side primarily actually they're saying.

Can you build this as an aside, so we have customers that are doing older operations right now in digital assets inside Taos.

That's ultimately there will be convergence because more and more of our clients are thinking about digital assets as just another asset class, crypto just another asset class.

They're not specifically in crypto for the sake of crypto.

They are in crypto because they also need to be in.

Crypto as well, right, so the platform on our side actually has to evolve as well to encompass other rasa classes, but that's kind of like how you see people are starting to move towards like you know using their existing infrastructure and working with this kind of like new environments as well.

So you anticipated somewhat my next question.

And it's a great segue.

So we look at almost this, I'll put it alternative investment category.

So crypto being an alternative investment perhaps that needs asset allocation, whether it's a traditional asset manager, whether it's a bank, whether it's an institution we're looking at how are they going to capture alpha across the spectrum.

So crypto being one conduit of that, perhaps digital asset being another.

You know, with that said, are you seeing those barriers coming down for traditional asset managers for banks, as well as some of your institutional participants?

100% and you know that already has happened outside.

So we are Tulsa is very diversified.

We have customers, I think in over 20 countries at this point.

It's, you know, significant customers in over 20 countries.

Generally regulation has been, you know, ramping up quite aggressively in other jurisdictions.

In the United States we obviously went through this almost like a step function, right?

So and that's kind of like how the business is operating as well.

We've been growing very steadily in EMIA.

We've been growing very, very steadily in AIPAC, and we've been very successful in those kinds of regions.

The United States has always been the larger one for us, but it was on par with others.

Today we're seeing quite acceleration in the United States as well.

So the customers like, you know.

The bottom line is, yes, unequivocally they're coming into crypto.

A lot of them have, you know, a lot of the larger banks.

It's part of the roadmap.

Again, it takes time for some of those institutions to figure out how to do this in a responsible manner.

They are still providing services.

They are still in major financial institutions.

They need to do this correctly.

This is not something that a bank can just come in and turn on trading for their customers, turn on custody for their customers, but we are almost unaware of any large financial institution at this point that is not considering and not, you know, moving forward on some sort of offering in digital assets and specifically in crypto.

Well, I think that's great news, right?

And I think maybe something that goes back to our earlier conversation off camera we're talking about some of the muscle memory, the existing financial market infrastructure.

I know you really all started around kind of order execution management systems and made this migration to what we'll call PMS or portfolio management systems.

Talk to me a little bit about that journey and, and, and.

Why PMS?

Yeah, so, so you know, PMS is definitely one of the verticals now that we provide and to your point, we started in trading and we started in trading because we saw the need there.

We saw institutional players that are coming in and saying, look, I mean we need access to liquidity, but the liquidity was completely fragmented.

That's still generally the case today across multiple jurisdictions across multiple technologies, you know, when we build this in every other asset class.

In capital markets, you generally had rails that were a little bit more standardized here that standardization in crypto standardization just generally did not exist.

So the first thing we set out to build is really standardized data and allow people through the talus, you know, gateway to come in and access all these assets underneath.

And then we built our electronic execution, algorithmic execution.

We've done tons of it.

We're the largest provider there as well today.

But then a time came later where more and more of our clients are saying like, OK, we understand the trading aspect.

But we are doing also all the other things now in capital markets, generally what you do is you say I will have somebody for data.

I will have another vendor for PMS.

I will have another data vendor for all or O EMS.

Maybe I'll have another vendor for you know, clearing and settlements and even recon, right?

In crypto, and in digital assets specifically, this is not a crypto unique thing.

This is digital assets because of technology that's embedded in the asset, you can connect a lot of that investment life cycle.

So for us it became a no brainer to address more and more of the things that our clients already do today.

So portfolio management and portfolio engineering came out of that because we have clients basically saying I'm using halos, but I'm using A and B, or maybe I'm writing them on my own because there is no good platform for it, so we expanded there.

Our clients were settling trades.

Settlement was a huge pain in digital assets because it's bilateral in many cases, right?

So that means I need to go.

I need to speak to my custodian.

I need to figure out how to do this.

Custodians are phenomenal in what to do, protecting the assets, but now we're talking about like movement of assets, so.

Connected to quite a lot of those rails, right?

And so basically what happened over time portfolio management, the settlement, the reporting, and even TCA transaction cost analysis that's so important for institutional clients just came out of client demand and we can do a lot of these things just by connecting those pieces together.

