Boca Bits: Notes from Day Three and Final Thoughts on FIA Boca-V 2021

Day three of a conference is usually “get-away” day at an in-person event but that changes in the new normal of on-line connection. In this case, the final day of the conference offered less promise to me as we turned from the excitement of day two’s focus on innovation to sustainability taking center stage on day three. Let’s face it, sustainability is a bit like broccoli: we all know that it’s good for us but it doesn’t usually inspire enthusiasm when we see it on our dinner plate. Fortunately, the appearances from acting CFTC Chairman Rostin Behnam, exchange leaders, and industry panel and, finally a view beyond the stars from Dr. Hakeem Oluyesi and the enshrinement of new members to the FIA Futures Hall of Fame made for a lively and informative day.

The View from the CFTC and Exchange Leaders

The day began with a one-on-one conversation between the hardest working man at FIA, Walt Lukken, and the acting Chairman of the CFTC, Rostin Behnam. In addition to discussing the just announced CFTC Climate Risk Unit and the Taskforce on Scaling Voluntary Carbon Markets that is being led by former Bank of England chief, Mark Carney, Behnam also touched on a laundry list of issues including crypto, EU/London equivalence and what he likes about being Chairman. In all, Behnam conveyed a solid message of collaboration and cooperation that characterized his predecessors as well. Though he may be a caretaker, he is continuing the progress of the agency in a way that upholds the best of what that means.

Next up was the Exchange Leaders talking about climate risk and, once again, I thought that their comments came up short. With a few exceptions, exchanges are more followers than leaders in this area, with new products substituting for vision and leadership. Eurex has done an exemplary job in that regard and both Nasdaq and LSE displayed broader efforts to address the challenges before us. In fairness, that in no small part is a reflection on the fact that the previous administration was openly hostile to sustainability issues, making it difficult, if not impossible, for a U.S. entity to be a leader in any ESG area.

An industry-wide look at climate change and a trip beyond the stars

The “Climate Change and Financial Markets’’ was moderated by Annette Nazareth of Davis Polk & Wardell and featured a well-balanced panel that delivered an information rich look at how climate issues are being addressed.The comments tended towards long monologues but this was entirely appropriate given the content and didn’t make the hour a bore. That’s no easy feat.

Content and comments from panelists included:

1. Meaghan Muldoon from Blackrock detailed the myriad ways that the firm is addressing climate and other ESG issues. Blackrock is an 800 pound gorilla in global financial markets and they have taken an activist’s stance when it comes to establishing a vision for and leading the way to a cleaner, more inclusive future.
2. Chris Leeds of Standard Chartered demonstrated how a bank with deep connection to global commodity markets is taking a leading role in getting to net zero by 2050, in this case with an active position in the carbon task force. A working group kicked off in September 2020 with 50 companies onboard and 140 more in consultation and McKinsey delivering project management and strategic vision. Normally, I subscribe to the inverse law of global task forces, with less action coming the bigger the number of collaborating parties are involved. In this case, however, the groundswell is large and the challenges are so large that the larger numbers are an indication of current action and future success. At least I hope so.
3. Audrey Choi from Morgan Stanley provided an excellent example of how a sustained commitment can make a meaningful impact. MS began their first sustainability efforts in 2009 and have remained a leading voice as the movement has grown.
4. Exchanges and traders had less to say in this case but that’s entirely appropriate. Julie Winkler from the CME Group detailed how the exchange is introducing new products for ESG, emissions and water, creating the risk management tools that are necessary to support the goals enumerated by task forces. CME Group has a long history of innovation and there’s no doubt that they will make important contributions to addressing pressing issues going forward.
5. Ed Monrad of Optiver represented the trading community and had the least to say of anyone on the panel. However, the efforts of Optiver and similar proprietary traders are essential to help build the liquidity and ultimate sustainability of markets. Personally, I found Optiver’s support of these new markets and products to be the boldest statement of all. Prop firms have skills and knowledge that allow them to make big profits but they generally lack the large base capital that is required to build and sustain liquidity on their own. It is easy for a prop firm to be quickly wiped out in a thin and inefficient market if they’re not careful. The fact that Optiver is committed to being a factor in the development of risk management tools to address climate and broader ESG needs is a very good sign indeed.

