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The Futures Industry Association (FIA) moved the annual FIA Expo conference to a new location this year and, in the process, delivered an event with more pep — and people — than the somewhat desultory affair in 2021. Even in the face of the recent implosion of FTX (or perhaps because of it?) the mood and message was generally upbeat, even when it came to matters relating to crypto assets. Here are some of the highlights from day one of the conference.
Points from the Panels
Beginning with an introduction from the FIA and a traditional one-on-one with the Chairman of the CFTC, the day unfolded in (mostly) familiar fashion with discussions with exchange leaders along with panels on both regulation and clearing, an intriguing keynote speaker, some BBI content (see below), and a first round of presentations from the Innovators Pavilion. Here’s how it all played out:
- Walt Lukken is in his 11th year leading FIA and he always delivers opening remarks that are full of good feelings and solid messages. He noted that when Expo was last held at the Sheraton it was1999 and ICE was just a thought in Jeff Sprecher’s mind, Don Wilson of DRW was a pit trader, Gary Gensler was working on derivatives reform at the Treasury Department and the biggest concern for the markets was…..Y2K. If only. Lukken touched on a number of hot button issues in his remarks: the need for responsible innovation and fair competition in the development of products and markets for digital assets, the issue of possible disintermediation of clearing firms when they contribute over $66 billion to default funds, pressing issues in commodity and climate markets, the possible boom in events markets and the need to “support open, transparent and competitive markets.”
- Next up, Lukken sat down for a one-on-one with CFTC Chairman Rostin Behnam. In covering topics that included FTX, customer protection, FTX, cryptoasset legislation, FTX, regulation of non-bank financial intermediaries (NBFIs), FTX, climate risk, defi, and FTX, Behnam demonstrated once more why the CFTC is a model agency for balancing oversight with innovation.
- The “Regulatory Battlegrounds” panel was moderated by Dan Davis of Katten Muchin and featured Trabue Bland from ICE, CFTC Commissioner Christy Goldsmith Romero, Tom Sexton from the NFA and Kari Lausen of Wilkie Farr. The discussion was collegial as all participants acknowledged the large challenges posed by volatility in commodity markets, possible disintermediation through new clearing models, and the repeatedly evident flaws in the structures and practices of cryptocurrency “exchanges”. Nothing brings people together like shared worries and concerns.
- In years past, the “Exchange Leaders” panel featured multiple exchange CEOs in one place but after the aforementioned Jeff Sprecher had to deal with some below the belt comments from the CME’s Terry Duffy in 2021 so the FIA apparently decided that one-on-one was a better format. (It’s probably better for the CEOs but the same can’t be said for the audience.) In fact, Jeff Sprecher quipped that he wouldn’t have to spar with anyone this year as he began his conversation with Walt Lukken. Lukken’s first question was to ask how Sprecher would define what ICE is and he replied that it is a database services company that happens to be attached to exchanges. Most of their conversation covered ICE’s focus on mortgage markets with Sprecher detailing the many inefficiencies that bedevil the process today and how they will address them. He, like many, pointed out the flaws in crypto markets and stated that he expects crypto focused regulation to advance in Congress. Besides that, he shared that their futures business is very good with three consecutive record setting quarters. There are many headwinds but needs are high and that, ultimately, is probably good for them.
- The tenor of the “Crypto Spring, Crypto Winter?” panel was surprisingly upbeat given the huge crater that FTX created in the past two weeks. Nick Baker of Coindesk led the discussion with Kristin Johnson of the CFTC, John Palmer from Cboe Digital, Trading Technologies’ Jason Shaffer, Greg Tusar from Coinbase and Chris Zuehlke of DRW. The panel provided a well-rounded and surprisingly unanimous and optimistic take on the current state of affairs. All participants voted for Spring when pressed on choosing between that and Winter but most also acknowledged that it might be a longer Spring than they would have predicted just a few weeks ago. The depth and understanding of Johnson’s comments were particularly reassuring although she had a hard time being succinct. If the panel is correct, more regulation is in the offing and it will likely be a good thing for all concerned.
- The midday keynote featured Jaime Rogozinski of WallStreetBets talking with JB MacKenzie of Charles Schwab Futures. I went into the session thinking of Rogozinski of a rabble rousing meme stock trader and came away with an appreciation for how he has tapped the confluence of technology, discontent, and a new generation of market participants. He began in 2012 by viewing Wall Street as a casino and having a desire to use it against itself . He learned along the way how technology can help gamify markets and that sometimes the incentive for market participants isn’t to make money. Looking forward, he thinks that event markets will be big and he envisions a fusion of crypto and equities so that they will eventually be indistinguishable. Food for thought.
- I made it through one more panel for the day but the BBI (boring but important) nature of “Clearinghouse Risk: A Work in Progress?” had me striving to keep my thoughts together. Jackie Mesa from the FIA did an admirable job as moderator (as always) while Juan Blackwell of the Ontario Teachers’ Pension Plan, Tija Kurian from Societe Generale, ESMA’s Klaus Lober, Kevin McClear of ICE, Erik Mueller from Eurex and the CME’s Suzanne Sprague navigated the sticky issues that clearinghouses are facing. In a nutshell, those would be flawed crypto markets, volatile commodity and energy markets, transparency and ESMA. No one came out and said that last one out loud but it’s pretty clear and ESMA has a good chance of mucking things up.
From there, it was down to the Exhibit Hall to see the first five presentations of this year’s cohort of nine companies in the Innovators Pavilion. The final four will make their pitches on Tuesday morning and I’ll try to continue my unbeaten string of picking a winner. This is the seventh year for the Pavilion and I correctly guessed the winner the first five years before missing the event on the sixth year and then agreeing with the People’s Choice winner last year. (That’s sort of undefeated.) You’ll have to take my word on picking the word tomorrow because I won’t have time to send an email and I’m not sure that the conduit that I used to broadcast my pick last year (Twitter) is still in business or not.
The Tuesday lineup includes exchange leaders from Eurex, OCC and CME, a focus on commodity markets, the final four Innovators pitches, and looks at enforcement, post-trade technology and markets of the future. Look for a recap coming out by Thursday morning.