FIA CEO Walt Lukken discusses risk management in derivatives markets

SmarterMarkets podcast touches on standards initiative, commodity volatility

16 May 2022

Walt Lukken, President and CEO of FIA, recently sat down with the SmarterMarkets team to kick off its new podcast series, "Systems at Risk."

In the interview, Lukken talked about the importance of FIA's role as the leading trade association for global derivatives markets, and its mission to set best practices and standards. He also discussed current and future challenges facing global commodity markets in the wake of the Ukraine war and the worldwide transition to a more sustainable economy.

Lukken noted that one key work area for FIA right now is modernizing workflows across exchange traded derivatives markets through its new initiative, the Derivatives Market Institute for Standards (DMIST). Initial stresses that emerged during the pandemic-related disruptions of 2020 helped draw attention to certain challenges. And while the global cleared derivatives ecosystem proved resilient, it also was clear that there were some stresses and pain points regarding settlement and allocation, Lukken said.

"One of FIA's clear missions is to raise the best practices and standards of our industry," he said. "So we stepped into a role of trying to coordinate all those market participants – the exchanges, the intermediaries, the customers – to try and say, 'Look, what were the issues? Why did we have these issues? How do we fix those issues, and are there ways to bring important standards to this process?' We need to make sure trades are getting into the right account, on the right day, for the people who traded those positions."

Separately, Lukken also discussed broader commodity market volatility  as well as the potential for continued uncertainty in these markets thanks to issues including supply chain disruptions and the transition to a more sustainable global economy.

"Even though the latest headline maybe the LME nickel crisis, in some ways we need to pull back the lens a bit broader," he said. "We're likely going to see more of these types of events with extreme price dislocations that happen in our markets."

The SmarterMarkets podcast is hosted by David Greely, and sponsored by Abaxx Technologies.

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