Commentary: Seven takeaways from FIA Boca 2024

20 March 2024


This year's annual FIA conference in Boca Raton was one of the most successful ever. About 1,200 people attended, the highest number in at least a decade. The program consisted of eight panels over three days as well as one-on-one discussions with prominent industry executives and thought leaders such as Ken Griffin, the chief executive of Citadel, and Daniel Yergin, a leading authority on energy, geopolitics and the global economy. The program was only half the story, however. FIA Boca has always been known for networking, and this year was no exception. The attendees, who included executives from exchanges, banks, brokers, trading firms, technology providers and venture capital firms as well as regulatory officials from Europe, Asia and the Americas, had many opportunities to connect with clients, prospects, partners and service providers and share their views on the trends and issues affecting the global financial markets. 

Seven main themes shaped the discussions at this year's FIA Boca: 

Industry Outlook: Exchange leaders see a positive outlook for trading volume in the listed derivatives markets. The interest rate segment in particular is seeing greater flows due to macroeconomic volatility and monetary policy uncertainty, while equity options volume is benefiting from increased retail participation and increased use of zero-day options.

Treasury Clearing: The SEC's recently finalized Treasury clearing mandate was a hot topic for many attendees. The Fixed Income Clearing Corporation talked about its plans to offer more client clearing for cash Treasuries and repos, and several other clearinghouses revealed that they plan to enter this business.

Competition among Exchanges: Two new exchanges, FMX and Abaxx, attended FIA Boca to meet with potential partners and clients. FMX plans to compete with CME Group in the US interest rate futures market, while Abaxx is focused on commodity markets such as LNG and nickel sulphate.

Rise of Retail: Exchanges and brokers discussed the rapid growth of retail participation in equity options markets in the US and India and the potential spillover into other markets. Retail participation also came up in the CFTC chairman's comments about new market structure models that combine infrastructure with intermediaries.

Geopolitics and Commodity Supply Chains: Several speakers commented on the long-term impact of Russia's invasion of Ukraine on global financial and commodity markets. Key trends to watch – a new emphasis on security in European economic policy; increased restrictions on cross-border movements of capital; and structural changes in the production, distribution and consumption of energy commodities.

Technology: Cloud providers such as Amazon, Google and Microsoft were more visible than ever, with representatives from these companies participating in panel discussions and highlighting the benefits of their partnerships with exchanges. The conference also revealed that there are significant differences in AI strategies across the industry, with some companies questioning the costs of AI and others embracing the opportunities for innovation. Another key trend in this area was the large number of fintech companies, investment bankers and venture capital executives attending the conference to make connections and discuss growth opportunities.

Cyber Risk: One of the biggest concerns for the industry is the threat posed by ransomware and other forms of cyberattacks. Exchange leaders said it is one of the top risks they face, and regulators told the audience that they are implementing more requirements to ensure that markets are not destabilized.

Bullish Outlook for Trading Volumes

From the opening panel on day one to the exchange leaders panel on day two, the message was clear – the listed derivatives markets are benefiting from rising volume in two main areas.

First, the interest rate sector is benefiting from several major trends that are driving increased trading by asset managers and other institutional investors. As Thomas Pluta, president of Tradeweb, said on the opening panel, the combination of macroeconomic volatility, the return of inflation, and the shifts in monetary policy have caused an uplift in trading volume across a wide range of interest rate markets. Ken Griffin, the chief executive of Citadel, shed some light on why investors are watching monetary policy so closely; in his one-on-one with CNBC anchor Sara Eisen, he warned that "big tailwinds" are feeding inflation and he urged the Federal Reserve to avoid cutting interest rates too quickly.

Second, in the equities sector, there has been massive growth in the trading of equity options, especially in the US and India, the two largest options markets in the world. Speakers from exchanges and brokerage firms pinpointed two main drivers: first, a generational change in investor behavior is leading to increasing retail participation, especially among younger people. Second, the sharp rise in the popularity of options with zero days to expiration, which has attracted both retail and institutional interest.

India in particular has been a revelation in the last several years. The National Stock Exchange of India has shot up the ranks of the world's largest derivatives exchanges by trading volume, mainly due to the explosive growth in equity index options. Sriram Krishan, the exchange's chief business officer, speaking on day two of the conference, explained that increasing retail participation has been the main driver for the increase in trading volume. He pointed to the impact of the pandemic, the spread of low-cost trading apps, the role of social media as a source of information, and the popularity of zero-day options as key characteristics of this market.

Treasury Clearing

Market structure issues are always high on the agenda at FIA Boca, and this year the conference happened to coincide with one of the biggest changes in market structure in many years – the expansion of central clearing in the US Treasury market. In December, the Securities and Exchange Commission finalized a rule that will make clearing mandatory for many firms active in cash and repo trading, and the industry is now grappling with how this mandate will be implemented.

Laura Klimpel of the Fixed Income Clearing Corporation, the only clearinghouse that currently offers clearing for the Treasury market, outlined FICC's plans to overhaul its rules and introduce new models for clearing cash Treasuries and repos. FICC currently offers a sponsored access model that some clients use on a voluntary basis, but it plans to introduce a different model that will besimilar to the agency clearing model used for cleared derivatives. She also provided an estimate of the potential impact, saying that FICC currently clears $7 trillion per day and anticipates an additional $2.5 trillion to $4.0 trillion once the rule takes effect.

