Futures Industry Association Expo Conference

By Jessica Darmoni

October 19, 2018

The Futures Industry Association (FIA) held their 34th Annual FIA Expo conference at the Hilton Chicago last week bringing together capital markets influencers, regulators and innovators to discuss some of the most pressing matters facing the industry.

While the industry is a global one, the conference kicked off with FIA President Walt Lukken talking about Chicago being home to people who get things done.  He quoted Carl Sandberg and invited people to “show me another city with lifted heads singing so proud to be alive and coarse and strong and cunning.”

Lukken believes Chicago is a city of builders, innovators and survivors.

“Since the launch of the Chicago Board of Trade, we have seen the Civil War, the invention of the car, the plane and the internet – industries have been built and destroyed but our industry has survived,” he said.  “We take pride in being innovators, builders and re-builders.”

Cross-Border Regulation

Lukken’s speech then turned more serious as he addressed the issue of cross-border regulation and the impact international trade has on our markets.  With sizeable Q2 2018 volume coming from outside the United States; including 19% of all Equities volume at the CME Group, 75% of all Individual Equity volume at Eurex and 90% of all Equity volume at the Singapore Exchange, harmonizing regulations with international counterparts remains a key issue.

“The FIA wants to keep our industry on a path of growth and maintain open markets,” he said.  “Our markets would wither without open borders.”

Commodity Futures Trading Commission (CFTC) Chairman Christopher Giancarlo took the stage after Lukken echoing his remarks on cross-border regulations.  He discussed a recent trip to Europe where he met with EU regulators and gave both a mea culpa and an apologia.

“The mea culpa acknowledged that in the past the CFTC has been accused of an over-expansive assertion of jurisdiction in applying Title VII of the Dodd-Frank Act outside of the United States,” he said.

He believes this assertion is partly responsible for fragmented global markets and decreased trading liquidity.

“At the same time, the apologia recognized the fact that the CFTC’s cross-border overreach may have been understandable back in 2013, when no other G20 jurisdiction had yet to fully implement the G20 swaps reforms.  To ostensibly protect U.S. markets, the CFTC sought to impose U.S. law abroad regardless of whether activity had a direct and significant impact on the United States.”

Chairman Giancarlo also talked about a white paper the CFTC released earlier in the month that outlined a better framework to address cross-border regulation.  He hopes global regulators will adapt a “deference” approach moving forward.

Meet the Innovators

FIA Expo is also a time to learn more about influential new technologies with their annual Innovators Pavillion, which featured 15 starts-up that foster innovation and entrepreneurship in financial markets technology. Based on the opinion of a panel of judges including Russ Abramson from Bank of America Merrill Lynch, Catherine Clay from Cboe Global Markets, Rob Creamer from Geneva Trading, Jan Bart de Boer from ABN Amro, Jared Delaney-Smith from Next Investor, Rumi Morales of Outlier Partners and Matt Haraburda from XR Trading; five of the 15 Innovators pitch their products in a conference session and then one is awarded the 2018 winner.

This year FreightWaves, a start-up developing trucking freight futures contracts to help bring hedging to transportation costs, won the competition.  FreightWaves Founder Craig Fuller presented at the Tuesday afternoon session talking about the cash settled futures product.

“To create a futures product, you need news, analytics and fundamental data,” he said.  “We now have this information laid out on a dashboard which helps folks manage risk and get ahead of trucking costs.

Of the 5 Innovators on the short list, two of them were in the digital asset space.

Tom Anderson, most recently a Managing Director of RCM Alternatives, launched Drawbridge Lending.  Drawbridge initiates FIAT loans secured by digital assets on the Blockchain.  The offering includes personal retail and commercial loans without margin calls and a commodity pool with no finance charges.

“This is an investment opportunity with limited risk in a growing asset class that is not going away,” he said about crypto.

iComply Investor Services, which tackles global compliance for digital finance and crypto-currencies was the other Innovator to present.

