London, U.K.— FIA’s President and CEO Walt Lukken today gave opening remarks at FIA’s International Derivatives Expo. Remarks are prepared for delivery:
Welcome to FIA’s 12th annual IDX conference—the international gathering of our industry to discuss and debate the issues of the day while having a little fun. The week of IDX has a tradition, or some might call it a curse, of attracting unexpected political activity.
Three years ago, IDX occurred the same month as the Brexit vote, preventing government officials from participating in the conference. Two years ago, a snap election in Britain during the week of IDX also banned UK officials from participating. This year President Trump decided to visit London during IDX and drop by 10 Downing Street, only to find Theresa May packing her bags.
And last month’s EU elections are still reverberating through the halls of Brussels as the factions of the European Parliament have become more dispersed and polarized. There is something about June in London that attracts political intrigue. Maybe next year IDX should have a political exorcism to help get rid of this curse.
It is fair to say that we are experiencing the highest level of political uncertainty and skepticism in the last 50 years. Whether its Brexit, the election of President Trump or the latest EU elections, there appears to be an anti-establishment ground-swell among voters around the world.
There are major societal problems facing us, ranging from climate change to food security.
What will we do if divided government is not capable of taking on these problems?
What will we do if our political leaders cannot work together?
It can be disheartening at times that as multinationalism begins to fray at the edges, we find ourselves in greatest need for global cooperation and solutions. In these times of political uncertainty, I am reminded of the power of markets as a catalyst for change.
The fact that the political apparatus might be in a state of inaction does not mean that change is not possible.
The derivatives markets serve as a healthy reminder of that fact. The futures, options and cleared derivatives markets serve two important societal purposes. First, they allow businesses around the world to manage unwanted price risk so they can focus on their core commercial activities—whether it's manufacturing, agriculture, or energy.
Just as important, our markets serve to discover prices of essential goods and services so businesses can rely on these benchmarks with confidence in making investment decisions.
Price discovery in our markets allows capital to flow to where it is most needed in society.
One topic that demonstrates the power of markets is the ESG movement. ESG represents a focus on Environmental, Social and Governance issues. Capital is beginning to flow to ESG investments as awareness of these societal problems becomes more heightened.
In fact, institutional investors worldwide have poured more than $20 trillion into ESG investments. Policymakers are beginning to take note.
Just look at the major focus on Sustainable Finance at the European Commission where a package of measures is being implemented. This includes facilitating sustainable investment and integrating ESG considerations into existing regulation. Our markets need to play an important role in advancing ESG issues.
While some may question the effectiveness of market forces on social issues, I would challenge them that we have real examples that markets can move the needle on these topics.
For example, at LME, great strides are being made to support responsible sourcing standards for cobalt and the rest of its metals complex.
ICE and Eurex have exchanges that trade carbon emission allowances aimed at helping businesses lower their carbon footprint and price the impact of climate change.
And Nasdaq has developed an ESG index and related futures products for investors who want to focus on this theme.
Even China, where I was two weeks ago, has taken a lead on this issue and now has one of the largest carbon trading programs in the world with six cities covered by these markets.
And yes, Beijing was sunny and clear when I was there.
In the United States, we don’t even talk about the acid rain problem anymore.
I can tell you as someone who grew up in the Midwest in the seventies and eighties, acid rain was a real problem – causing serious health issues, damaging crops and endangering the ozone layer.
The cap-and-trade system put into place in the 1990s essentially eliminated the problem.
Another great example of the power of markets is the spike in crude oil prices in 2008 and the subsequent changes in energy production and consumption.
As you may recall, crude oil futures shot up to $140 a barrel over a decade ago.
The markets were telling us there was an imbalance in supply and demand. So what happened next?
High prices discovered on the futures markets incentivized producers and consumers of energy to correct the imbalance.
In fact, massive amounts of capital flowed into alternative energy sources such as wind, geo-thermal and solar. Capital also flowed into more efficient ways to use energy, such as electric vehicles and battery technology. It’s no accident that Tesla produced its first car in 2008.
All of these examples show the power of markets in finding solutions and driving change.
With the ESG movement becoming more and more prominent, the derivatives markets are already playing a significant role in helping investors and governments meet their goals.
And I expect much more will be coming.
My main message today is this: at a time when we need big solutions to big problems, we need to bring the power of markets to the markets of power.
Will markets solve all problems? Of course not, but policymakers and the public must recognize that markets can be and should be a major component of the solution.
And when markets and government work together, change can make us, literally, breathe a little easier.
Before turning to the program, I want to recognize our new Head of Europe, Bruce Savage.
As many of you know he is joining us from Deutsche Bank and has served on our European board for many years.
He will be joining FIA in August and we are thrilled to have him as part of our team.
Bruce please stand up so we can welcome you.
Now turning to this year’s program, IDX is filled with an outstanding lineup of speakers, including Robert Ophèle, chairman of the French AMF; Chris Giancarlo in his final FIA address as CFTC Chairman; and Laura Kuenssberg, the BBC’s leading expert on political affairs.
And, we are excited to hear from Dame Helena Morrissey, a leading expert and author on diversity in financial services and the founder of the Thirty Percent Club. We will also hear from the leaders of the world’s exchanges, including a one-on-one interview with David Schwimmer, CEO of the London Stock Exchange Group.
And now, we want to give a special thanks to our exhibitors and sponsors who help make all this happen. At the close of IDX, FIA is always pleased to host our annual charity dinner that benefits Futures for Kids. Over the last 10 years, the IDX Gala Dinner has raised nearly £1.6 million for this worthy cause. Of course, it is tradition that every year we ask one member of the industry to raise funds by wearing a kilt. This year the privilege goes to FIA’s own Emma Davey, who is giving the challenge a special tartan twist! I hope you are able to come and support this very worthy charity.
And now it is my pleasure to introduce our first speaker.
This week, we will mark the 75th anniversary of the D-Day landings in Normandy and a day that will be forever remembered when the free world came together to fight tyranny, and by winning the war, unleashed the greatest economic expansion the world has ever seen.
We will never forget the unimaginable bravery and sacrifice of those on the beaches that day so that we can live in freedom and prosper economically. We need this perspective from time to time.
Today, with the ongoing Brexit drama and the recent elections in the EU, it is important to have perspective and insights on what it all means for the global economy.
Our first keynote today will do just that.
Laura Kuenssberg is the Political Editor at the BBC, which means she is responsible for political coverage on the BBC’s flagship news programs. She is the first woman to hold this important post.
Throughout her career, she has been front and center to some of the world’s biggest events, while securing interviews with the key players on all sides.
Please help me give a warm IDX welcome to the BBC’s Laura Kuenssberg.
FIA is the leading global trade organization for the futures, options and centrally cleared derivatives markets, with offices in Brussels, London, Singapore and Washington, D.C. FIA’s membership includes clearing firms, exchanges, clearinghouses, trading firms and commodities specialists from more than 48 countries as well as technology vendors, lawyers and other professionals serving the industry. FIA’s mission is to support open, transparent and competitive markets, protect and enhance the integrity of the financial system, and promote high standards of professional conduct. As the principal members of derivatives clearinghouses worldwide, FIA’s member firms play a critical role in the reduction of systemic risk in global financial markets.
For more information, contact Steve Adamske at +1 202.772.3008.
- Social Responsibility
- Sustainable Finance