FICC may not be the only clearinghouse in this business, however. CME's Terry Duffy and Intercontinental Exchange's Jeff Sprecher both said that they expect to enter this business, and LCH's John Horkan commented that Treasury clearing "is definitely something that we're looking at." Duffy also mentioned that the upcoming changes in how Treasury securities are cleared will pave the way for CME and FICC to expand their cross-margining agreement to include positions held by customers. That would lead to significant margin offsets for customers active in both cash Treasuries and Treasury futures.

All this interest from the clearinghouses raises a crucial question – who will step forward to clear those trades? Clearinghouses depend on their members to process trades and guarantee their customers, and one of the top issues facing the industry is that capital requirements are constraining the ability of banks to clear derivatives for their clients. As Mariam Rafi of Citi, one of the industry's top clearing firms, pointed out in the opening panel, US banks are facing a steep increase in the capital requirements for clearing derivatives due to two pending proposals from the US banking regulators. Adding Treasury clearing will create even more demand for that capacity.

Technology may be part of the solution. Clearing firms and their clients are looking for ways to use their resources more efficiently. Margin optimization came up in several panel discussions, and one bank executive noted during a technology discussion that there are now more than a half dozen vendors offering solutions in this area.

Exchange Competition – A Blast from the Past

The interest rate sector is seeing more than just a surge in trading activity; it is also seeing the reemergence of competition among exchanges. Industry veterans were reminded of scenes from Boca a decade ago when exchanges were battling for a share of the US interest rate futures market. CME emerged as the winner with nearly 100% market share, but BGC is now preparing another attempt through its recently formed futures exchange subsidiary, FMX. A team of top executives led by Howard Lutnick, BGC's chairman and chief executive officer, attended this year's conference and met with market participants to drum up support for the launch of trading, which is expected later this year. 

Another example of emerging competition at the conference was Abaxx, a startup that has established an exchange and a clearinghouse in Singapore. Abaxx is preparing to launch trading in liquified natural gas and nickel sulphate. Although futures on both commodities are already available on other exchanges, Abaxx argues that its contract terms are better suited to the needs of commercial firms active in the underlying physical markets, and it came to the conference to connect with potential partners on the clearing side.

FIA Boca also saw some examples of increased competition among the incumbents. On the opening day of the conference, ICE announced the launch of total return futures on two widely used MSCI equity indices, another salvo in its competition with Eurex to be the top market for MSCI futures and options.

The Next Generation of Traders

In the past, retail was rarely top of mind for FIA Boca attendees, but this year marked a turning point. Several exchange leaders spoke about how rising numbers of retail participants are not only driving an increase in trading volume, but also causing them to rethink their business models and growth strategies.

“We have a new generation of investors that have come into the markets, whether that’s in equities or options, that have really helped to fuel volumes,” said Adena Friedman, chair and chief executive officer of Nasdaq, which operates the second-largest stock market in the US and several equity options markets. She added that she also sees individual investors becoming more engaged in the futures markets, which historically have been dominated by institutional investors and commercial hedgers. 

ICE's Sprecher explained this shift in participation as part of a generational shift in how people think about time. He noted that the professional basketball team in his hometown of Atlanta now sells tickets for just the fourth quarter, and people buy those tickets because they only want to see the final part of the game. Sprecher said this type of short-term interest is showing up in how retail participants want to trade, with zero day options being the most obvious example.

CME's Duffy predicted that this trend will only grow over time. "I'm very big on retail going forward and I think what we describe as retail today will be different in the next three to four years. We won't even recognize it,” he said.

Steve Quirk, chief brokerage officer at Robinhood, the brokerage firm that has played a leading role in encouraging more retail participation, echoed Sprecher's comments on a panel dedicated to the growth of options markets. Quirk commented that the enthusiasm for zero-day options reflects the shortening of attention spans in today's world. “Look, everything we do in life, now people have a shorter attention span, and we shouldn’t expect investing to be any different,” he said.

A key question going forward is whether the industry should do more to protect these retail traders. Cboe President Dave Howson stressed the US options industry's long-standing commitment to education through the Options Industry Council, and Robinhood's Quirk added that his firm cuts its educational messages into short snippets to match how today's investors consume information.

Another key question raised at the conference is the effect on market structure. Several market operators have moved towards vertically integrated models, where an exchange and a broker are part of the same organization, to increase the appeal for retail. Rostin Behnam, chairman of the Commodity Futures Trading Commission, tackled this issue in his keynote address and said he is aiming to issue a proposal this summer to address the potential conflicts of interest in this type of model.

Geopolitics and Commodities

Russia's war with Ukraine has lasted for more than two years, but its impact is continuing to have a profound effect on the derivatives markets. Stéphane Boujnah, the chief executive officer of Euronext, speaking on the exchange leaders panel, said the invasion has caused a reorientation of European policy towards what he called "ESG 2.0" – energy, security and geopolitics. Boujnah said the Russian threat will accelerate Europe's Capital Markets Union, and he predicted that financial markets will have a key role in mobilizing capital for increased spending on defense.

