It was great to be back at the International Futures Industry Conference in not-so -sunny Boca Raton, FL from March 15-17. It was wonderful to be able to engage with clients and colleagues and discuss the latest market trends in futures, options, derivatives, cryptos, regulation and more.
After two years of pandemic-induced virtual conferences, Futures Industry Association (FIA) members from all over the world were able to assemble at the newly remodeled “The Boca Raton” resort. Many participants noted that while one crisis (Covid-19) was receding, another was beginning – the tragic war unfolding in Ukraine. Against that backdrop, the impact of the war on market stability, cybersecurity, cloud usage, cryptocurrency and the broader markets were just a few of the hot topics explored.
Economic and financial sanctions imposed on Russia for its invasion of Ukraine have certainly led to increased market volatility. Edward Tilly, Chief Executive Officer, CBOE Global Markets, pointed out that market resiliency is clear, and the impact of volatility is not as shocking as it would have been years ago. After the “Flash Crash” in 2010, the industry has harmonized and created stability. The pandemic also created the opportunity for the industry to prepare for future disruption, apply lessons learned and identify areas for improvement.
Many of the measures implemented in the past two years in the name of market stability have functioned properly and been very effective. They enabled the markets to handle billions of messages daily during a period of extreme volatility, allowed for rather seamless trade processing and trade settlement — at record levels – and ensured the smooth management of intraday margin calls.
Exchange leaders came together and had a unified view that markets have succeeded in face of major challenges. Lynn Martin, President of NYSE Group & Chair, ICE Fixed Income & Data Services, highlighted how the exchange’s role is to provide the technology and transparency that allows members to properly manage risk. She shared how ICE was able to process half a trillion messages five times in two months with zero degradation – an impressive feat. And all that has been accomplished while it continues to diversify and innovate. For example, ICE has been on the forefront of analog to digital conversion, notably in their mortgage business technology. By digitizing these markets, they can present interest rates in different buckets and introduce a rate lock index. This is just one example of how the exchanges are arming participants with the tools they need to continue to grow and support our diverse world economies.
As always, market data and analytics were hot topics as they are such key components of trading activity. It’s hard to believe that the industry recorded a 40% increase in market data in just over one year. And real-time analytics continue to be critical to trade operations, as evidenced by the success of firms like Barchart and CQG. The war in Ukraine demonstrated the value of non-trade data as well. For example, the “sanctioned individuals” dataset usage skyrocketed when the US and many European nations imposed sanctions on Russia – creating one more area where firms must ensure regulatory compliance.
Considering all we’ve been through over the past two years, there was a strong consensus among FIA Boca participants that our market infrastructure has held strong. But we cannot become complacent. Particularly considering recent warnings from the Administration on the risk of cyber-attacks against US critical infrastructure (including financial institutions), every firm needs to ensure it has the most robust cyber defenses available. Every financial institution should consider itself a potential target and proactively take the appropriate measures to ensure they have comprehensive cyber programs in place, including employee training, third-party risk assessments, incident response programs and more. Digitization has made us more efficient as an industry – but in many ways it’s also made us more vulnerable to cyber breaches that could expose critical data and lead to significant reputational risk.
Lest the Ukraine crisis and pandemic overshadow the entire agenda, FIA Boca also saw lively discussions on the incredibly hot topic of ESG (environmental, social and governance). ESG now affects all businesses and has become critically important to shareholders, clients and employees. This is truly a generational shift – and companies must take heed and ensure they have a proper ESG framework in place and are consciously moving forward with their corporate programs.
Loh Boon Chye, CEO of SGX Group highlighted how Asian markets will play a critical role in scaling up ESG efforts. He was keen to note that markets are often viewed as complex, but we help simplify the subject. This idea was also heralded by David Schwimmer, Chief Executive Officer, London Stock Exchange Group, who noted the tremendous growth they have seen in Asia.
Finally, cloud continues to be a hot topic in the market. While many non-real time workflows moved to the cloud 10 years ago, adoption has been slower for some real-time applications and critical business and trading functions. But today, more firms understand how the cloud can empower their clients to consume services at their own pace, while simultaneously improving resilience and portability and addressing real-time capacity needs. While cloud may not be the perfect solution for every issue or use case, the fact that firms now have the luxury to choose between numerous respected cloud providers and deploy multiple cloud environments are just a few of the reasons why firms have gained greater confidence that their cloud environments will enable them to ensure redundancies and recover faster in the event of any downtime.
As the pandemic continues to recede, hopefully we will have more great opportunities to gather as a community, share best practices and continue to drive innovation in our industry.
Senior Relationship Manager