Boca Bits — FIA Boca 2016 Day Three

The sun rises on day three of FIA Boca

The Best Exchange CEO Position in the World?

Charles Li may well have the best exchange CEO position in the world. He is positioned in Hong Kong, the gateway to China, and he has the ability to take the long view and work patiently to develop his markets in what everyone knows will be a leading financial center for the next 25 years, at the very least. Fortunately, he well understands both the long game as well as the constraints that he faces and this makes him well suited for the tasks at hand. In his one-on-one interview with Paul Davies of Goldman Sachs, Li repeated the Hong Kong Exchange strategy of developing commodity benchmarks for China and displayed his ability to assess the shortcomings of China in a way that is honest, without being overly critical. The development of financial markets in China is the very definition of a long term project and Li displays both the moves and patience to steer the course forward.

CME Group Clearing CEO Sunil Cutinho makes a point on “skin in the game” during the Future of Clearing panel.

Six Against One Isn’t a Fair Fight

I give Sebastian Pujol-Schott of the CFTC props for appearing on the panel “CFTC Reg AT: Will It Improve the Status Quo (1)” because it was clearly him against everyone else on this one. While panel moderator Gary DeWaal of Katten Muchin Rosenman and panelists Jim Moran from the CME Group, William Sprenkeler of Optiver, ICE’s Kurt Windeler, Greg Wood from Deutsche Bank and Chris Zuehlke of DRW were polite and civil in their comments, they clearly have many, many disagreements with both the spirit and specifics with the CFTC. Reg AT is a broad and deep set of rules that are intended to monitor and regulate automated trading (AT) in futures markets and the reported number of comment letters (52) and length of some of those letters (104 pages from the CME and 112 pages from the FIA PTG — Professional Traders Group) illustrate the sheer weight of issues that have to be resolved here. Reg AT has deep, fundamental problems, as illustrated by the fact that Chairman Massad referred to it as “principles based” in his comments on Tuesday but the CME and DeWaal count as many as 87 specific requirements in its text. With this being an election year and the CFTC being down to only 3 of it’s mandated 5 commissioners, I would gladly wager that Reg AT will not be resolved in 2016 and an over/under of 2018 isn’t at all out of the question.

Industry Changing Technology 2016 = Blockchain

Which of the companies will be fintech winners and who will be losers? Overstock.com, R3CEV, Bloomberg, ICAP and MarkitSERV.

Final and Random Thoughts

The FIA concluded the conference with “The Results Show”, a combination of feedback from an online survey of conference attendees and a breakout session on key industry topics. The results can be summed up in one word: optimism. I concur with this and it’s illustrated in the conference attendance numbers: a new record of ~1,200 with 30% being first time attendees.

  • The pointed but polite questions during the Reg AT panel led me to think of creating a “Trumpinator” app (patent pending) that would take the pointed content from a question, simplify it, exaggerate it, mention China or Mexico, and add an insult or two. For example, a comment such as “Reg AT doesn’t adequately address questions of cost benefit analysis” might become “Reg AT is a disaster, a disaster, it’s horrible and it will cause all of our trading to move to China and it’s yet another case of incompetent Washington bureaucrats and Wall Street flunkies making it so that America can’t win anymore.”
  • FIA head Walt Lukken referred to CFTC Chairman Massad as “the James Brown of the futures industry” (i.e. hardworking) and his actions and demeanor are widely praised by the industry.
  • The FIA mourned the loss of Diane McFadden this week. I worked with Diane when I was at ICE and cherished her depth of experience and collaborative spirit. She will be missed. On another note, it was refreshing to hear Kim Taylor’s distinctive (and loud) laugh echoing through the sessions and halls of the conference once again. We missed her when she was away.
  • There sure were a whole lot of analysts in attendance. I wonder if the LSE/Deutsche Borse merger had anything to do with that?
  • Companies with buzz: Neurensic, Open Gamma, t0, and Duco.
  • Speaking of buzz, whatever happened to the buzz around “futurization” from several years ago? History will show that the short term concerns about futurization turned into the long term reality of trade compression.
  • I’m not calling the top yet but the market is getting closer to having the regulatory pendulum stop its swing to more and more restriction. At least I hope so because unqualified adoption of MiFID II and Reg AT would likely kill us all. And that’s before I put that comment through my Trumpinator app!
Those back in the office assume that riding the wave machine is what goes on at a conference in Florida. The reality is stiff chairs in windowless rooms — followed by cocktails at the pool.

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Chuck Mackie

Chuck Mackie

Chuck is a student of markets and frequently writes on topics ranging from emerging technology to current events in financial services and beyond.