Episode Transcript
Transcript
John Lothian: Joe, tell me about the history of Exchange Analytics,
Joe Adamczyk: Believe it or not, you probably may be aware, many of your listeners perhaps are not. I know a lot of people I talked to are surprised to hear that Exchange Analytics is almost 30 years old now. In two more years, it will be 30 years old. So it was founded back in 1995 by Larry Israel and his partner.And so they've been serving primarily the futures industry ever since then and of course, evolved further into some other industries as well. But we've been around for a very long time.
John Lothian: Now, what was the reason it was founded back then?
Joe Adamczyk: There was, you know, a new requirement that came out a federal requirement that came out for ethics training from the CFTC a little bit before then. And clients were firms, were out there trying to figure out, well, how am I going to get all of my traders and my brokers to comply with this? How am I going to go out down to the pits on the floor and get them all trained, they're not going to want to do this. What's an efficient way of complying with this new federal mandate that came out?
And Larry and his partner at the time thought, well, maybe there's a way we can do this at scale and a lot of forward thinking went into it and they said, well, maybe we can do this in an electronic format. And so, we will deliver it and how they started doing this was after a few live sessions to scale this a bit more was let's put it on the old, if you remember those old 3.5 inch floppy discs that you used to, you used to have to jam into the little disk drive and it would get stuck half the time and it would get jammed.
But they would create the content, load it up onto these disks, you know, create a whole bunch of them and start sending them out to a firm so that they could either get their folks in the classroom or hand them out one by one.
And it was a pretty, you know, efficient way for kind of way of delivering training content in, for this new requirement that people just didn't have to do.
So, it was really interesting to hear that. That's how it got started, as you might imagine, it just kind of took off from there and Larry as he took out on the firm on his own, continued to innovate even further. Because after that, a few years later then they said, well, how can we make this even more efficient?
We're sending out these 3.5 inch floppy disks all over the place and that's working well, but there's this thing out there that's starting to get popular called the Internet and this was in the late nineties, about 1998 I believe, where I thought, well, maybe we can deliver this over the internet and make it available on demand.
And you know, you think of having just gone through, you know, the pandemic and the effort that our industry, of course, and industries, all types of industries all over the world had to go through to, you know, Zoom, and Zoom became so popular in a way Larry through his training and using the internet to communicate was doing this since the late nineties.
And not that long after, for those CME folks out there, that Globex trading platform was I think introduced in '92 for electronic trading, you know, so just about 67 years later, Larry was out there bringing, you know, this federally mandated training requirement through the internet.
So a long history of innovation for the firm after ethics training, what was the next kind of training that exchange analytics brought on, we saw a big uptake, you know, around two thousands with a lot of the money movements going on.
Of course, anti money laundering became an important course for us as electronic payments, the electronic transfer of money became ever more popular. And then of course, the various things were happening with that. And so regulators started to impose more requirements on that type of conduct and that type of behavior. And so we began offering an anti money laundering course.
And then, you know, what really then impacted so many of us in financial services was the 2007-08 financial crisis
and the resulting Dodd-Frank legislation that came along, it began to impose a lot of mandated training requirements on firms, particularly for us in the futures industry, which is where the firm really got its start and has really established itself.
The CFTC imposed a new customer protection rule requirement that financial, that FTM and other financial services firms have to take on an annual basis. So the ethics have to be taken roughly every two to three years.
But now all of a sudden you start to see annual training requirements and the customer protection rule is one of those, another one which we hear about the space we hear about all the time.
Now today is cyber security coming through the Dodd Frank legislation, the CFTC imposed and the National Futures Association who helped self regulate the industry, of course, also put out some guidance that effectively requires annual training in cyber security.
And so these were two areas that were ripe again for a very efficient training solution to be brought to the market to help firms out with, you know, putting together this kind intent in delivering it on an annual basis.
