A panel discussion focused on risks and opportunities in global markets tooks some interesting twists and turns at CME Group’s 10th annual Global Financial Leadership Conference in Naples, Florida, on Tuesday. Societe Generale Chairman Lorenzo Bini Smaghi began the session by noting a market correction is likely in the next 12-18 months and cautioned the audience that when the market shock finally comes, it will be larger than people think. Smaghi, who is also a member of of the board of the European Central Bank, said markets and individuals shouldn't rely solely on central banks to fix income inequality, adding “monetary policy doesn’t create wealth, it just tries to shift it.”
Virtu Chairman Emeritus Vinnie Viola pivoted towards a continued trend here at GFLC: cybersecurity and what it means for markets. Viola believes clearinghouses have been a “beautiful privilege” and creation for politicians, but now present a market risk due to the inherent cyber vulnerabilities. “Markets should be concerned about cyber risks related to clearinghouses,” said Viola. Milliman Financial Risk Management managing director Adam Schenck echoed Viola’s concerns about clearinghouses, labeling them “too big to fail.”
Viola wrapped up the panel discussion by reminding the audience to focus on megatrends by citing examples of how the ability to extract oil is outpacing demand and how mobile phones are enhancing the ability of human beings around the world to be creative. In the world of finance, Viola stated market structures will struggle to keep pace with the profound impact computational power and algorithms will have on markets.