Report from FIA Boca 2018: Blockchain, Brexit, Bitcoin and More
The 42nd annual FIA Boca conference took place last week, with the global derivatives industry’s leaders gathering on Florida’s Atlantic coast for a busy week of sessions, networking and dealmaking. The robust lineup of topics and high-profile speakers generated many noteworthy takeaways. But before I get to that…
One thing stood out: there seemed to be more of a female presence this year. The FIA team doesn’t track attendance by gender, but my informal on-site poll coupled with my personal observations suggests that more women — and more women in senior positions — attended Boca this year than ever before. And this increased female presence wasn’t just among attendees; many also noticed more women on panels than in years past. (Of note, there were not one but two females on the exchange leaders panel!) I know I’m not alone when I say that I’m encouraged by the shift to more diverse representation. There seems to be a genuine interest among our industry’s leaders in fostering diversity, and I’m optimistic that this trend will continue.
For Trading Technologies, the conference marked a shift in our business model as we announced an expanded focus beyond the trading screen. In TT® at Three: The Next Wave, our CEO Rick Lane explains how the foundation we built with the TT platform has allowed us to branch into new data and infrastructure offerings. “Of course, TT will always build screens, and with the institutional knowledge and expertise built up over nearly 25 years of creating the industry’s leading front-end for the world’s most demanding end users, I suspect ‘screens’ will always be a defining aspect of what we do. But these screens now sit atop a foundation that is already enabling our clients and partners to redefine their businesses in ways far beyond the desktop.” Read his blog post for the full story.
For the third year running, Trading Technologies kicked off the conference with a charity tennis tournament to benefit Futures For Kids (FFK). While the exact number is still being calculated, with the money raised through players’ tournament fees and TT’s dollar-for-dollar matching contribution, we will donate several thousand dollars to FFK to support children’s charities worldwide. Thanks to all who played, and congratulations to the winners.
In his opening remarks, FIA President and CEO Walt Lukken spoke of the 2008 financial crisis (more on that coming up), noting three outcomes: the number of FCMs has shrunk, technology investments are now underfunded, with spending shifted to compliance, and cross-border trading has become more challenging. And he predicted three megatrends for the next decade: we’ll see fintech driving change, China dominating the futures markets and a revolution in the energy sector. Specific to fintech, he called out AR/VR, artificial intelligence, big data, blockchain, cloud computing and robotic process automation as the ones to watch.
CFTC Chairman Chris Giancarlo dedicated his remarks to retiring CME Group Chairman Emeritus and industry pioneer Leo Melamed, then went on to review the CFTC’s progress against the agency’s three primary goals: to help foster economic growth, right-size the CFTC’s regulatory footprint and enhance the markets. Under Giancarlo’s strong leadership, we are heading in the right direction. His remarks reinforced his commitment to simplify the regulatory process and ferret out the “bad actors.” Among the points that stood out to me: The creation of LabCFTC, which is focused on engaging with fintech innovators to bring market-enhancing technology to the industry and create a bridge between new technologies and regulation. With Trading Technologies’ entry into the regtech space, I found his desire to collaborate with the innovators to be compelling. It will be interesting to see how much progress the CFTC has made against these goals when we reconvene in Boca next year.
FIA marked the 10-year anniversary of the financial crisis by inviting four speakers who were in the thick of it to share their observations in retrospect. FIA’s Lukken moderated the feisty debate, which featured Patomak’s Paul Adkins, OCC’s Craig Donohue, former Congressman Barney Frank and Thomas Russo, who is now retired from AIG. When the crisis hit in 2008, Adkins was an SEC commissioner, Donohue was CME Group’s CEO, Congressman Frank chaired the House Committee on Financial Services and Russo was Lehman’s Chief Legal Officer. Opinions clashed and tempers flared when discussing the TARP program’s effectiveness, with Adkins recommending that Frank “take some accounting classes.” Although Russo also sparred with Frank, his assertion that letting Lehman go was a “terrible decision” seemed to be shared. Donohue argued that while Dodd Frank was effective in addressing many areas and making markets safer, the capital constraints are hurting the industry. Russo followed up with a sobering call for bipartisan action to address the country’s long-term economic viability. Whether this can happen in today’s political climate is anybody’s guess, but let’s hope a year from now we’re reflecting back on progress.