And because it needs to be done annually as well, there's the need to stay up, keep pace with what's new, what new advisories are coming out or interpretations or new regulatory cases that can help shed light or bring the latest best practices to the participants, so they can keep up to speed with that in cyber security.
Of course, that landscape is evolving all the time through your newsletter and through the major papers, you see day in and day out, new incidents are happening, new techniques, new cyber risks. And so that has become a very, very important course for us as well. Probably if not our top seller, the top two, certainly top three sellers.
So cyber security, you've got that annual requirement and then there's just that demand that costs need to continue to bring new information to light for users. So that's been very important for us.
John Lothian: So how did you get involved with Exchange Analytics?
Joe Adamczyk: Yeah. So Larry and I have known each other for quite some time, probably going on 10 or 12 years now. I got into this industry when I came out of law school in 2001, I began working at a firm called Freeman, Freeman. And Salzman Salman was Jerry Salzman C M E S long time outside council. And Jerry through working with Jerry, I got to be involved in some matters for the CME at the time. And in particular, back in that would have been 2000 by probably 2006.
I was doing work on the merger between the Chicago Mercantile Exchange and the Chicago Board of Trade working on behalf of the Chicago Mercantile Exchange at the time. And there's this process that the Department of Justice took the parties through, called it a second request.
It's a very detailed, lengthy, arduous process where they asked for everything out of the phone at both firms and it got me, although I had done some matters for CME at the time, it gave me an inside view into the exchange and what they do.
And so really began to get more involved with matters at the time. It just so happened that around that time, the firm decided to sell itself to another firm, a very prominent Chicago firm called Jenner & Block.
And so I moved over to Jenner at the time but I was already speaking to Chicago Mercantile Exchange because although I like being a lawyer, I sort of always knew John that you know, the lawyer thing day in and out is not going to be, for me, it's a great foundation to get started and to learn new things and get exposure.
But I knew I wanted to be more on the business side. And so when the firm decided to sell itself, it created this opportunity where I could maybe make that move over. And so I began speaking to the Chicago Mercantile Exchange at the time. But they had a hold on hiring because they're still going through this merger review. Once that got approved, they then had the green light to bring me on.
And what we started talking or what I've been talking to them about was it's such a great time, John, you'll appreciate this, right.
You know, you're talking 2005, 2006, 2007, right? You've got these big mergers coming through. These two stories coming together. That was huge news, as you know, of course, and I got to have a front row seat in that, but electronic trading was also really starting to just, you know, boil up and really start to take, take off, right.
And so the stakes were becoming bigger, there was more scrutiny through some of the consolidation that was taking place with the exchange level, but also with the firms, more federal oversight was happening. More scrutiny was being imposed on the exchanges.
And CME wanted, in their market regulation department, they have as you know, their own set of rulebooks, their own disciplinary committees to oversee and regulate the markets and they had non-lawyers doing a lot of that work. They were getting more scrutiny from the CFTC.
And so they wanted to bring in and start a group, an enforcement group of lawyers to help with that process. And so they brought me in to start and create this new enforcement group and become more involved.
And through that, I got to work with their disciplinary committees which was made up primarily of different members at the firm level, at the individual level and where Israel through his work with exchange analytics and being a board of trade member was on those committees. And so with the merger, I got to interact with those individuals a lot.
I got to know many of them, many of them who still friends with and acquaintances with today. But Larry and I always hit it off very well. For those that know Larry know that he's just one of the kindest, most generous individuals.
And so it was just a great relationship and over time I got to talking with him as I moved on throughout CME and then ultimately joined Options Clearing Corporation as his chief compliance officer and did that for a number of years, but not only did I, you know, always see myself getting into business, but I always wanted to kind of get out on my own and, and test the waters that way and see what that was like.
And Larry was kind of had his eye in a couple of years time looking to retire. So he had been at it for over 20 years or so with Exchange Analytics and plus his prior work before that. And so we sort of knew he was looking to probably leave at some point, wanted to hand it off to someone and I was looking to get out on my own. And this was something that seemed like a good sweet spot for me.
