Chicago — FIA President and CEO Walt Lukken today made the following remarks at the opening of FIA’s Futures & Options Expo. Mr. Lukken’s remarks are as prepared for delivery:
Good morning and welcome to FIA Expo. It’s been two years since we last met here in Chicago, and I can’t tell you how excited I am to be back. Before Covid, my annual calendar revolved around FIA conferences.
If I was in Boca, it was spring. If I was at IDX in London, it was summer, Chicago Expo was the fall and ironically Singapore represented a festive Christmas.
When Covid hit, our travel stopped, and the world abruptly went virtual. I’m proud to say that this industry adapted incredibly well. We remained productive, we worked with regulators to tailor our rules and we discovered together how to gather online as a community. This should be celebrated.
That said, there are certain synergies and intangibles that can’t be replicated virtually. We are missing some of the creative magic that occurs when we gather in-person to share ideas, exchange views, and connect with each other. This is why FIA felt it was imperative to bring this community back in a safe and thoughtful manner.
If you don’t believe in the magic of in-person interaction, I offer you this example. As you know, I am a fan of good music in any form—especially Chicago blues. The unmistakable sound of Buddy Guy has influenced a generation of musicians like Keith Richards, Eric Clapton, and Stevie Ray Vaughan. And at 84, Buddy Guy is still producing music and inspiring fans at his nearby southside club. Last time we were together in Chicago, our industry band—Pork Belly and the Out-Trades—gave a performance at Buddy Guy's club, and much to our surprise, the man himself jumped onstage to sing the blues with us.
Now, this was not planned. You can call it what you will: serendipity, spontaneity, organic synergy. I call it magic, and it would never have happened on a Zoom call.
In-person human interaction stimulates all of us to be creative, to value the team over self, and at times, be inspired by these magical moments. To me, that is what Chicago Expo represents: a time to gather some of the most innovative people in the world and watch the magic occur. These interactions are particularly important for the next generation of young leaders who learn and emulate through experience and mentoring.
You cannot succeed unless you put yourself out there and let life happen. Or to quote Ferris Bueller, “Life moves pretty fast. If you don’t stop and look around once in a while, you could miss it.”
Like I said, I’m really glad to be back in Chicago.
What strikes me about this moment for our industry is the confluence of major trends impacting our markets. From climate change to inflation to retail to crypto. Change seems no longer linear; it feels exponential. We must be prepared to embrace and adapt to whatever changes may present themselves, but I am confident our markets are well positioned to do just that. One of the main drivers of this underlying change is technology.
Whether it’s the way people access markets, the types of products traded or the settlement rails that facilitate trades, technology is revolutionizing our markets. Obviously, there is a lot of discussion about the societal value of crypto assets and how and whether they should be regulated.
The proponents of crypto say these instruments—and the blockchain technology that underlies them—have the potential to modernize and decentralize the way citizens access money. Cynics warn that this is just another Ponzi scheme dressed up in fancy algorithms and technology. I’ll admit, my personality normally leans skeptic. No one is going to call me “Crypto Walt.” However, at times like these, I put my faith in the Wisdom of Crowds, and in this case, the markets clearly believe there is value in these instruments.
Just look around. Most traditional exchanges —including the exchange leaders on our next panel—have significant crypto offerings. Fund managers are also diversifying their portfolios with crypto assets, made easier with the recent approval of an ETF on crypto futures. Even first responders are getting into the game with the Wall Street Journal reporting the Houston Firefighters pension fund investing $25 million in bitcoin.
This excitement is tempered by frequent reports of fraud and abuse and calls for regulation of these markets. Just last week, CFTC Acting Chair Behnam called for additional authority for the CFTC to regulate the cash markets for crypto, citing that 60 percent of these assets are considered commodities. SEC Chair Gensler has also been saber-rattling about the need for SEC oversight of these instruments.
I believe our markets are poised to be a central player in the development of these products. I’m confident that we will see a natural migration toward the futures markets because of the benefits of our infrastructure and regulatory regime. In fact, the CFTC’s authority offers a flexible, principles-based structure that provides exclusive federal jurisdiction for registrants and preempts state-level rules, greatly simplifying the regulatory landscape.
Recent acquisitions of CFTC-registered crypto exchanges is evidence of the growing interest in our markets and its regulatory framework. As these products mature, FIA will remain active in this space.
