Welcome to FIA’s annual Boca International Derivatives Industry Conference. I hope our video intro brought back some fond memories of being in the warmth of south Florida in the company of friends and colleagues. While we are still not able to meet in-person, I am confident that next March I will be at the newly renovated Boca Raton Resort with many of you, with a broad smile on my face. I literally cannot wait! If you want a sneak peek at the new Boca renovations, check out the Boca video in our on-demand section.
I start today by offering a good morning, good afternoon, and good evening. That has been my Zoom greeting with international colleagues for the past year. I find it ironic that as COVID-19 shut down our ability to meet in person, it has opened up new ways for us to connect with each other around the globe.
As an example, today’s virtual Boca conference has a record number of registrations with nearly 1500 individuals signed up from over 30 countries with more than half being first time attendees. This shows the power of this virtual platform that will live beyond COVID-19.
Today, there are many reasons to be optimistic about the state of the pandemic and our global economy. Infection rates—as well as the serious health impacts of COVID-19—are decreasing in most countries. Vaccine production is being ramped up as many of us are getting our first COVID-19 jabs. And economies are beginning to open more fully. In fact, the World Bank is predicting the global economy will expand over four percent in 2021, and our industry stands ready to be a part of this revitalization.
A year ago, this month, we made the difficult decision to cancel the Boca conference for the first time in 45 years. It broke our hearts. Boca is an annual ritual that marks the beginning of the year for our industry and the turning of the winter calendar into spring.
Boca is an incredibly efficient week where industry leaders from around the world gather to announce mergers, discover new ideas, and connect with clients and regulators. One global exchange leader told me Boca is the most productive week of the year. This made last year’s cancellation extremely difficult as we came to grips with the severity of the pandemic and the “Boca that Wasn’t.”
But what a difference a year makes! Our community was determined to rise above our circumstances and adapt and innovate our way through the challenge. And I am proud that this year we virtually celebrate the ‘Boca that is.’
No, it is not the same as an in-person event. However, we have evolved our virtual experience to make it more engaging. First, we have created daily themes—from market access to innovation to sustainability—to sharpen our discussions. You will also notice our new virtual platform that optimizes the attendee experience. We also shortened the program to make it punchier and more digestible.
Within these conference themes, I want to spend a few moments on two topics that will be a focus of FIA and its members in 2021 and beyond: that’s operational resilience and sustainability.
As I reflect about our industry over the last year, I keep coming back to this word “resilience.” Resilience is the capacity to recover quickly from difficulties. It serves as a measure of toughness and mental fortitude. And indeed, this industry has shown its determination to not let the challenges associated with the pandemic hold us back. We fought to keep our markets open and discovering prices during the extreme volatility a year ago. We wrote letters to policy makers and sought relief from regulators to keep these vital risk markets open for business.
But the word ‘resilience’ does not quite capture the entirety of what I am feeling about our industry or the strength of its people. It’s not just about getting back to where we were before the pandemic. We must become stronger and better through self-reflection and intentional improvement to meet the challenges and opportunities ahead.
A recent FIA survey gives some indication of where we are as an industry:
- Over 65 percent of respondents believe that trading volumes in the derivatives markets will increase in 2021.
- Those surveyed believe commodities and equities are the most promising asset classes for growth.
- The Asia-Pacific region and the U.S. are perceived as having the greatest potential for expansion in 2021.
- Over 50 percent of you believe competition will become fiercer over the next year.
- And when asked what part of the trading and clearing lifecycle is most in need of modernization, post-trade processing topped the list.
Undoubtedly, these answers reflect the experiences of members over the last year. Whether it was the historic March volatility, negative crude oil prices or recent extreme weather events, our market infrastructure has been put to the test. While the clearing system has proved itself resilient, these events have uncovered some areas in need of modernization to ensure trades are properly risk-managed and settled. If we truly want to improve as an industry, we must address such issues head-on – even if they aren’t easy.
And that’s precisely what FIA is doing. Modernizing our post-trade settlement process will be a prime focus of FIA in 2021 and beyond. We must, as a community, bring our industry stakeholders together to find ways to simplify and standardize the lifecycle of a cleared trade.
FIA’s board has formed a global committee to guide this topic. We have empowered our divisions, committees and working groups to drive change. We will be partnering with exchanges, vendors, and customers about the best approach.