It's sort of in my wheelhouse a great way to get out on my own without having to start something from scratch. It's got a great client base that I was able to acquire. And so one thing led to another and in 2020 we completed the deal and I took over Exchange Analytics and I've been working there ever since. And it's been great.
John Lothian: How has Exchange Analytics changed since you've taken over?
Joe Adamczyk: We started with the work that Larry had, had built up. And through those courses that we just talked about in particular, and those were the mainstays and, and he developed these great relationships with these firms, which we were able to leverage.
And now we're looking to build out and grow the firm, as you may imagine, in a few different ways. One of the first was to increase the course offering and increase our course catalog. So, in the two to three years now, since we've been involved, we have more than doubled the course offering. So we're looking to do more on the security side, for example, there are some offshoots of our cyber security courses, identity theft protection that we do. We do some other best practice type courses, getting the trade practice rules for the CME and for ICE that are very important.
And so we're looking to expand into other product markets as well as other geographic markets we are in over, our clients are based in over 40 different countries, which is great, but it's primarily them coming into the US markets, which is great and there's room to grow there, but we'd like to do more in some of their home markets as well.
So firms that are based in the UK or Singapore or Australia that are coming to us because they're accessing U.S. markets.
We'd also like to do some work on their behalf and get more involved in their home markets.
And so to help with that one thing we started doing in addition to expanding our course offering was change the way we do some of the courses and that meant making them not so U.S. centric in all instances.
I get questions from clients who say, why do I have to take three different AML courses?
One for the US and one for the UK and one for Singapore is an AML AML and I say yeah, in large part it is.
And so we've reshaped our anti money laundering course to be one that was so about CFTC requirements to one that is more general now and can be applied in just about any industry, in any jurisdiction around the world.
Because yes, its core, the principles are the same.
So we've been looking at our courses and saying, well, how can we do that a bit more in some instances now, of course, like CFTC ethics, that's very specific.
You can't really change it all that much like CFTC customer protection.
Of course, you can't really change that all that much.
It's very specific, but things like security, anti money laundering and some of our other courses that we've begun coming up with, you can make those a bit more general in their approach that they're more applicable and can be used in more than one jurisdiction.
So we're doing that with the courses.
We're also been experimenting with how the courses are delivered and we're introducing new features to them like role-based learning or test through our test out type optionality.
So that it brings a bit more efficiency to the clients.
And then finally, something else I'll mention is we're working on our partnerships with some other firms throughout the world.
So one that we have formed for a couple of years now, eco advisors out in Geneva and Switzerland who focus on consulting and some training type work there.
But they bring us a bit closer to, to some of the clientele in those jurisdictions. They extend some of our expertise.
So when those clients have questions about requirements of clients type matters in those jurisdictions, we've got some connections there that we can leverage and we're looking to do the same.
We're talking to a potential partner in Australia right now.
That will bring us a bit closer to the Australia and New Zealand markets, which is great because we've got clients already who are saying we love working with you, but can you do more?
And as you may imagine, it's a bit hard for us to, you know, establish ourselves from, you know, being a U.S.-based firm to working on more localized training in that jurisdiction as well as all the other jurisdictions that our market participants are in.
And so it helps to build these relationships with these global partners in order to offset some of that work and some of that overhead and extend some of our expertise at the same time.
John Lothian: What is the future of training?
Joe Adamczyk: Probably something much different than what we do for the most part today.
Our tried and true methodology has been to present a bunch of text on a screen followed by some sort of file graphic for the most part that helps translate that a little bit, if you will, what we're trying to get across on that page and it can be a bit tedious for folks particularly for those that have to take the courses year after year after year.
Although we try to freshen it up with new content, nonetheless, that type of format, although it helped demonstrate, particularly when firms get examined by regulators that they've done the training and what's been in there.
