London — FIA President and CEO Walt Lukken today made the following remarks at the opening of FIA’s International Derivatives Expo. Mr. Lukken’s remarks are as prepared for delivery:
“IDX 2021: The Power of the Human Connection”
Hello everyone and welcome to IDX—FIA’s first in-person event since the pandemic shutdown 18 months ago.
In an obvious understatement, I am extraordinarily happy to see everyone in person today. The only downside is I had to put on trousers, but it’s a small price to pay to be with you today.
Admittedly, it feels surreal to be with you. The pandemic has been a difficult time with some of us having lost friends and loved ones. It has also warped our perception of time. When the world went virtual, we lost many of the normal markers of time when we see each other on a routine basis. Truthfully, we just aren’t as connected to each other virtually. Yes, we can do our jobs via Zoom and that has proven out over the last two years. But the real secret sauce happens when we get together to share ideas, exchange views, and connect with each other at a deeper level.
Today feels a bit like best friends who go away for the summer and reunite back at school to tell of their adventures. I have a teenage daughter so I can tell you firsthand how excited and fast someone can talk to their best friend about their escapades.
So, London besties, here’s the story of my Pandemic break:
I proved I could grow a mediocre beard and set up a mediocre home office. Check!
Others from the industry followed suit. It felt cool at first, didn’t it? I also bought a Peloton with the aim of getting into shape and an electric bass guitar with the hope of taking lessons. Here is a recent picture of both. Note: one has been converted to a laundry rack and the other still has a sales tag on it. And of course, I discovered the incredible Ted Lasso. And footballer Roy F-ing Kent.
These Covid experiences may strike a similar chord with many of you. Whether it was exercise pledges, commitments to reunite with old friends or promises to learn a new skill, many of us were going through the same Covid cycle of emotions. I gained weight, lost weight, gave up booze, then realized that was dumb, grew close to my family until they grew tired of me.
It’s been a rollercoaster.
What stage of the pandemic seven steps am I currently experiencing? I have now entered the acceptance phase in which I am coming to grips with the fact that Covid may be a persistent reality that we have to learn to live with.
That said, I am committed to bringing this community back together in a safe and thoughtful manner. These two things are not inconsistent, and today’s conference is our first effort to bring our industry back together safely. Like I said, I’m really glad to be here.
Oh…I almost forgot. Some other minor things happened since we last met in London: Brexit, Boris, Biden, Climate Change, Crypto, China, Mairead, March 2020, MIFID 2.0, just to name a few. It feels as if the pace of change picked up speed during Covid or in some cases, because of Covid. I’d like to take a few moments to highlight some major developments that are impacting our industry.
Climate Change
Europe has always been ahead of the world on this issue, but the pandemic seems to have woken up the rest of the planet on the seriousness of this global matter.
While governments have spearheaded the response to the challenge, I believe it is the private sector that has moved the needle over the last two years. We should be proud that our markets will be front and center in managing the risk around climate change and helping discover prices. Our markets will help align incentives, drive capital investment, and change citizen behavior. Not surprisingly, our members are stepping up to this formidable challenge.
FIA and its members have been participating in Mark Carney’s Taskforce on Scaling Voluntary Carbon Markets. In its most recent report, the Task Force has accepted many of FIA’s recommendations to promote the use of our markets in solving this issue. In addition, I am proud to announce that FIA has published a report ahead of the COP26 global climate conference that highlights many actions taken by FIA members to respond to climate change. The report also includes a list of “green” futures and options contracts designed to help the global transition to a more sustainable economy. Be assured that FIA will continue to work with members to support solutions to tackle this problem.
Operations and Standards
Another issue brought to light during the pandemic is our industry’s need to standardize certain operational processes in our markets. Nothing gets me more excited than operations and standards. I’m serious. If done right, this could make our markets safer and reduce costs significantly for market participants. When Covid abruptly shut down our world economy in March 2020, our markets experienced record activity and extreme volatility that highlighted some of the vulnerabilities of the trade and clearing lifecycle.