FIA supports a thoughtful U.S. government review of the regulatory regime around these instruments. Whether it’s the Financial Stability Oversight Council or the President’s Working Group, this review will ensure the protection of investors and the integrity of these markets. Importantly, the CFTC needs a strong voice in these deliberations, and FIA calls on the Senate to quickly confirm Acting Chair Behnam so there is a permanent chair representing the views of our markets.
There are important questions at play: how should the cash markets for crypto assets be regulated? What should be our oversight approach to DeFi? How should we best protect retail investors who transact in these products? We plan to discuss these questions and more throughout the conference and hope to have an engaging and productive dialogue over the next two days. Stay tuned.
While we track these headlines around Crypto, we mustn’t forget our need to invest in the roads, bridges and highways of our markets that allow these products to settle predictably and safely for market participants. When Covid abruptly shut down the world economy in March 2020, our markets experienced record activity and extreme volatility that highlighted some of the bottlenecks of the trade and clearing lifecycle.
The good news is our clearing system worked. Our markets were able to handle this enormous stress and continue to manage risk and discover prices. That said, this 100-year flood incident became a rally point for modernizing our settlement system. That's why FIA embarked on an initiative to assess the lessons learned from this event and develop a strategy to improve and modernize our settlement workflow. Like the equities markets efforts to shorten their settlement cycle, we must ensure that our markets have the most efficient procedures and standards to settle and clear trades in the right account on trade day. That is our North Star.
To get there, a consensus approach is required. We formed a board committee, utilizing subject matter experts to help drive recommendations. With this foundational work, we set up an industry taskforce on standards, incorporating the views of global exchanges, clearinghouses, vendors and customers.
FIA has released a Blueprint Report conducted by JDX Consulting and based on the interviews of more than 60 industry participants in various roles. This Blueprint provides recommendations on ways to improve our infrastructure through the development of standards and best practices. First, the Blueprint recommends forming an independent Standards Body to oversee the development of market standards in the trade and clearing lifecycle. As memories of March 2020 fade, the Blueprint recognizes that the industry may need more than good intentions and recommends institutionalizing a more formal structure to bring the markets into alignment with best practices.
Second, the Blueprint recommends the standards body adopt a meaningful agenda that is broadly supported by the industry. Third, the Blueprint recommends that its governance be representative of industry stakeholders with its deliberations open and transparent. Consensus and transparency are key to the acceptance of these standards and are critical to advancing these efforts.
FIA will be working with its Taskforce and other market stakeholders in the comings weeks and months to consider these recommendations and build support for this initiative. We are also taking advantage of this year’s Expo to receive feedback, with panel discussions aimed at fleshing out these topics. I encourage you to visit FIA.org to learn more about how you get involved.
Before I introduce today’s program, I want to thank you—our members—who have worked with us throughout this pandemic. We never take FIA members for granted, and these last 18 months have shown why this industry and its people are the best around. This year’s Expo may feel different from normal due to new program designs aimed at enhancing our attendee experience. Based on member feedback, we are trying new ways of integrating our first-class programming with the trade show to make it more engaging.
We welcome your feedback on how you like it and ways to make it better. I also would like to thank our sponsors and exhibitors. They are the ones that make these events possible, and we encourage you to stop by their exhibits and get to know these amazing companies.
Turning to this year’s program, I am excited to interview FTX CEO Sam Bankman-Fried who runs the third-largest crypto exchange in the world and was on the cover of Forbes Magazine last month as one of Forbes’ 400 richest people. We are also excited to have CNN Chief International Correspondent Clarissa Ward as our keynote luncheon speaker this afternoon. She will share her observations on female resilience, bravery, and the uncertain world we live in. The program includes our amazing Innovators Pavilion, interviews with Leo Melamed and Chris Giancarlo and many other topical discussions.
I do want to highlight a special panel tomorrow with Bevon Joseph of Greenwood Project, which focuses on connecting Black and LatinX students with internships in the financial services industry. FIA is a proud supporter of this incredible organization and encourages you to get involved. No Expo would be complete without our charitable work to raise funds for the Greater Chicago Food Depository. More than ever, we need to help this important safety net organization. Tickets are still available at the Registration Desk.
