Three Takeaways from FIA Boca 2024 – The Challenges of Growth and Need for Resilience are Top Concerns

Twelve hundred attendees, twenty countries represented, and three days of meetings: that sums up FIA Boca by the numbers. But what were the big topics of discussion and emerging trends that are shaping the industry? The BornTec team has a few ideas to share from conversations we had with customers and prospects at the futures trading industry’s biggest event of the year.

Growing Volume and Regulations, Shrinking Resources

From 10,000 feet, the futures industry has it very good but from ground level, there are a number of challenges to deal with. Volumes are strong, driven both by a surge in shorter-term options and micro-sized contracts as well as rising interest rates and general economic uncertainty. At the same time, regulatory mandates from governments and exchanges alike paired with constrained budgets and two recent technical disruptions – one a year ago and the other in January of this year –  mean that firms must be creative as they strive for flexibility and resilience.

Cloud Has the Numbers but Operational Resilience Has Everyone’s Attention

FIA Boca witnessed unprecedented levels of sponsorship and participation from the big, cloud hyperscalers with AWS, Google Cloud and Microsoft Azure all showing up in force. However, the number one topic of conversation with colleagues, customers and prospects was the need for improved operational resilience. Recent events have made clear that system outages can arise for any reason, not just the increased threats from ransomware and other cyber challenges. In all, this elevates the importance of resilience planning and vendor management. 

Everyone is Talking About AI but Few are Asking for It

AI was the topic of discussion on several panels but down in the trenches (or, in this case, the Palm Court) managers and their teams are not asking for AI to address their challenges, they only want pragmatic solutions that unite their disparate data and systems. AI shows great promise and will most likely become more embedded in processes but, for right now, the emphasis is on making the most of what they have in the least disruptive ways possible.

The View from BornTec

FIA Boca is a fantastic opportunity to meet with the most important players in the futures and derivatives trading industries and the blend of business and ideas is both enlightening and productive. Overall, the industry is dynamic and growing but there are a number of challenges that must be met. By virtue of our deep industry experience and focus on maximizing data to increase data transparency, improve operational resilience, enhance risk management and improve speed to insight, BornTec is excited to build on top of success as we partner with our clients to deliver outstanding outcomes. Contact us to learn more.

BornTec is a Chicago-based technology solutions firm that provides tools to support surveillance, risk, compliance, and regulatory reporting functions in financial markets. Contact us for a demo of our data resilience solutions.

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Three Takeaways from FIA Expo 2023

FIA Expo is a high point of the year for the futures and derivatives industry. It doesn’t have the glitz and glamor of FIA Boca, held in March each year, or the international appeal of IDX, presented in London in June, or the Asia Derivatives Conference, hosted in Singapore in November, but it is the largest gathering of the bunch and it delivers a real “meat and potatoes” look at the industry. FIA has staged the event as late as November in years past but they moved it up to the first week of October, for 2023 and, in the process, gave all of the attendees a taste of fine Midwestern Fall weather, a condition that is sure to devolve into wind, rain and cold all too soon. 

BornTec was in attendance at the trade show and events at FIA Expo and has a few observations and takeaways to share:

  • FIA has been busy. The week before Expo was a busy one for FIA, as they released two important research papers, one with recommendations on how exchanges should proceed with regard to exchange volatility control mechanisms and the other a report with findings relating to the ION Markets ransomware event in January of this year.Volatility control mechanisms (VCMs) are tools employed by exchanges in times of market stress and may include pre-trade price bands, daily price limits, and other tools used to interrupt trading in times of market stress. In brief, FIA encourages as much transparency as possible for VCMs and, as such, once again displays their leadership as a source of improving market practices.

     

    It’s a little less clear-cut with the ransomware report. The issue is more pervasive and complex. The FIA report seemed to lack succinct recommendations outside of performing further study due diligence. Having said that, it is clear much more work needs to be done in this area and we look forward to the FIA exhibiting clear leadership to ensure that effective results are forthcoming. Banks, FCMs, and other industry participants report that internal work has begun to build processes, meaning that this issue won’t be going away anytime soon, if ever.

 

  • Out with crypto. Crypto was already on its way out last year at Expo, as FIA staff scrambled to black out FTX’s sponsorship mentions on presentations and signage, and it was virtually non-existent on the trade show floor this year. In the Innovators Pavilion, the “shark-tank” competition that highlights emerging technologies, only one firm was crypto related and that firm, Crossover, is essentially a hyperfast platform that most closely replicates prime brokerage. Crypto still has a place in the industry, particularly when it comes to tokenization in areas like repo, but the shine is largely off of the crypto apple. In fact, the beginning of FTX’s Sam Bankman Fried’s fraud trial coincided with the first day of Expo.

 

  • Up with AI. AI, on the other hand, is all the rage. For example, five of the ten firms in the Innovation Pavilion are powered by AI and the two winners chosen by the panel of experts, runner-up CodeComplete and overall winner ClearDox, are AI-based: CodeComplete as an AI-engine for writing proprietary code and ClearDox for the extraction, management and utilization of information in written documentation in the energy, agriculture, and metals markets. ChapGPT captured the public’s attention when it burst onto the scene last November but, like the Alien’s first emergence in the iconic space-horror film of the same name, AI has actually been gestating for some time. There’s a lot more to come. 

Overall, FIA Expo revealed an industry that is strong and dynamic. The past few years have been a challenge and incidents like the ION Markets ransomware event point to a complicated and challenging landscape but, overall, the derivatives industry is in good shape.