Daniel Yergin, an author known for his expert analysis of energy, geopolitics and the global economy, was one of the keynote speakers at the conference, and one of the main themes of his address was the global shift towards a new geopolitical order characterized by less cooperation among the major economies and more nationalism in economic policy. He predicted that financial firms will face more restrictions on their ability to operate at the global level.

One example already being felt in the industry is the decision by the UKto leave the European Union. Although that split took place five years ago, ICE's Sprecher said that the continuing uncertainty about how the UK regulates the financial sector is making it difficult for his firm to make investments in either the UK or the EU.

Another example is the structural reorientation of energy markets and the rising importance of the US as an energy exporter. Mike Sommers, the president and chief executive officer of the American Petroleum Institute, an association representing oil and natural gas producers, spoke about the technological advances that have helped the US become the world's largest producer of oil. Yergin described how Europe has pivoted away from Russia as a supplier of oil and gas, and how the US stepped into that gap by exporting LNG. Yergin also predicted that the world is less and less likely to hit net zero targets by 2050, in part because energy security is becoming a higher priority than climate change, and partly because he expects a shortage of copper and other metals needed for the transition to clean energy.

Moneyball and Markets: The Crossover of Finance and Sports

Not all of this year's conference was devoted to financial markets. One of the more surprising areas of overlap was in the use of data – the speakers revealed that the top teams use highly sophisticated analytics, including AI, to process massive amounts of data to gain an edge on their competitors.

Another interesting area of overlap was in the personalities on the panel. Doug Cifu, one of the panelists, is not only the chief executive officer of Virtu Financial, one of the largest broker-dealers and market makers in the world but also part-owner of the Florida Panthers, a professional ice hockey team based in Miami. Don Wilson, who moderated the panel, is not only the founder and chief executive of DRW Holdings, one of the top principal trading firms in the world but also a three-time world champion in the M32 class of sailboat racing.

Technology – Cloud, AI and Tokenization

Amazon, Google and Microsoft, the three largest providers of cloud computing, were well represented at the conference and used it to highlight their offerings for financial markets. To give just one example, 15 people attended from Google's cloud division, the same number as Société Générale. Cloud providers are not new at Boca, but this year's speakers were noticeably more knowledgeable about derivatives markets, which may reflect the time spent working with their exchange partners.

The panel discussions revealed that there are differences in approach across the industry. Some exchanges said they value the cloud because it allows them to quickly scale up their operations. Others highlighted the cost savings that come from using cloud providers rather than on-premise data centers. But some exchanges, notably ICE, remain committed to running their own cloud rather than relying on one of the tech giants.

Artificial intelligence was one of the hottest topics at this year's conference, and no wonder – financial firms are among the fastest to adopt new technologies. Nasdaq's Friedman was one of the most bullish on this topic, telling the audience that she sees huge benefits from using AI as a productivity tool in coding and research as well as an analytical tool for market surveillance. The cloud providers joined in, outlining how their services can be used to drive massive advances in data analytics and generative AI. But some speakers were more skeptical. Boujnah of Euronext warned that the costs of AI are likely to rise over time, and Matt Haraburda, president of XR Trading, said that AI is too slow for the ultra-low latency data processing necessary for market making. Haraburda explained that in the US options markets, firms like his need the ability to process millions of order messages and update thousands of price quotes in less than a microsecond.

As in past years, several trading platforms for bitcoin and other crypto currencies came to FIA Boca to connect with the key players in the derivatives markets, including Coinbase,, Cboe Digital and EDX Markets as well as two new players, AsiaNext and GFO-X. But this year they had a more subdued presence than a few years ago, when the crypto markets were booming. On the other hand, technology experts such as Veronica Augustsson at 7Ridge and Nadine Chakar at DTCC as well as exchange leaders such as Thomas Book from Eurex mentioned tokenization as an emerging trend in financial markets, especially for certain use cases such as collateral management. Adding to the buzz was the fact that several blockchain-related startups attended the conference, including Axoni, Baton, ChainLink, Digital Asset and R3.

Cyber Risk and Operational Resilience

For electronic markets such as derivatives exchanges, the threat of cyber risks has always been a concern, but one thing that has changed is the level of regulatory attention. During the exchange leaders panel, several speakers said the potential for a cyberattack to disrupt their operations is the biggest risk that they face in today's world. So far no exchange has suffered a crippling attack, but over the past year, there have been several widely reported incidents of ransomware attacks on market participants that disrupted their ability to operate for days or even weeks. Those attacks have made it clear that when an important service provider or market intermediary goes offline, the impact ripples through all its clients and business partners.

This issue now has the attention of regulators. A panel discussion with representatives from the European Commission, the Monetary Authority of Singapore, the Bank of England and the National Futures Association in the US revealed that there is a global trend towards strengthening operational resiliency requirements to address the risks that arise when critical service providers go offline. The regulators are at different stages of this process, however. As one panelist pointed out, a lack of coordination could lead to challenges for companies operating in multiple jurisdictions.

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