CEO Matthew Unger explained how the platform provides turnkey compliance solutions by simplifying multi-jurisdictional requirements for non face-to-face transactions.

A Deep Dive into Digital Assets

In addition to including Innovators in the crypto space, the conference also featured for the first time a Digital Assets track looking at the big picture, the institutional perspective and emerging products for this new asset class.

Some of the highlights from the track included when Hu Liang, CEO of Omniex, a front-to-back platform for investors and traders, talked about the long-term value of cryptocurrencies.  He spoke on the Digital Assets: The Institutional Perspective panel.

“What is the long term value?  Because without it is just speculative trading,” said Liang.  “Crypto-only crowds think this will lead to a decentralized economy and decentralized businesses.  Business that can be owned by us, such as more Ubers and AirBnBs.”

He also believes that the early adapters of cryptocurrencies are just now learning about institutional infrastructure.

“When we started looking at our competitors we realized that we were competing with Microsoft Excel because this is what the crypto-only crowd is using,” he said.  “But we also know that institutions are more concerned about custody and looking for more global custodians like Northern Trust, Bank of New York Mellon and State Street.”

Security is a concern for many institutional investors and fellow panelist Chris Hehmeyer, President of Hehmeyer Trading +Investment spoke on the topic.

“We won’t get institutional flow until we have safe and sound crypto markets,” he said.  “Institutions need to feel comfortable before they will invest.”

On the Digital Assets: Emerging Derivatives Products panel, Thomas Chippas, CEO of ErisX, spoke about the compliance and regulatory procedures needed to build a crypto exchange.  ErisX is a new entrant to the digital asset space with spot and regulated futures contracts on Bitcoin, Bitcoin Cash, Ethereum and Litecoin.

“We are building this new and designing everything from the ground up with security in mind from day one,” he said.  “We will be under the jurisdiction of the CFTC with our futures products; and with the spot market, we have applied for a Bitlicense and Money Service Business licenses.”

Conclusion

FIA Expo 2018 brought together some of the most influential leaders in the capital markets to discuss cross-border regulations, innovation in the industry and the hot topic of cryptocurrencies.  While everyone seems to be willing to roll up their sleeves and get work on furthering the markets, it may be that we don’t know exactly what is in store for us yet when it comes to these hot topics.

“I like baseball so I will use this analogy,” said John Tornatore, Global Head of Crypto at Cboe Global Markets on the Digital Assets: Emerging Derivatives Products panel. “People say we are in the first inning of this crypto-craze.  I don’t believe that.  I don’t even believe the first pitch has been thrown out yet.  We’re still watching people enter the stadium.”

Jessica Titlebaum Darmoni, Founder of The Title Connection

Jessica Titlebaum Darmoni

Founder of The Title Connection

Jessica Titlebaum Darmoni has over 15 years of experience building relationships, networking and connecting the dots. Jessica was able to build an extensive network as co-Founder and President of Women in Listed Derivatives (WILD). As WILD’s President, Jessica led WILD’s parent Board in Chicago from 2009-2014 and established branches in London, Frankfurt, Toronto, Mexico City and New York.

Jessica also spent time as the Marketing Director for the Americas at Itiviti, previously known as Orc Group, as well as a Communications Specialist at the National Futures Association and the Senior Vice President of Sales/Editor at Large at John J. Lothian & Company.

Currently, besides managing The Title Connection, Jessica is also the Head of Business Development for DyMynd, a financial empowerment firm that provides educational resources to help women feel confident about their investments and build healthy relationships with money. She is a frequent contributor to The Glass Hammer and her content has also appeared in Automated Trader and Markets Media. She is a re-occurring presenter at the Chicago Board Options Exchange’s Options Institute, a member of the Futures Industry Association’s Operations Americas’ Board and co-chairs the Board’s FCM Committee.

Jessica has a Bachelor’s of Arts in English from the University of Maryland in College Park and a Master’s of Science in Journalism from Roosevelt University.

Jessica@thetitleconnections.com