By Peter Fredriksson – Chairman and Co-Founder of Baymarkets
In the ten years since the global financial crisis, the exchange and clearing
landscape has undergone a period of radical transformation while the emergence of
new trading venues and technologies continues to shape this dynamic space. This
year’s World Exchange Congress brought together over 400 exchange CEOs and
executives from across the industry, myself included, to discuss these and other key
trends currently facing exchanges and their customers.
Held in Beirut, the event was hosted by the central bank of Lebanon, Banque du
Liban, and the Capital Markets Authority of Lebanon. Lebanon is also in the process
of launching an electronic stock exchange in the coming weeks which will initially list
just nine stocks - six banks and three construction companies. To grow further and
attract international participants the regulators said they will be looking to attract
regional listings from other countries, in addition to offering ETFs and clearing
services. Another interesting launch expected this year is Project Heather, a new
stock exchange in Scotland which is being established by Tomás Carruthers’
investment group and which has Euronext and EuroCCP on board as partners.
Changing roles
In addition to the launch of new venues, a key theme among exchanges in general is
that of increasing data ownership. Speakers at the event explained that this growth
in data analysis and sales is helping exchanges to diversify their revenue streams
and expand their customer base, which in turn is part of a bigger shift in the way in
which exchanges operate. In turn, exchanges are now becoming innovative
technology companies in their own right and creating a real challenge to specialist
technology vendors. There is a strong trend among venues, even smaller frontier
exchanges such as the Armenian exchange, to monetise their technology spend by
selling technology products and data directly to the market. The focus on modern
technologies such as AI and machine learning was also highlighted as an essential
consideration for exchanges.
I was of course particularly interested in the discussions related to clearing and there
was a strong focus on the changing role of CCPs in the capital markets. This was
highlighted by a data presentation of clearing volumes, which have more than
doubled since the 2008 financial crisis as a result of the growing number of
instruments now being pushed onto central clearing. The number of CCPs was also
shown to have risen to 19 CCPs in Europe and 80 worldwide - with that number still
going up. The consensus among speakers was that CCPs will continue to play a vital
role in the capital markets going forward, while risk management should be
considered a key priority.
Future growth
It was also interesting to learn that although state regulators were keen to have local
exchanges for listings, they’re priority was to ensure the stability of their financial
markets and so do not tend to find the prospect of mergers desirable. Overall, the
reasons for exchanges to stay independent rather than to merge were said to be
stronger than the potential gains. Some exchanges are instead working on profound
technology transformation projects, such the pioneering tokenisation and blockchain
developments underway on SIX and ASX.
One final shift that I believe will increasingly come to the fore was the growth of
crowdfunding platforms and how easily this is allowing direct access for retail
participants, without the need to go through an intermediary. While this is currently
only relevant for SMEs and startups, Hannes Takacs from the European Bank for
Reconstruction and Development suggested that the exchanges should begin
running these crowdfunding platforms as well. He argued that this would prove to
be of huge benefit to the venues because as those companies matured, it would
be an obvious next move for them to simply move onto the exchange.
My overall experience of the World Exchange Congress was hugely positive and it
provided an excellent forum to hear from industry leaders on not only the
challenges facing exchanges, but more importantly where the opportunities for
growth might be found. Coupled with the value of the networking opportunities and
technology being exhibited, I really enjoyed this year’s event.