Tell the Truth: Notes from FIA Expo 2024

The Futures Industry Association (FIA) commemorated another successful year with FIA Expo in Chicago this past week and, as usual, FIA President and CEO Walt Lukken found a way to creatively frame his opening remarks. In this instance, he noted that the NFL Washington Commanders are off to a surprisingly good start due at least in part to their habit of “truth telling” postgame meetings on Monday where all the good, bad, and ugly is put on the table. Seizing on that idea, Lukken created a “Tell the Truth Tuesday” theme for his remarks and I, never one to let a good idea go uncopied, will follow suit with a “Frank Facts (and Opinions) Friday” after first making a stop for some “panel truth”.

Four Truths from the President/CEO

Lukken’s opening remarks were framed by the new theme that FIA has developed for Expo: Designed for the Doer. In contrast to FIA Boca in March where domestic industry luminaries and international leaders deal with the macro issues facing the industry, Expo delivers (their words) “industry experts providing actionable recommendations, an exhibit hall full of cutting-edge technologies, products and solutions, plus numerous opportunities for making meaningful connections.” Within that framework, Lukken discussed four “truths”: volumes, innovation, competition, and regulation:

1. The industry is on track for its 7th consecutive year of record volume. Growth is broad and deep but increasing retail volume from India and in options, crypto, and event markets is particularly strong as well.
2. This year marked the 10th anniversary of the Innovators Pavilion and innovation in Treasury clearing and collateral tokenization is looming. This year's inductees to the FIA Hall of Fame includes one of the greatest market innovators of all time in ICE’s Jeff Sprecher, who joins his fellow exchange leader Terry Duffy from the CME and four others in achieving HOF status.
3. Competition is heating up with new entrants like FMX in interest rates and the emergence of the previously mentioned event markets but more is needed. The 100 clearing firms of 25 years ago have been whittled down to 50 now and the seemingly benign shift from 20 to 16 exchanges over the same timeframe masks the fact that nearly all volume goes through just 4 of those 16.
4. In the face of change, regulation needs to keep pace to ensure that competition is fair and not merely unfettered. The current climate favors regulatory change and the number of issues that need to be addressed are large. Strap in: it’s likely going to be a long and wild ride.

Four Facts from the Panels

The shift to the theme of “designed for the doer” led to panels that were loaded with content, more so than in recent years. Out of this rich content stream, four issues stand out: Treasury clearing, collateral tokenization, AI, and regulation.

1. Treasury clearing is going to be huge, both in terms of volume generated and risk reduction gained. Allison Lurton from FIA led an expert panel of Aaron Friedman from Citadel, Paul Hamill of ICE, DTCC’s Laura Klimpel, Suzanne Sprague from CME Group and Jason Swankoski of Morgan Stanley to discuss the sweeping mandate to clear Treasurys and the aggressive timeline under which it is supposed to occur. One can only conclude that Treasury clearing will be hugely transformative and that there is no way that it will occur on the timetable that is currently proposed.
2. Who knew that the CFTC has a Chief Artificial Intelligence Officer? Not me, although it certainly makes sense and is a comfort to know that such a role exists. Ted Kaouk is the CAIO at the CFTC and he appeared one-on-one with , Yuying Chen-Wynn, head of AI at Peak 6. Wynn noted that AI is mostly a lot of small automations at this point and it reminds her of her hometown of LA where nearly everyone is a writer/actor/director/producer. Kaouk for his part gave a detailed and thoughtful accounting of how the CFTC is approaching AI, an approach that is a blend of innovation, safety, and festina lente (see below).
3. One day after Expo, the CFTC’s GMAC (Global Markets Advisory Committee) voted 27-0 that no changes are needed to regulations in order to allow collateral tokenization to proceed. The application of DLT technology to speed processes and reduce risk is very compelling but there are many complexities that need to be addressed before widespread adoption can be achieved. In fact, CFTC Commissioner Caroline Pham has previously pointed out that a GMAC recommendation from November 2023 concerning money market funds as collateral has yet to be adopted by the agency. Festina lente again (see below).
4. The upcoming change in administration has advocates for regulatory change (i.e. liberation) all excited while Washington veterans are more inclined to mutter that they’ve seen this all before. The appetite and attitude toward change is more pronounced with the incoming administration but the fact remains that deep, effective regulation takes time to develop. Festina lente one more time (see below).

"Frank Facts (and Opinions) Friday"

Lukken’s opening remarks were expansive but he couldn’t cover all important topics in his 30 minute time slot. Here are a few items that he either couldn’t or didn’t want to talk about.

1. Let’s not forget crypto. An audience poll conducted during the Inside the Beltway panel led by Kyle Glenn from the FIA revealed that 65% of audience members believe that comprehensive digital asset market structure legislation will be passed and signed by the end of 2026. (Others on that panel included Paul Balzano, staff member supporting the House Agriculture Committee, Kevin Batteh of Delta Strategy Group, FIA HOFer De’Ana Dow with Capitol Counsel, and the NFA’s Karen Wuertz.)