FIA embarked with its members to develop lessons learned from this event to improve and modernize our post-trade settlement process. Earlier this year, I announced that FIA had formed a global board committee to guide the topic. We empowered subject matter experts in our working groups, committees, and divisions to help drive recommendations and change.
We have formed an industry taskforce with global exchanges, clearinghouses, and customers about identifying bottlenecks in the post trade clearing process and developing standards that will facilitate addressing them. Some early conclusions from these efforts are apparent.
First, all market participants from exchanges to customers recognize the need to address this issue and we must take advantage of this momentum. Second, this project must be done transparently and open to the industry to ensure there is proper buy-in and take up of whatever standards might be developed. Third, private sector vendors are already developing solutions for some of the bottlenecks identified in the March 2020 review.
Our efforts should not slow down these innovative solutions but work to leverage these efforts and address gaps where the private sector is not active. Our industry taskforce plans to deliver a blueprint of recommendations before the end of the year to guide our multiyear effort on making our markets more operationally efficient and resilient. Stay tuned for more developments in the coming weeks.
Cross-Border Regulation
Finally, these last two years have highlighted the fragile interconnected nature of our industry and the global economy it serves. For the last 40 years, our industry has relied on governments’ willingness to defer to the regulation of other jurisdictions to facilitate these cross-border connections. These recognition and equivalence regimes have worked extraordinarily well without major incident.
Yet, this proven system is under stress with the EU and UK having just completed their separation. We also have a new administration in the U.S. and a Chinese market beginning to open to the world. It is critical that we remain vocal about finding the right approach to regulation that enables cross border activity in our markets.
FIA plays an important role in advocating for rational cross-border equivalence regimes that are comprehensive, outcomes-based, and protective of the marketplace. This requires regulators to assess the genuine risk to the home country and determine whether the foreign regulatory regime comparably addresses that risk. This is not a line-by-line assessment but one that looks at regulatory results and international standards to measure equivalence. This recognition process, combined with robust information sharing, enhanced communication, and close coordination among regulators, has helped our global financial system to thrive.
Recently, FIA joined other trade associations in a letter that calls on European Commissioner Mairead McGuinness to extend the European Commission’s equivalence decision for UK CCPs. With the equivalence decision set to expire in the middle of next year, we are seeking clarity and continuity to avoid any negative impacts to customers. FIA will continue to defend appropriate recognition regimes for this industry.
IDX 2021
Before I introduce today’s program, I want to thank you—our members—who have worked with us through this pandemic. Our committees and working groups have continued to meet and tackle the issues important to the industry. I never want to take FIA members for granted and these last 18 months have shown why this industry and its people are the best around.
I would also like to thank our sponsors and exhibitors—all of which you can see on the screens behind me. They are the ones that make these events happen, and we encourage you to stop by their exhibits and get to know these amazing companies.
Today’s program welcomes two senior government officials who will provide insights on the post-Brexit landscape with panels featuring UK exchange leaders and industry executives discussing the hot topics of the day. Tomorrow will focus on sustainability with a look at the future of our industry that includes discussions on diversity, fintech, DeFi, and cryptocurrencies. We open tomorrow with a Keynote presentation by Chuka Umunna (Amoona) of JP Morgan who heads up their sustainability strategy.
And now it is my pleasure to virtually introduce the new Executive Director of ESMA, Natasha Cazenave. Unfortunately, Natasha was not able to be here with us in person due to Covid restrictions, but I was able to catch up with her a couple of days ago. Natasha started at ESMA this past summer, and we are thrilled to have her at IDX in one of her first public appearances since assuming this new role. She previously served as the Managing Director, Head of the Policy and International Affairs Directorate at the French AMF, where she held leadership roles at IOSCO and FSB. I’m excited to welcome Natasha virtually to the IDX stage.