What are your thoughts? Please get in touch with any comments or questions.

BornTec is a Chicago-based technology solutions firm that provides tools to support surveillance, risk, compliance, and regulatory reporting functions in financial markets. Contact us for a demo of our data resilience solutions.

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Challenges Ahead for a Healthy Derivatives Industry

FIA IDX in London is one of the bellwether events for the international trading community, and the 2023 edition shone a spotlight on an industry that is experiencing strong growth while simultaneously dealing with the challenges brought along by rising volatility and outside threats like cybercrime. The record 1,100+ attendees attest to the health of the industry while the topics discussed highlighted the many challenges that must be faced in order to maintain that strength. In particular, panels on the future of markets, operational efficiencies, and operations resilience highlighted key areas that are attracting the attention and resources of participants.

Top Challenges for the Derivatives Trading Industry

The derivatives industry is seeing robust growth but that growth presents challenges that must be met. Three panels, in particular, brought these challenges into focus:

  • The future of markets: After years of low-interest rates and relatively quiet market volatility, risk is back. As a result, there is a heightened interest in improving real-time risk management in order to gain an understanding of a true risk management profile. To achieve the best results and drive innovation, collaboration is needed across the technology and operations stack. 
  • Operational efficiencies: Operations is the backbone that drives risk discipline and it requires good data in order to map the risk landscape. There are automation gaps in derivatives markets that must be addressed and new technology approaches, including low code / no code automations, are assisting in these efforts. More standardization of data from exchanges and CCPs is needed because high-quality, reliable data is a necessity to be able to grow safely at scale.
  • Operations resilience: The ION Post Trade Processing ransomware incident makes it plain that it’s not a matter of “if” but “when” a cyber event will affect an enterprise’s operations. A top-down understanding of infosec is required, with constant training around a response plan required. Collaboration, internally and with partners and competitors alike, is key and the industry is making great strides in these areas.

Building on Trust in International Markets

Trending topics get the headlines but it’s the nuts and bolts issues that most accurately reflect where the hard work in the derivatives trading industry is being done. Crypto was the buzz topic in recent years, and that focus has now shifted to AI, but the lessons learned from the systemic stresses encountered during the Covid 19 pandemic and, more recently, with the ION Trading ransomware event indicate where the difficult challenges are being met. 

In his opening remarks at IDX, FIA President and CEO Walt Lukken emphasized trust as a key to industry success. Pointing out that trust is “gained over a long time but lost in a moment”, Lukken noted that “in global derivatives markets, we need each other more than ever to overcome challenges, understand our differences, and find collective solutions that benefit our markets – and the global economy as a whole.” Trust is the essential foundation on which success is built. In that regard, the international derivatives industry is in very good shape.

BornTec is a Chicago-based technology solutions firm that provides tools to support surveillance, risk, compliance, and regulatory reporting functions in financial markets. Contact us for a demo of our data resilience solutions.

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FIA Boca 2023 Recap

BornTec Insights: Three Takeaways from FIA Boca

Generally referred to simply as “Boca”, the annual international futures industry conference hosted by the Futures Industry Association (FIA) each Spring is traditionally a time for the leading luminaries of the global derivatives community to gather and assess the state of the industry. Boca was back to full steam this year following the Covid-19 pandemic and renovations to its longtime home at The Boca Raton and the issues most addressed revealed a healthy and dynamic industry that also has its fair share of challenges. Here are three issues that were topics for conversation at Boca.

 

1. What’s next for digital assets?

Executives from cryptocurrency exchanges were flying high in 2022 but were in somewhat short supply this year as plunging prices, failed businesses, and, in some cases, criminal charges combined to clip their wings. Crypto is still of interest, however, and many discussions centered on how digital assets are likely to be adopted in the years ahead. While there may be less talk and activity right from the trading side of the business right now, the subject is a hot one on the legal and compliance side of things. It’s on these foundations that future digital assets will be built.

2. The “ity” twins: profitability and volatility

In markets, profitability and volatility often go hand in hand and that is proving to be true in 2023. A multi-year period of low interest rates was a challenge to the futures commission merchants (FCMs), who earn more money on deposits held when rates rise. Now, banks and FCMs are enjoying their best year in some time due to both rising rates and higher volumes. However, volatility has risen with recent events like the failure of SVB and First Republic Bank, leading to greater risk, and future events such as the U.S. debt ceiling standoff may bring more of the same.

3. Boosting Operational Resilience

One of the recurring themes of the conference this year was around operational resilience. This was covered by multiple panels and it was often a topic of general discussions over a coffee or cocktail. The pandemic-induced convulsions of March 2020 started the conversation and the recent ransomware event at a significant industry software vendor brought the problem into sharp focus. The ransomware event has forced a reckoning of sorts and further examination and analysis is likely to lead to higher standards for operational resilience. Many in the industry are looking for additional functionality to come along with resilience increases in order to defray some of the expected costs.

Lessons from Boca

The international derivatives industry provides vital products and services that help manage risk, enabling more certainty and flexibility for all businesses. While the industry has a remarkable history of innovation and growth, there are always challenges to be addressed. The major ransomware attack in February 2023 is a reminder that vigilance is a constant requirement and that new standards and procedures should be adopted to address both current and future threats. BornTec stands ready to assist in those efforts, ensuring the strength and integrity of these critical markets. To learn how BornTec can help your firm address your operational resilience challenges, contact us at resilience@borntec.com

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