Boca Bits: Notes from Day One of FIA Boca-V 2021
The global Covid 19 pandemic has changed so much about our lives and the continued disruption that it has caused is being brought into stark relief for members of the futures industry this week as the annual rite of spring known as FIA Boca was interrupted for the second year in a row. FIA Boca was perfectly positioned in the calendar last year to become one of the first conferences to be cancelled and this year found it morphing from a live, in-person event to an online streaming affair. While there is no substitute for countless coffees in the Palm Court or late nights in Bar Luna at the Boca Raton Resort and Beach Club, the online version of Boca brought more focus to the program and the opportunity to try some new wrinkles, particularly when it came to the opinions of the exchange leaders.
Walt and a regulator to kick things off
FIA Chairman Walt Lukken began the proceedings with some pretty impressive stats and a look at some of the priorities for the trade association in the year ahead. Over 1,600 delegates are “in attendance” at Boca-V (the “V” stands for virtual), nearly one-half of them for the first time, and over 30 countries are represented. A survey of FIA membership found nearly two-thirds expecting higher volume this year, with 44% looking for APAC to lead the way in growth. Post-trade was identified by 56% of respondents as a top concern and that’s no surprise given the hiccups the industry experienced during extreme volatility last Spring. This area will be a prime focus for FIA in the future, as will climate change, primarily through participation in a working group on carbon markets. Finally, Lukken announced a partnership with The Greenwood Project, which introduces Black and Latinx students to the financial industry. Not bad work for less than 15 minutes of screen time.
Next, Lukken passed the baton to Mairead McGuiness, Commissioner for Financial Services, Financial Stability and Capital Markets Union, European Commission. McGuinness is more direct and plain spoken than most government regulators but I must confess that I personally don’t possess the attention to details for times like this when the difference between “might” and “should” can be momentous. When Lukken asked her a question about financial services and Brexit McGuinness responded with a soup bowl’s worth of acronyms before getting around to words to the effect that clearing Euro swaps outside of the Eurozone (i.e. in London) is not sustainable. British clearers have secured equivalence until the end of June 2022 but what happens after that is open to debate. Should be interesting.
Exchange Leader Snippets and the Future of Markets
The Exchange Leaders panel is typically a staple of the first full morning at both Boca and Expo in Chicago in the Fall but this year the FIA opted for something a little different. Instead of one panel, the FIA interviewed each exchange leader separately and then interspersed their answers to several questions throughout the day. I’ll come back to deal with three slices discussed today — market trends, access and regulatory rules, and geopolitics — in the final installment of these conference recaps.
First, then, “The Future of Markets” took a Euro/American look at market conditions and trends. Led by Nick Rustad of JP Morgan and featuring Alicia Crighton from Goldman Sachs, Eurex Clearing’s Erik Mueller, Tracey Jordal from PIMCO and Edwin Schooling Latter of the FCA, the panel touched on shifts, both realized and expected, due to Brexit, lessons learned from last Spring’s volatility (focus on post-trade processing and procyclicality of margin), and forward looking issues like Libor cessation (behind but well in hand) and ESG (LOTS of issues, including the U.S. lagging the pack, efforts on the “G” and an expected future focus on the “S”). Overall, the shared challenges of 2020 have regulators, clearing firms, exchanges and customers pulling together — for now.
China Liquidity and On to Day Two
The sponsored session “China Liquidity” from HKEX was the last panel and penultimate event of the day, being followed by the third of three snippets from exchange leaders. Will Mitting from Acuiti moderated with George Harrington of MSCI, HKEX’s Chris Lee and Conor O’Mara from Jefferies rounding out the panel. In a word, the results were “wow”. HKEX is trying to position itself as the gateway to China and the emergence and development of the larger Chinese financial system is driving some exceptional results. There is a move for a “homecoming” for Chinese equity listings and the “southbound” trading from China is driving strong results. While Singapore’s SGX may have a thing or two to say about the crowning of the king of Chinese-centric derivative markets, no one can deny that the growth of these markets has the promise to skyrocket. As a lifelong denizen of the futures world, conditions remind me of the emergence of financial futures beginning in the 1980’s, European growth in the 80’s and 90’s and, most importantly, the moonshot in volumes and venues with the ascendance of electronic trading. This is gonna be big.
Compared to that picture, the exchange leaders’ perspective on China is more like kids on the outside looking in at the candy shop. Eurex has a JV in Shanghai but the other exchange operators have, by and large, been excluded from participating in the formation of derivatives markets in China. With the Chinese economy expected to surpass the U.S. in size within the next few years, the potential for growth is exceptional. The game isn’t over yet but much will need to be done for American and European exchanges and clearing houses to get in on the game. Should be pretty interesting.
Stay tuned for more from FIA Boca-V.
The Wednesday session of FIA Boca will focus on innovation with keynotes from Rana Foroohar of the FT and Derek White from Google Cloud as well as what will undoubtedly be an energetic and provocative conversation between Don Wilson of DRW and bitcoin evangelist Michael Saylor of Microstrategy. That should be really interesting.
Chuck Mackie is a Principal at Fathom Communication where he leads efforts to provide depth of insight and understanding through thought leadership content for financial services and technology companies.
