My wife jokingly complains that I’m too positive and not enough of a realist. She has nicknamed me Positive Polly. And I admit, I tend toward wanting to see the best of a situation or a person – sometimes to my detriment. When we first dated and I mentioned my blood type was AB positive, she exclaimed, “Of course…you are absolutely positive!” The delicious irony is that she is a complementary O negative.
The new year always brings a sense of optimism in many people, Positive Polly included. Maybe it’s something primal dating back to the Winter Solstice and the days getting longer. Or maybe it comes from our connections to faith and spirituality that give us a sense of perennial renewal. Whatever the reason, it seems innate that we start the new year with a glass-half-full mentality.
Periodically, elections factor into the fresh start of a new year. Citizens feel empowered to make their voices known, leading to new governments. Often, a desire for a better life for our friends and family drives people to vote for change in our political systems. And boy did we see that in spades last year.
2024 saw more people across the world vote in elections than any year in recent memory. The Associated Press reported nearly half the world’s population went to the polls to elect leaders in 70 countries. The result of so many people voting brought new leaders with new policy positions and new ways of governing.
In short, the new year brings a lot of positive anticipation around these political transitions that could have significant impacts on the centrally cleared derivatives industry. I wanted to highlight three regions central to our markets that have experienced political transitions and share how FIA is bringing our positive agenda to each of these parts of the world.
The US handover
The publishing of this Viewpoint one day following the presidential inauguration in the US. Despite the constant partisan rhetoric and opinions about those coming into power and those leaving, Inauguration Day actually celebrates democracy. It celebrates our fellow citizens’ ability to peacefully affect change in self-government. It manifests that familiar “We the People” phrase from the US Constitution.
On 20 January, President Trump took the oath of office at the US Capitol and travelled up Pennsylvania Avenue to take up residency at the White House for the next four years. After hosting the incoming President for tea in the morning, outgoing President Joe Biden attended the inauguration and departed the US Capitol grounds by helicopter with First Lady Jill Biden for one final fly-over of Washington. As someone who lives near the US Capitol, I have witnessed several of these Presidential flyovers with great pride for what it represents.
This US handover of power happens at all levels of the Executive Branch as well. The Senate will confirm a number of President Trump’s cabinet members, and he will swear them into office. And of special interest to our industry, Inauguration Day also led to leadership changes at the Commodity Futures Trading Commission and Securities and Exchange Commission. Both agencies swore in acting Republican chairs.
All signs point to the new administration hitting the ground running, with nearly 100 executive orders prepared for incoming President Trump’s signature upon taking office. Closer to home for our industry, I expect the new Administration will focus on passing digital asset legislation in Congress, given President Trump’s support of this industry.
I would caution that enactment of crypto legislation will likely take some time. The Senate will need to confirm both the SEC and CFTC chairs in the coming months. The Senate and House Agriculture Committees, which oversee the CFTC, also need to pass a Farm Bill in 2025, which may compete for priority over crypto legislation. Nevertheless, the steer of travel is clear. Republicans have set crypto legislation and regulation as a priority in 2025, and FIA stands ready to participate in this debate.
The market regulation agenda also will see different priorities at the CFTC and SEC under new leadership. I hesitate to speculate on the specifics of the incoming CFTC or SEC agendas but anticipate a shift in the pace and scope of their regulatory efforts. And we look forward to working with incoming SEC Chair Paul Atkins, as well as the soon-to-be-nominated CFTC chair.
UK: Labour takes the reigns
Shifting to the United Kingdom, the Labour Party ended 14 years of rule by the Conservative Party in July 2024. Keir Starmer moved into Number 10 and appointed Rachel Reeves as Chancellor of the Exchequer. Equivalent to a finance minister in other countries, Reeves holds responsibility for all economic and financial matters for the UK as head of His Majesty’s Treasury.
Reeves and the new Labour administration aim to make the UK more competitive and deliver stable and sustainable growth, and the Treasury will publish its Growth and Competitiveness Strategy in the spring.
The Financial Conduct Authority and the Bank of England Prudential Regulation Authority regulate the UK financial markets. The last government introduced legislation to make growth and competitiveness a secondary objective for the FCA and PRA. The new Labour administration has reiterated this policy by issuing new growth-focused remit letters to both regulatory bodies.
FIA has strong and deep relationships with the Bank of England, FCA and His Majesty’s Treasury. We will engage heavily this year on a busy regulatory agenda that we expect to focus on commodities, digital assets, operational resilience and UK EMIR, amongst other topics.
Chancellor Reeves also has indicated a far more extensive “reset” of post-Brexit relations with the European Union, a significant change of policy from the last administration. Although Reeves will focus on negotiating a new trading relationship, relations between UK and EU regulators on financial services also will improve with a second meeting of the EU-UK regulatory forum scheduled for 12 February in London.
Despite UK CCP Equivalence not appearing on the agenda for the forum, the positive direction of travel in regulatory dialogue will hopefully help ahead of the expiry of time limited equivalence for UK CCPs on 30 June 2025. FIA and several other trade associations across Europe have urged the European Commission to extend equivalence for UK CCPs in a non-time limited manner well in advance of the deadline.
EU: Rise of the middle
Across the English Channel in Brussels, last summer’s European Union elections changed the makeup of the European Commission and European Parliament, with some familiar and not so familiar faces. The outcome of the elections has shifted the parliament to the right and strengthened the voice of the centre.
Ursula von der Leyen defied the global trend of voting out incumbents and persuaded her electorate to return her to office. Now in her second term, she has served as the 13th president of the European Commission since 2019.
Despite re-election, her cabinet – the College of Commissioners – experienced much turnover. The themes of competitiveness, decarbonisation, economic security and crisis resilience will become more prominent in the EU top-level political debate, with the financial services sector on course to feature widely on the policy agenda.
Applicable to our markets, von der Leyen nominated Maria Luís Albuquerque, a former Portuguese finance minister, as European Commissioner for Financial Services and the Savings and Investments Union.
In short, von der Leyen has tasked Albuquerque with increasing the competitiveness of the EU’s markets and attracting more capital to those markets while safeguarding financial stability. A tall order by any measurement. The Commission plans to publish a communication on the Savings and Investment Union on 1 April.
Albuquerque will draw inspiration from several recent reports as she proposes a bold new path forward for the EU, including former prime ministers of Italy Enrico Letta’s on the future of the Single Market and Mario Draghi’s on European competitiveness.
As we shared last September, the Draghi report suggests transitioning the European Securities and Markets Authority from a coordinator of national regulators into a single regulator for all EU securities markets – like the SEC in the US.
The report also proposes that the EU should ultimately have a single clearinghouse and a single central securities depository for all securities trades. It suggests consolidation of clearinghouses and CSDs should start with the largest players, with smaller ones joining afterward.
As you might imagine – and Draghi predicted – these suggestions have met strong resistance. FIA shared our view with the EU commissioners back in September. And FIA’s board will visit Brussels in February to meet with the new EU leadership to discuss these views and other priorities of our industry.
Positive realist
I remain a Positive Polly for the outlook of our industry’s issues in 2025.
A growing consensus among policymakers in the US suggest the Basel capital rules need revisiting, especially around client clearing. This, in turn, has stalled UK action on the same topic, and likely in the EU, too. These headwinds appear to be shifting to the backs of the industry.
With these positive conditions, the global transition to new policymakers provides an opportunity for FIA to make the case for our industry. FIA stands ready to continue introducing the industry to these new players and evangelizing about our markets’ ability to safely manage risk in the global economy.