I am optimistic about what can get done. Last year, we worked with exchanges and clearinghouses to implement a new trade identifier field—commonly known as Tag 1031—to help simplify the settlement process. There are other similar steps that can be taken to standardize and quicken the settlement process with a cumulative benefit of making our industry safer.
Now, none of that will be easy. But I personally believe that it is a top issue for our markets right now. And after seeing how our industry responded to COVID-19, I am positive we are up to the challenge. We are only just beginning this multi-year focus, but I plan to speak on this topic often so stay tuned for more developments!
The COVID-19 shutdown also clarified another important priority—and that’s how we address climate risk. We are seeing many customers and businesses making commitments to transition to a zero-carbon world, but we currently lack the financial tools and capital investments to transition our economy. This is where markets can play a significant role.
Markets have proven effective at allocating capital to societal needs, hedging risk and pricing scarce resources. The race to a sustainable economy will need all of these tools during the transition.
The good news is our markets are actively involved already. For example, ICE provides benchmarks and market infrastructure for several carbon markets, including the EU Emissions Trading Scheme—the world’s largest one. This month, CME launched its Global Emissions Offset futures contract to develop a global benchmark for carbon reductions. Deutsche Boerse also provides market infrastructure for several important environmental products through its subsidiaries EEX and the Nodal Exchange.
FIA is also proud to be a member of the Taskforce on Scaling Voluntary Carbon Markets with several other members of our industry. Under the sponsorship of UN Special Envoy Mark Carney, this private-sector initiative aims to scale up the use of voluntary carbon markets to help meet the goals of the Paris Climate Agreement. I am certain that the standards developed by the Taskforce will lead to innovative new benchmarks being launched by our industry.
Will markets alone solve these problems? Of course not, but we must recognize that markets can be and should be a major component of the solution. Our existing market infrastructure will continue to play a critical role in the transition to a more sustainable economy and we are excited to dedicate Thursday’s program to this topic.
I want to conclude by thanking our many sponsors that enable us to hold these conferences. In particular, I want to give a shout-out to our Platinum sponsors – Ateo, CME Group, DTCC, Eurex, Hong Kong Exchange, ICE, London Stock Exchange Group, and SGX. We appreciate your steadfast support during these challenging times. We couldn’t do it without you.
I also want to humbly thank our members. We never want to take you for granted. FIA exists to work for your common interest and to build a productive community. I so appreciate your continued support, despite the uncertainty of COVID-19 and look forward to working with you to keep this community strong.
Two years ago, FIA made a commitment at Boca to strengthen our community by launching a diversity initiative aimed at increasing opportunities for diverse talent amongst our ranks. We have committed to having greater diversity on each of our panels and hosting networking opportunities at our major events.
This year, I am pleased to announce that FIA will be partnering with the Greenwood Project to facilitate summer internships to diverse college students with our member companies. Greenwood Project was founded by Bevon and Elois Joseph, who both worked on the floors of exchanges and now dedicate their lives to helping young students get trained and placed for internships at financial companies in Chicago, New York, London and beyond. This is a wonderful way to introduce these students to our markets with the aim of developing a pipeline of talent for our industry. To find ways to support Greenwood Project, please go to FIA.org for more information.
Now, turning to our program, we are thrilled to have incredible keynote addresses from Acting CFTC Chairman Russ Behnam, MicroStrategy CEO and bitcoin evangelist Michael Saylor, FT columnist and editor Rana Foroohar, astrophysicist Dr. Hakeem Oluseyi and Google Cloud executive Derek White. Our global exchange leaders and expert panelists will be tackling our conference themes of market access, innovation and sustainability. And to cap it off, on Thursday we will induct eight new members into the Futures Industry Hall of Fame.
But to start us off, it is my distinct pleasure to introduce our first keynote speaker, EU Commissioner Mairead McGuinness. Commissioner McGuinness serves as the European Commissioner for Financial Stability, Financial Services, and the Capital Markets Union. This makes her a critical decisionmaker in shaping policies around how customers access our markets—today’s conference theme and a top priority of our members. She started her career in journalism before jumping into politics, first in her native Ireland and then the EU as a member of its parliament. I have had the pleasure of meeting with her shortly after she took office. I can assure you that she will be a thoughtful voice in support of EU financial markets and the citizens who rely on them. I am thrilled that she could take time out of her busy schedule to talk to us today.
Please welcome to the Boca virtual stage Commissioner Mairead McGuinness…