Derivatives exchange leaders discuss market trends and challenges

In what has become an annual tradition at the International Futures Industry Conference, a handful of exchange leaders gathered on Wednesday for a conversation about trends and challenges affecting the derivatives sector. From Brexit to blockchain, pretty much any topic was fair game during a panel discussion in Boca Raton, Fla.

Blockchain

It wouldn’t be FIA Boca without a conversation about blockchain. Nasdaq President and CEO Adena Friedman said technologies like blockchain will always be appealing because companies across many industries are constantly looking to reduce inefficiencies.

“The blockchain revolution is really going to be an evolution,” Friedman explained.

Friedman went on to cite hospitality, insurance, shipping and gaming as just a few examples of industries leveraging new technologies to optimize operations.   

Intercontinental Exchange Chairman and CEO Jeff Sprecher pointed out that early forms of distributed information have been in use in the industry for years, but that new audiences like the appeal of blockchain because they do not trust the government or individual market participants to act as sole guardians of data.

Cryptocurrency

Cryptocurrency prices have experienced tremendous fluctuations during the last 12-18 months, but the panel of exchange leaders said things will stabilize as the market matures. Among the exchange leaders, similar thoughts about the current status of the crypto market prevailed. Nasdaq’s Friedman said the “hype cycle” of cryptocurrencies might have enjoyed numerous headlines, but there is a growing sense that reality has set in.

“We are just starting to begin to understand the use of that asset class,” Friedman said.

CME Group’s Duffy drew an interesting distinction by pointed out how the general public often conflates two conversations about cryptocurrencies into one: The value of cryptocurrencies is worthy of one dialogue, but the greater conversation should focus on the use case.

Brexit

Brexit has been a hot topic in Boca this week as multiple votes have been taking place in real-time in Parliament as experts discuss the market impact of whatever might come to pass regarding the future of the United Kingdom.

Eurex CEO Thomas Book said Brexit poses serious risks that could result in market fragmentation, but stopped short of predicting any specific outcome.

“It is like a divorce and sometimes it feels odd to talk about the opportunities in a divorce,” Book said.

Having recently traveled to London, CME Group Chairman and CEO Terry Duffy noted that the majority of young Brits seem to want to stay in the European Union, while older Brits appear to want to leave. Duffy pointed to volatility of the pound as an indicator that no one really knows what is going to happen.

“A hard Brexit would be a very difficult thing,” Duffy said. “Markets hate uncertainty.”

In the end, Duffy predicted a second referendum would be held and that voters would decide to remain in the EU.