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IDX 2021 Panel: EU and U.S. Regulated Exchanges Tackle Crypto, ESG Challenges

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Suzanne Cosgrove

Suzanne Cosgrove

Editor

The FIA’s IDX panel of executives from U.S. and EU derivatives exchanges on Tuesday quickly turned to a discussion of meeting the challenges of several of the new products currently demanded by investors and traders.

In response to questions from moderator and FIA CEO and President Walt Lukken, who asked the panelists to address how their exchanges were approaching cryptocurrencies, Zubin Ramdarshan, head of equity and index product design for Eurex, noted that “by and large, most bitcoin are traded on unregulated exchanges … (and) connectivity to a regulated environment is a healthy development.”

Stéphane Boujnah, CEO and chairman of the managing board, Euronext N.V., said offering crypto products was an “operation risk decision.” Euronext is striving to offer its customers “indirect exposure” to these assets, he said.

Speaking for CME Group, Derek Sammann, a senior managing director for the exchange, recounted his exchange’s launch of bitcoin futures in 2017. “What we saw was unregulated markets on the cash side .. and what the market needs is well-regulated markets,” he said.

Lukken also asked if the exchange executives were surprised by the surge in Robinhood-type retail trading.

While there has been an increase in retail market participation in Europe, perhaps a 50% increase, “it’s not as significant as in the U.S.,” said Bjørn Sibbern, Nasdaq president, European Markets.

“I would like to see retail attracted to long-term” investment, rather than to a 100% gain over a weekend, said Ramdarshan. But he added that the ETF options segment has seen a significant increase in products, and that it’s liquid and available.  

Moving to the topic of sustainability, Sammann said, “We are all being rated by these rating agencies. Sustainability affects all levels of our markets, both on the corporate side and the trading side.”

Ramdarshan noted that Eurex is a leading European provider of ESG-related products, adding that the ESG-X futures and options “are now highly liquid.”  But he added, the “alphabet soup on what constitutes ESG … that is the challenge.”

“Investors come to us wanting yield, capital gains and liquidity,” said Boujnah. But they also now want to address transparency of governance and other ESG issues.

Two of the current derivatives market’s most challenging and transformational factors are topics we never learned about in school: zero interest rates and ESG, Boujnah added.

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