We all know and you in particular, John, and your audience and your listeners, you know, things like this podcast is something that could be a better way perhaps of delivering content where you listen to it and you maybe a button a couple of times this show that you're alive and listening to it.
I know when I have to do my attorney continuing legal education, that's a format that I've done and enjoyed and has worked well and is just a better way of kind of listening to it and kind of engaging in a bit more rather than staring at a screen the whole time.
We took our big cybersecurity course that I talked about, our major cybersecurity course.
And this year for 2023 we used video, we did an interview with Bob Bigman, the former chief information security officer for the U.S. Central Intelligence Agency.
And through that Q and A, we created some video content and we were able to use that and inject it in the course so that just brings it to life a bit more.
Bob is a great personality, a great storyteller, obviously tremendously experienced in that field.
And so to be able to present that to viewers in this different format, we've gotten great feedback.
So we're gonna be looking to do more video.
And so there are things like you and I have talked a little bit about this in, in another setting, John, where, you know, our course that I mentioned it's called our market conduct course.
And it, it primarily deals with the trading rule that CME, Board of Trade, ICE, you know, for, for the traders that are out there and what they can and can't do in terms of front running sp or whatever it may be.
It's, it's very esoteric in some ways, very technical, in many ways. But particularly for newer folks and when you're trying to convey a new concept, you know, putting a bunch of text on a screen and showing some random picture that you got from Getty Images or something is probably not the greatest way to communicate that and make that point.
And I understand that I appreciate that.
And so, you know, if you could show it by showing a training screen or some sort of animation to make that point come across and, and so they can see it as opposed to just kind of reading words, that's probably a more effective way of delivering that type of content, you know, so that's some nearer term ways that we're thinking about and experimenting with delivering the content.
But down the road, you know, I actually pay attention and look at what meta is doing in some of these firms in terms of virtual reality.
And I know for a fact that there are firms not so much in financial services, which has been our bread and butter, but in pharma and manufacturing and shipping where they're experimenting and doing some things where, you know, they're at a lab or they're on a, you know, large vessel or something like that, dealing with substances and materials.
And so it helps to have sort of that, that again, animation or VR type aspect to it.
And so it would be interesting to see if there isn't something, you know, where we do in that respect.
And I could even see that being, you know, a way to work on some trade practice requirement courses that we just talked about even beyond just animation where it's in more of a virtual environment, you practice trading or practice that simulation or that sort of thing.
Could be an interesting way to deliver some of the content.
John Lothian: What is Larry Israel up to these days?
Joe Adamczyk: Larry is very happy enjoying grandkids and there isn't a time that I don't check in on him and he isn't first and foremost, talking about the grandkids and the family and having fun with that.
I know he was, you know, seeing as how we are in a cafe here in Sarasota where he was just in Southwest Florida just a few weeks back.
And unfortunately, I missed him.
He was down to visit his brother in Naples and had only a short sliver of time and I just happened to be going away for a couple of days.
So we couldn't quite make it work this time around.
We did spend some time about 67 months ago with his wife, Mindy, got everyone together at the firm and it was a great time.
His longtime associate, Chuck Frank, is in Sarasota as we speak and we will be meeting up with him and his wife in a couple of weeks and we're looking forward to that and lunch.
So it's great to still keep in touch with Larry.
He's always a phone call away and sure enough, God knows, I, I call him up often and say Larry, what about this?
What about that?
And he's always just been so generous with his time.
So there are many challenges that we still face and that the industry still faces.
And so it's great to have people like yourself, Larry and I could go on and on because as you know, John, I mean, one thing about our industry, people are just so generous with their time and I feel very blessed to have been able to get into it and be a part of that.
I try to give back in my own ways myself.
But as the industry continues to deal with, you know, ever more requirements or things like cyber risk and cyber issues, it's helpful to have those people that you can reach out to and get some thoughts and ideas and some help along the way.