Well, I mean, so well, I'd say the tapestry woven and intersecting all these parts.

I'd be remiss if I didn't ask you.

Here we are sitting at the New York Stock Exchange, the epitome of traditional finance, tradify.

You know, we hear so much about defy decentralized finance.

You know how you've got this unique lens of seeing all this that's happening across the assets and certainly from a global perspective.

How are the institutional clients participating or interacting in and does Talos have a role in that?

Yeah, absolutely.

Look, I mean our job is to provide institutions with access to this underlying asset class.

Now if the liquidity or other services are in centralized markets or whether they in decentralized markets, that's the job.

We don't pick where the liquidity is.

Our job is to connect the clients to provide the service, so.

Decentralized assets and our ability to provide our clients with assets to decentralized assets has been has been part of the part of the company for quite some time.

We had, we had some acquisitions that we made in the space as well.

We acquired a company called Schoen.

We've built quite a lot of our.

Capabilities.

So today, if you think about the tools that we offer, right, the again portfolio management and you know some of the white labeling tools, but execution and settlement, we have connectivity to both centralized and decentralized assets.

Now in terms of institutional adoptions.

It's a little bit of a mixed bag.

We have some, it's kind of like the earlier evolution of centralized marketing in crypto as well, right?

Some institutions and some institutional players, but if we're specifically talking about how institutions are actually accessing DFI, I would say it's a little bit of a mixed bag.

And it's reminding you a little bit of the evolution of institutional participation in the centralized markets in crypto assets beforehand, right?

So we are seeing some of the smaller and some of the risk friendly institutions, some of the, you know, are able to actually interact with the world, so they are happy to do execution and decentralize.

Markets, they are happy to hold some assets that are not yet supported on the major custodians.

So for instance, that requires you to hold specialized wallets.

There are folks that are, you know, if that's where they're making their money, they are happy to do that.

They're little early adopters, a little extra alpha capture, exactly right.

So the early adopters is the name of the game.

Now we're seeing more and more larger institutions thinking about DI as well, and so it starts from a slightly different place.

For instance, you know, there's we have Ethereum ETFs in the market, right, publicly traded instruments.

There is a staking component of that instrument that is missing that is not yet in the market.

Staking is a very decentralized market type of you know scenario.

So they kind of to add that they need to start thinking about how they're interacting with decentralized markets as well.

So I think we're going to see this compliance remains one of the largest problems around decentralized assets.

So and decentralized markets specifically, can an institution interact in a safe environment in a known with a known set of players?

That's becoming one of the questions.

But generally speaking, it's just a matter of time before decentralized markets play a very meaningful role, I think, in execution overall.

Again, super encouraging, you know, I guess Santana, as we're closing out, if I can ask you without revealing any of your secret sauce or the confidential nature of things, what do you see anything, it's the end of the day.

Yeah, we'll get away with it now.

Great.

Hey, so what's in the future?

What do you have on the road map?

What can we look forward to hearing about from Talos?

Yeah, so we, so generally.

In some cases, more of the same, in some cases, new things.

So where we have found success is, you know, providing this kind of technology either to our buyite customers or providing this technology to sell side or service providers to be able to provide their own clients with training capabilities.

We're doing a lot more of this now and there's going to be some partnerships that are going to become apparent.

The newer things is we're building more and more of the verticals that are requiring that are required for our customers that really truly morphs into a one stop shop for those customers.

So that's kind of like, you know, everybody knows that that's our path.

Everybody knows that that's what we're building, you know, we have some organic growth to do there.

We also have some inorganic growth to do there.

So M&As continue being a part of the strategy of course for us building, we are all engineers building is a huge portion of our strategy.

The things that are more interesting and a little bit longer term for us is really starting to think about how we connects to other asset classes.

Again, as I mentioned, a lot of our clients are coming in and saying we are looking not only for crypto, but we are thinking about our portfolios as diversified portfolios that include multiple assets and especially as we see other asset classes migrate to digital assets rails, TAOS needs to become a multi-asset platform and that's exactly where we're headed to.

Well, thanks for joining today.

I learned so much.

This is a bit of the master class today.

You got to come back and share with us again soon, Anton.

It's very, very kind of you.

Thank you so much for having me.

My pleasure.

Thank you.