World Exchange Congress 2019: Trading Venues and Transformations

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.