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Exchange leaders expect more exchanges will emerge from areas of the world that don’t have any now.
“Each of us here has a pretty global business now,” said Jeffrey Sprecher, CEO of Intercontinental Exchange, “but I think there will probably be more than six big exchanges because there are parts of the world that are emerging.”
Robert Greifeld at NASDAQ OMX noted that a lot of the world wasn’t represented on the FIA exchange panel, while consolidation had led to global players.
As regulations become more harmonized, China and other big countries will enter the fray. However, as Sprecher noted, harmonization is not a smooth process. Although the G20 has agreed regulations will be harmonized, putting that into effect is different in every region and will probably take years, he said.
“I think there will be more exchanges,” added Magnus Böcker, CEO at SGX. “Other exchanges might be able to grow faster that we.”
At CME, said CEO Phupinder Gill, growth is coming from new instruments, even in a low-interest rate, low-volatility environment. One example is a USD Malaysian Crude Palm Oil Calendar Swap which expands a local contract to global exposure.
Sprecher said that when ICE bought the International Petroleum Exchange it had four low-volume contracts; now it has 900 active contracts. ICE could do that because it can align the contracts with its clearing operations.
For the Singapore Exchange, a primary concern is finding more local customers, said CEO Magnus Böcker.
“In Asia today, the traders are from Europe and the U.S.”
From Hong Kong, the goal is to build more business in the Asian time zone, said Charles Li, CEO of Hong Kong Exchanges and Clearing. “We sit in the middle and look east and west. Hong Kong is almost a split personality dealing with very different needs.”
He momentarily stumped other panelists during a discussion of whether NASDAQ OMX was a free rider when it comes to clearing operations and innovations developed by others, with the Chinese observation: “The butt tells the head what to do.”
‘Ah, what you think depends on where you stand,” helped out one of the other CEOs.
Yes, agreed Li, although the original Chinese expression uses a less polite term than butt.
FT Columnist Gillian Tett, who was chairing the exchanges panel, said that one reason to look to Asia was to avoid the regulatory quagmire of the U.S. and Europe.
Andreas Preuss, CEO of Eurex, agreed.
“The HFT rule and the Financial Transaction Tax discussions contribute to insecurity, and that puts us at a competitive disadvantage.”
He said German rules on high frequency trading have been handled well, although it required a lot of communication and education of the regulators.
“Could it have been done better. Yes. but not by much.”
Discussions of the financial transaction tax reveal some disturbing trends — many of the advocates know it won’t do what it promises, and they either don’t care or they favor a negative impact.
“It would be damaging to entire economies, and not just the financial markets,” Preuss said. “Some advocates say they don’t care about the economy, we want to harm the financial industry because we think there is too much of it.” France is an example of a national regulator that is not learning, he added.
“There is only one fundamentally European exchange left, and that is one with the worst set of cards,” he added ruefully.
Fortunately for Europe, the Nordics tried a financial transaction tax and it was a disaster, said Greifield.
“They are now outspoken opponents.”