The exchange leaders panel featured Thomas Book from Eurex, Jeff Sprecher of ICE, Nasdaq’s Adena Friedman, Loh Boon Chye of Singapore Exchange, Cboe’s Edward Tilly and Julie Holzrichter of CME. There was talk (and criticism) of regulation along with questions as to where growth will come from. If the audience poll is any indication, look for regional growth to come from the Asia/Pac region and product growth to come from fixed income. All agreed that capital requirements were creating roadblocks to growth. Friedman pushed Nasdaq’s agenda as a technology company, while Cboe’s Tilly jabbed at CME, pointing out the latter “followed” the former into bitcoin futures. When asked about deals they wished they’d done or were glad they closed, Sprecher, always good for a wisecrack, pointed out he wished he’d bought the CBOT — which prompted Holzrichter to reply with a lighthearted jab that CME was glad they bought the CBOT. All in all, due to the nature of the participants, this was a fairly tightly scripted conversation with no bombshells to report.
A scheduling conflict prevented me from attending the afternoon panel on regulation, but attendees were buzzing about CFTC Commissioner Brian Quintenz’s remarks, which you can read verbatim here. Quintenz held nothing back, putting the EU policymakers in his crosshairs for their response to Brexit: “I now have serious questions about our counterpart’s trustworthiness as well as their priorities. Is the EU still committed to minimizing cross-border burdens, market fragmentation, and protectionism? Or, as it appears, is Europe intent on creating a closed, self-contained environment in which they can operate without the support or engagement of outside regulators and businesses.”
The bitcoin and listed derivatives panel moderated by DRW’s Richard Gorelick featured TT’s own Michael Kraines with Paul Bauerschmidt from Coinbase/GDAX, John Deters of Cboe, Renovatio PR’s Bo Collins, Fred Grede from Bcause and CME Group’s Tim McCourt. Let me get the shameless self-promotion out of the way: TT recently launched a unique cryptocurrency trading solution, offering trading of spot cryptocurrencies on Coinbase’s GDAX exchange alongside bitcoin futures from Cboe and CME through a single TT screen. We see tremendous opportunity for crypto trading at the professional level, a perspective the other panelists shared. Both McCourt and Kraines observed that bitcoin futures are driving new participants into the futures markets; it’s not just millennials, but also institutional players who are showing interest. And the audience poll concurred, with about two-thirds of respondents saying they welcomed the launch of bitcoin futures. Whether the crypto-trading trend will sweep across institutions remains to be seen, but from where I sit, I’m going with yes.
Cameron and Tyler Winklevoss aka the Winklevii joined FIA Tech President Nick Solinger to share how they got into bitcoin and what they’re doing now. Early bitcoin enthusiasts, they see a day when every portfolio will include crypto. They called bitcoin “Gold 2.0,” describing it as a portable virtual currency that works like email, built for the internet by the same engineers who created the internet. They gave credit to bitcoin futures for making it possible to short the coin in a regulated market. And they discussed their plan to create a self-regulating organization (SRO) for the cash crypto exchanges, which could go a long way to address the present lack of regulatory oversight in the crypto markets — and, in turn, attract more professional and institutional participants to cryptocurrency trading.
Another hot topic was how fintech is transforming capital markets. Seismic Foundry’s Bill Templer moderated the discussion between CloudMargin’s Steve Husk, Lars Ottersgård of Nasdaq, Symphony’s Goutam Nadella and Matthias Voelkel of McKinsey. They spoke of how the number of fintech firms has grown, but how success is dependent on more than just a good idea; it requires an experienced team that knows how to turn that idea into a successful company. Nadella explained how Symphony accomplished that by collaborating with established firms rather than going it alone–an approach that was not always easy, as financial institutions were once very protective of their technology initiatives and resistant to collaboration. They also discussed the challenge of getting institutions to accept new technologies, using the cloud as an example of a once-resisted technology that is now mainstream. The panel concluded with an audience poll which revealed, among other things, that post trade represents the biggest opportunity for innovation.
Hats off to the FIA team for organizing another excellent event filled with quality speakers and provocative programming. From geopolitics and regulation to technology and cryptocurrencies and beyond, the industry has a lot to ponder as we head deeper into 2018.
