Exchanges have never faced more challenges and opportunities than they do today.
John Lothian News sat down with six exchange CEOs at the 2014 FIA Boca Conference to talk about their views on four main topics: competition, regulation, growth and technology. Phupinder Gill, CEO of CME Group, said that regulation will continue to define the competition and industry framework for the foreseeable future and rising global demand for existing and new products, particularly from Asia will drive growth.
“The competitive landscape, as it stands now, is going to be largely dictated by where the regulatory landscape takes us,” Gill said. “As exchanges with a global footprint start to think about how the world might evolve, you have to take into account a few things – what the impact of Dodd-Frank is, the finalization of the SEF rules, how MIFID and EMIR work themselves out and implications for infrastructure providers such as ourselves. The trick for us is to make the experience for our client base as seamless as we possibly can.”
Customers are also looking for more flexibility in exchange technology.
“Over the last 10 years, I would say the basic core technology of exchanges is generic and its being commoditized,” Gill said. “Speed is not an issue anymore. Where technology has expanded is within the construct of the asset classes that are being traded.”
Growth is part of every company’s strategy and CME is looking for growth in several areas. Gill said that it will continue to add new users to its core benchmark products and complementary services. But he added that the exchange is also focused on creating and building new products for its customers such as deliverable swap futures.
“As a result of deliverable swap clearing, we realized from a customer perspective that some customers’ needs were not being met,” he said. “Meeting those needs with deliverable swap futures which are simpler to execute, simpler to margin, simpler to understand, becomes an important point for us.”
Gill said that Asia will also continue to be an important market for CME to tap into. In the past several years, CME Group has bolstered its representative and sales office in Singapore and in last year or so, opened an office in Korea, reopened an office in Hong Kong and re-established an office in Tokyo.
“Asia, as a central consumption point, will become more important over time whether China opens up or not,” Gill said. “So the need to innovate has been expanded, both for the emerging trends that we see as well as the emerging global client base.”