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ICE’s Chris Edmonds Dishes on Risk, Messaging and Systemically Important Financial Institutions at Boca 2022

John Lothian

John Lothian

Executive Chairman and CEO

ICE’s Chris Edmonds took on an even bigger role at the exchange group in December when he was named chief development officer in addition to his role as head of clearing and risk for Intercontinental Exchange. He already had responsibility for six clearinghouses around the globe and was asked to add marketing and communications. But Edmonds made it sound like it all made sense; whether you are talking about the risk, marketing or communications, you should be getting a consistent message from the exchange. 

Edmonds spoke with John Lothian News at the FIA Boca 2022 conference about his work managing ICE’s presence around the globe.

The exchange group also just released a whole new marketing campaign for NYSE and ICE with its “Make the Connection,” which plays into that idea.

 “The communication side of it and the education piece of it that we do for our brand makes certain that what we’re doing on the clearing and risk side and what we’re doing on the exchange side provide a consistent message,” Edmonds said.

 We asked Edmonds about how ICE deals with different index providers. ICE benchmark products include Brent Crude Oil futures, Gilts, Euribor and SOFR. Other products include SONIA, which operates in the UK, and natural gas, electricity, and environmental markets. “There are literally thousands of benchmarks that we work with on a daily basis,” Edmonds said.

Customers are looking for risk management, and ICE looks to see what the best avenue might be to provide that, Edmonds said.  

ICE is a 24-hour a day market operating across the globe. “We’re proud of the fact that for over 100 years we’ve had intermediation in our model,” Edmonds said. “We have FCMs – Futures Commission Merchants – many people here [at the conference] represent that – and that is the essence of FIA at the end of the day.”

Edmonds  acknowledged the innovation in the markets related to intermediation but said he does not look at one model being right and the other model wrong. “For us, it’s about risk. And we worry a lot about non-intermediated models affecting the intermediated models,” Edmonds said.  

We asked him what impact inflation might have on the collateral held at the ICE clearinghouses. He said that it looks as if inflation is probably less transitory than some wish it to be. “The market will react to that as it does,” Edmonds said. “That’s the beauty of the free market system.”

A key issue for Edmonds is the safety of the funds, and the ultimate safe spot is at a central bank. However, in the U.S. there is no way for clearinghouses to apply to become designated as “systemically important.” The U.S. government decides independently to designate entities as “Systemically Important Financial Institutions.” This designation allows firms such as clearinghouses to hold their funds at the central bank rather than take the credit risk of an investment bank.

Edmonds said, “However, many clearinghouses have voluntarily upped their resiliency to the same levels called for by the systemically important clearinghouses.” Edmonds said he believes that operational issues arising from the time of day that settlements take place can be solved by the use of a central bank. 

“The easiest and safest place to put [these operational issues] is in a central bank. Other central banks around the world have provided that accommodation to all clearinghouses there, and we think the US needs to consider doing the same to protect client collateral,” he said.

 

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