2. When it comes to Treasury clearing, it looks like it’s a three way horse race with DTCC (FICC), CME and ICE all jockeying for position. One industry insider that I spoke with characterized it as DTCC’s race to lose, with CME hanging tight along the rail ready to exploit any stumbles in their characteristically aggressive manner while it’s not clear that ICE has much of a chance as they linger at the back of the pack.
3. Events markets are having a moment of late. Popular buzz has it that they were more accurate than opinion polls for the recent Presidential election and Kalshi CEO Tarek Mansour was the first panelist that moderator Will Acworth engaged with during the “Innovating Exchange Products for the Future” panel. Mansour in his hoodie reminded me of now imprisoned Sam Bankman-Fried in his shorts and crew socks at FIA Expo just three short years ago. Will Mansour be more like SBF or Jeff Sprecher? Only time will tell. (Others on the panel included Rob Hocking from Cboe Global Markets, Jim Hyde representing NYSE/ICE, Summer Mersinger of the CFTC, and Randolf Roth of Eurex.) 
4. Festina lente: make haste slowly. Kaouk from the CFTC said it well when invoking this Latin phrase. So many of the technology issues facing the industry and, in fact, society, are developing quickly and must be addressed NOW. At the same time, while areas like crypto and AI demand immediate attention they also require prudent stewardship. Make haste slowly, indeed.

Odds and Addenda

A few stray thoughts to finish things off:

1. The recent cooperation and collaboration on legislation between the CFTC and SEC is a promising development. More of that will be needed as the complex wrinkles presented by Treasury clearing, crypto, and digital assets necessitate a fresh or revised approach to how regulation is structured and delivered. 
2. If the CFTC is granted oversight of spot crypto markets as expected, will this be something of a “camel's nose under the tent” moment that sees the agency's mandate expand to other commodity spot markets or even FX in the years to come? Will it be an instance of “be careful what you wish for”?
3. Speaking of the CFTC, what will happen to futures market surveillance, compliance, etc. if their remit is expanded to include spot crypto AND the Elon/Vivek/MTG DOGE leads to big cuts in their budget? This could have dramatic impacts…..or is that by design? This topic was discussed at Eventus’ excellent pre-conference event on Monday and leaves me to wonder: is it a bug or a feature? One thing is certain, SROs like NFA will be busy no matter what happens.
4. Former CFTC Chairperson and current SEC leader Gary Gensler has indicated that he will step down in January leading one to ponder: what will his legacy be? Largely respected but disliked, he was relentless in his adoption of Dodd Frank mandates while at the CFTC and faced a complicated new paradigm of digital assets while at the SEC that was largely met with “regulation by enforcement”. How will that look in the years ahead? As a champion of Brooksley Born back in the day, I have to wonder.
5. I was tempted to ask Tarek Mansour of Kalshi  if there was a prediction contract on whether or not Summer Mersinger would be the next Chair of the CFTC when they both appeared on the New Products panel moderated by Will Acworth from the FIA but that was too cheeky, even for me.
6. ICE = free rider? Intercontinental Exchange, affectionately known as ICE, is one of the largest and most innovative exchanges in the world. They always have a booth in the exhibit hall at Expo and their executives appear on panels but their name never shows up among the list of Expo sponsors. In economics this is referred to as the “free rider problem”: extracting benefit without paying for it. What’s up with that?
7. I’m new and naive when it comes to Treasury clearing and all the talk of “done with” and “done away” had me pondering death and my own mortality. Fortunately, they didn’t use the phrases “done in” or “done for”. (The mind does wonder when sitting through panel after panel, doesn’t it?)
8. Back in the day, FIA Expo concluded with a massive fundraising event that raised hundreds of thousands of dollars for the Greater Chicago Food Depository. The “Great Chicago Steak Out” has disappeared as Expo has evolved but the need it served is as great as it ever was. Please consider giving to the Greater Chicago Food Depository this year.
9. In further philanthropic news, Walt Lukken announced in his opening remarks that Chris Edmonds from ICE and Alicia Crighton of Goldman Sachs will try to top SGX’s Rama Pillai’s record fundraising effort this coming year in the Futures for Kids Kilt Challenge. Chris and Alicia chose a “Mission Impossible” theme: we’ll see if they can go all “Tom Cruise” and make the impossible possible.
10. Finally, a shout out to Emma Davey as she attended her last Expo as FIA CCO. Emma has always been a beacon and advocate for the industry. Given that MaryAnn Burns continues to attend Expo following her retirement, we can only hope that Emma follows suit as well.

The new “designed for the doer” orientation for FIA Expo worked well and will provide plenty of opportunities to expand on the usefulness of the conference in the future, particularly with new innovations like roundtable discussions. There was a good buzz in the exhibit hall this year and innovation was front and center in nearly all areas. All in all, it was another great year for FIA and the derivatives trading industry that will hopefully continue in 2025 and beyond.

And another thing.....

I didn't realize until after I posted this article that I failed to mention one very important fact: the winner of the Innovator of the Year award.

This was the 10th anniversary of the Innovators Pavilion and the 2024 cohort was likely the most dynamic and accomplished to date. I have made a sport of predicting the winner in past years but I was unable to do so this time because I wasn't able to see all of the pitches. Even if I had, I expect that I would have had a very hard time choosing from so many strong candidates.

This year, there were two runner-ups and one winner: ClearToken and Grao Direto as runner-ups and TradeWell Technologies as the overall winner. You can read more about them in the press release from FIA.

Many thanks to this years judges (Alyssa Blankenship, DRW Holdings; Mira Witzig Borja, Citigroup Global Markets; Alex Gheorghe, Illuminate Financial; Nathaniel Jackson, Barclays; George Kalant, Chicago Trading Company; and Tim Perevozchikov, Two Sigma Securities, LLC) and to Will Acworth and the entire team at the FIA for this exciting and informative program.

• Thanks for reading. Don’t hesitate getting in touch with any comments, questions or, better yet, business opportunities.