The final keynote of the conference came from Dr. Hakeem Oluyesi, former space science education lead from NASA. It had nothing to do with futures/derivatives markets and everything to do with feeling optimistic about the future. Oluyesi has an inspiring story of improbable success in the face of long odds that will be detailed in a new book coming in June: A Quantum Life, My Journey from the Street to the Stars.

He started with a comparison of the difference between traditional deterministic and quantum physics as a way to explain his unlikely success and offered a number of other interesting observations:

• He was accepted at every grad school where he had the opportunity to meet someone at a science fair, conference or convention prior to applying and rejected at all of those where he did not personally connect with someone prior to his application.
• If humans were trusting and trustworthy we could have Star Trek tomorrow.
• We are the architects of our world and our perspectives determine our outcomes.
• He takes special satisfaction when he meets someone who tells him “I thought I was dumb until I met you”!

Truly inspiring.

“A Quantum Life” will be published in June 2021

The Futures Hall of Fame and Final Thoughts

FIA Boca-V concluded with the induction of eight new members into the Futures Hall of Fame. FIA President and CEO Walk Lukken began with special mention of the passing of Jack Sandner, the pugilistic former chairman of CME Group, and introduced a video of the inductees. Notable additions included:

• Brooksley Born: As Chairman of the CFTC in the late 1990’s, Born was often vilified by the industry when she suggested that the over-the-counter swaps markets needed to be better monitored and regulated. She was largely unsuccessful in that effort at the time but her concerns proved to be prescient when the opacity of OTC swaps contributed to and exacerbated the 2008 financial crisis. It’s a credit to the industry that they honor her now.
• Bryan Durkin: So capable and such a good guy. It’s nice when someone like Bryan wins.
• Jeffery Geldermann: Futures royalty, Geldermann originated the GMI systems that underpin the back office of futures markets to this day. A Hall of Fame nod is probably the only way that GMI, now owned by FIS, will be shown any love by the industry.
• Charles Li: I’ve always been a big fan of his bold decision making and sense of humor although I suspect that I wouldn’t like working for him. It’s good to see him get the recognition that I think he deserves.

Go to the FIA website for the full list.

Final, random thoughts that I scribbled over the three days of FIA Boca-V include:

• Regulation of crypto markets in the U.S. is similar to a belt and suspenders and duct tape and bubble wrap and chicken wire approach. There are so many regulators that can and will have a position to take on these unique markets as they emerge that the U.S. is likely to lag in adoption.
• After a year of lockdown, I realize how I enjoy scanning the behavior and environments of fellow video participants. I snicker a little bit when I can tell that someone is clearing answering emails while on camera and get judgmental when I see vanity golf pictures arrayed behind a speaker. What will I do when I have to meet people face-to-face again?
• I was generally disappointed by the performance of the exchange leaders. I held off from commenting on the first day in the hopes that my perceptions would soften over the next two days but that didn’t prove to be the case. It may have something to do with the program, with the leaders coming off as less powerful in disconnected snippets, but I suspect that it also has to do with the times. Derek White of Google highlighted how digital transformation is affecting financial services, Chris Giancarlo gave us a glimpse on the new trails that crypto is blazing, and Charlotte Crosswell led a panel that revealed how fintech is changing everything. Institutions like exchanges generally are followers in circumstances like these and this obviously contradicted their position as leaders.
• No one directly criticized the previous administration in the U.S. but there seemed to be a general sigh of relief when talking about future cooperation on everything from ESG standards and addressing climate change with an emphasis on public/private partnerships. I am admittedly biased on this subject so I may be reading too much into things….. but probably not.
• I usually include a few descriptions of the yummy food that is available at industry conferences but the anchovy stuffed olives and dark chocolate covered cherries that I consumed in my home office (not at the same time!) don’t count in this case. I disparaged broccoli earlier in this blog post so here’s a recipe for grilled broccoli that helped us get through the pandemic. Enjoy!

Finally, kudos to the team at FIA for a successful Boca-V. They obviously learned a lesson or two from online Expo last Fall as both the program and the platform on which it was presented were notably improved. It will be interesting to see if there will be a drive to produce hybrid in-person / virtual conferences in the future and what ways, if any, that technology can be used to address smaller, more focused topics in a virtual way. For now, let’s hope that we’ll be meeting face-to-face when it comes time for FIA Expo in the Fall.

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.