The clocks have been moved forward by an hour and St. Patrick’s Day beckons so it must be time for international futures participants to gather in Florida once again. As temps hovered in the chilly 60s, the 43rd edition of FIA Boca kicked off on Tuesday with a lineup that featured presentations from three of the largest exchanges and a “Looking to the Future” panel that was no warmer than the air outside.
InformationXchange: Eurex, ICE, and CME
It’s a tradition that exchanges take the stage to kick off Boca as they present their triumphant results from the year past and their rosy projections for the year ahead. Just as in 2017, the lineup this year was Eurex in the leadoff spot followed by ICE and then CME and just as in 2017 all three followed form: reserved, polished, and conservative.
Eurex has a tradition of covering the most ground in their presentation and consequently garnering the smallest audience: they most likely present the exact same information when they do one-on-ones with their big clients so there is little reason for any of them to show up for the presentation here. In all, 2017 was not a great year for Eurex, with volume down by 3%, but 2018 is off to a strong start with a number of promising programs including MSCI indices, volatility products in VSTOXX, and expanding the trading day to 21 hours beginning later this year. Perhaps the most interesting development at Eurex is the Partnership Program which is an attempt to create a cleared swaps market for continental Europe at the expense of LCH. As Phil Simons, global head of fixed income derivatives, noted, the approach of Brexit is causing market participants to “hope for the best and prepare for the worst” and this includes the very real possibility that swaps held at UK-based LCH will no longer fulfill the definition of an exchange-traded derivative on the continent. Eurex has teamed with leading market participants and is offering substantial financial and governance rewards for the top ten firms that help them hit defined growth targets for cleared IRS. The program began in January and is a resounding success so far: volume through February has already surpassed that for all of 2017 and notional cleared is up by over 700%. As Chicago Mayor Rahm Emanuel famously declared “you never want a serious crisis to go to waste”, Eurex should be shouting these results from the rooftops as they have a once-in-a-lifetime opportunity to wrest control of a cleared product class from a competitor.
Next on tap was ICE and they once again led the way in presentation values, breadth of product and vision. As I’ve mentioned before, this is the only exchange panel that featured any women. The presentation began with a high-energy video and featured an introduction from CEO and Chairman Jeff Sprecher and a panel moderated by SVP Chris Edmonds. ICE is in the opposite position of Eurex because their European clearing house is based in London and they spent the first 10 – 15 minutes of their presentation focused on the UK, Brexit, and MiFID II. They also highlighted their breadth to good effect with mentions of SFTI, their IM platform, cryptocurrency data, NGX, growth in agriculture volume and much, much more. Trabue Bland pointed out the synergies in the ICE team as exemplified in FANG+: conceived by head of strategy David Goone, traded on Bland’s exchange, cleared by Hester Serafini, and supported by Lynn Martin. ICE is a powerhouse.
The final exchange panel came from the CME and they broke from their standard formula of a solo presentation from Chief Economist Blu Putnam and took the bold step of bringing customers to the stage in the form of ABN Amro’s Tim Brennan and Sebastiaan Koeling from Optiver U.S. CME Managing Director Derek Sammann led off with stats that focused on the impressive growth in options trading, particularly on the screen. Blu Putnam then took a turn with an analogy from physics as he highlighted eight “phase transitions” that will influence volatility: demographics, central bank activity, tax cuts, deficits, world GDP, inflation, the Fed, oil, and weather. Finally, Brennan and Koenig took the stage for a panel discussion that was long on promise but short on zing. The final question was a look into the crystal ball and Brennan saw promise in China and risk in regulatory overreach, Koeling liked the effects of globalization and also saw the possibility of regulation hurting the industry, and Putnam was encouraged by cross asset hedging and concerned about unstable correlations.
FIA Opening Remarks and Opening Keynote
The day concluded with remarks from FIA Chairman Walt Lukken and a panel on “Looking to the Future”. Lukken began by noting the ten year anniversary of the financial crisis, a discussion that will highlight the Wednesday morning panels, and some of the unintended consequences of the response to that crisis, in particular, the shrinking of FCM ranks due to higher costs, technology that has been underfunded because of high compliance costs, and cross-border cooperation challenged by differing implementation schedules and a resulting rise in costs. Looking forward, Lukken looked to change driven by technologies such as AR/VR, AI, big data, blockchain, and more as well as the watershed effect of the imminent direct access to Chinese markets and revised energy regulation. As I write this now it sounds somehow pessimistic but that’s not the way that Lukken presented it!
The final event of the day was the Looking to the Future panel led by Jerome Kemp from Citibank and featuring Michael Bodson of DTCC, Pimco’s William de Leon, Blythe Masters from Digital Asset Holdings, Nick Rustad of JP Morgan and Caroline Silver from Moelis & Company. Unfortunately, the panel discussion lacked zip or punch despite touching on topics such as blockchain, room for growth, and the impacts of diversity and inclusion. Even Masters, who normally lights up a room, came across as subdued and a bit bland. Maybe it was me and I should have had a Coca-Cola or two before the panel…..but I doubt it.
2 More Days to Go
Stay tuned for highlights from day two which includes the ever-popular exchange panel, a 10-year look back at the financial crisis, and, of course, a panel on cryptocurrencies, as well as a final recap by next Monday morning.
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