News From The Futures: FIA Expo 2022 Day Two
Day two of FIA Expo broke from the normal pattern of a getaway day that is low on energy and ideas. I heard from some exhibit hall vendors that the second day was better than the first for business and the discussions and presentations packed plenty of punch as well. From exchange leaders discussions with Eurex, OCC and CME Group and important conversations about commodity markets, sustainability and post trade technology there was a great deal of power packed info.
Highlights from the Morning Panels
The day began with FIA’s Walt Lukken (the hardest working man at Expo) sitting down for a one-on-one with Michael Peters from Eurex. To me, Eurex is the boring exchange that gets things done and is generally the voice of reason in an industry that has been known to stoke outsized egos. The exchange is not afraid to swim against the tide as they did with the introduction of passive liquidity protection (PLP) for options markets. Peters was short on details but he asserts that their efforts to reduce “pick offs” has resulted in new participants entering markets and should lead to tighter spreads and more liquidity. Few of the big players in the market would have agreed with him when the project began but PLP may be improving markets for all. One other takeaway from his comments is how close they are to a war that is raging in Ukraine. It’s easy to overlook that reality from here in the U.S.
Rob Creamer of Geneva Trading moderated the “Commodities Markets — The Impacts of Geopolitics” panel and was joined by Brad Giemza of RJ O’Brien, Pete Keavey from CME Group, the CFTC’s Summer Mersinger, Ed Monrad of Optiver and Ram Vittal from Marex. Covering the full scope of the market from trader (Optiver) to regulator (CFTC), the panel demonstrated how healthy the futures ecosystem is. Challenges from procyclicality to the possibility of counterproductive price caps abound but the elements of the business are remarkably coordinated and professional. With respect to the Ukraine war, the CME began to increase relevant margins in the Fall of 2021 while Giemza revealed that RJO began risk modeling for an invasion in December, fully two months before the invasion. Like Eurex before them, this panel demonstrated how well informed and proactive the futures industry can be.
And the winner is…..
Now in its seventh season, the Innovators Pavilion (IP) is a mainstay of FIA Expo. Highlighting emerging companies that are innovating on the edges of the financial mainstream to build the breakthroughs of tomorrow, the IP hammers home the fact that FIA and the futures industry are continually delivering new products, services and solutions that are fostering powerful new tools to serve the world.
I’ve always been a big fan of the IP because it puts exciting new ideas by plucky entrepreneurs on display and because I’ve managed to select the winner 5 of the 6 previous times that the IP was staged. This year, I was hoping to make it 6 of 7.
Here are the 9 companies that we represented in the IP:
- BeZero: Ratings agency for voluntary carbon markets
- Clouty: Music derivatives
- Emmi: Climate risk analysis for investors
- Exponential Exchange: Vehicle value derivatives
- Floating Point Group: Prime brokerage platform for crypto
- Hxro: Infrastructure for on-chain derivatives
- Kemet: Infrastructure for trading crypto derivatives
- Tallarium: Market data for OTC commodity traders
- Zerobeta: Cloud-based risk and collateral management platform
Each entrant was given four minutes to make a pitch to a panel of five judges who then took four minutes to pepper the participants with questions. The judges selected a runner up in addition to a winner and, as a bonus, Expo attendees could vote for the People’s Choice award as well. After sitting through all of the presentations I had a clear favorite and I sent a Tweet to record my choice:
I had selected BeZero Carbon in the People’s Choice voting and I was somewhat dismayed to see that they only garnered 3% or so of the vote. Sure enough, when it came time to announce the winners the People’s vote went to Kemet Trading. Turning to the judges’ votes, audience darling Clouty was the runner up while the winner was…….drumroll please…….BeZero Carbon.
Boom! I did it again!
The final panels of the afternoon
I had to cut short my time at the “Responding to Sustainability” panel in order to make it to the one-on-one between Jackie Mesa of FIA and outgoing CEO of the OCC, John Davidson, but, like the “Commodities Markets” panel before lunch, it demonstrated how the futures/derivatives industry is poised to be a positive force as the world grapples with serious issues embedded in ESG. The panel was moderated by Erin Eckenrod from AES Clean Energy and featured Trabue Bland of ICE (filling in for Brookly McLaughlin), Suyash Paliwal from the CFTC, Incubex’ Dan Scarbrough, and Dr. Guy Wolf from Marex.
The aforementioned discussion between Mesa and Davidson did not disappoint. Jackie is an engaging moderator while John is the type of industry veteran that has seen pretty much everything and is ready to tell it like it is — or was. In the first instance, he made a striking analogy between today’s issues with “defi” and the savings and loan industry in the 80’s. Just as now, greed, fraud, and an incompetent regulator led to spectacular losses as 4,000+ S&Ls were reduced in number to less than 900 in just a few short years. To him, there is no “de” in “fi”. On the other hand, he had a very old school, conservative take on the dramatic increase in retail participation over the past several years. While he is largely correct (the old adage that the best way to make a small fortune trading futures is to start with a big one still holds) he might be overlooking a sea change in motivations and incentives for participating in financial markets as old school is supplanted by new school. He won’t be around to see if that is true as he’s slated to step down at the OCC in 2023.
The final panel that I could extract any content from was the “Innovation: The Evolution of Post Trade Technology” and a large part of that was information that I should have been aware of if I had been paying attention. I haven’t, so the work of DMIST was a revelation to me. Futures processing in the middle and back office is too slow, complex and expensive and needs to be able to handle what’s ahead as the world becomes even more interconnected and FASTER. DMIST is an industry wide effort to improve performance, particularly as it relates to give-ups and other post trade operations. The panel, which was led by Jon Schlamp from Macquarie and featured Robert Costick of OSTTRA, FIA Tech’s Mark Davis, Jeremiah DeNonno from Cit, Dana Stopczynski of ION and J.P. Morgan’s Kyle Tobolik. I was particularly impressed with comments from Stopczynski, who called out how work needs to address bigger quality of life issues, not just stop at squeezing one more ounce of efficiency from processes. In the world of the present — and the future — DEI, gender and ESG are both relevant and important. Bravo to her for taking the conversation there.
The final exchange leader that we heard from was Terry Duffy of CME Group. Terry wasn’t able to attend due to an unavoidable conflict with the CME’s influential Global Financial Leaders Conference (GFLC) occurring simultaneously in Florida so he taped his interview with Walt Lukken beforehand. As per usual, Duffy said “I” and “my exchange” more than other exchange leaders and he was extremely adept at dancing around the CME’s application to go into the business of direct clearing, thereby disintermediating their own clearing members. Duffy said that he wasn’t interested in being a disruptor, he is only acting because he doesn’t know what the world will look like in 3 to 5 years. You know, like the camel saying “it’s only my nose under the tent: what’s the big deal?” Snarkiness aside, you can’t argue with the results seen under Duffy’s leadership.
One last shout out goes to the WILD sponsored “Conversation with Women on the Rise.” Moderated by Lisa Campbell from the CME Group and BP’s Maura Durkin, it featured insights and advice from Simta Gupta of ADM Investor Services, Kaitlin Meyer from MIAX Exchange and Kelsey Stokes of S&P Dow Jones Indices. FIA and the industry have made great strides in encouraging and advancing the careers of women but there is much more work to be done. WILD proudly carries the banner of change and advancement.
That’s a wrap for day two from FIA Expo
Thanks for reading! Keep your eyes peeled for a wrap up and recap of FIA Expo hitting the Medium site sometime this weekend and don’t hesitate to reach out if you have questions or comments.
