Letter from WFE Chairman Ronald Arculli

Author Name: 
Ronald Arculli, WFE Chairman and Chairman of Hong Kong Exchanges and Clearing

Dear Colleagues,

I currently have the honour and privilege of serving as chairman of the World Federation of Exchanges (WFE), as from the Federation’s 50th General Assembly in October 2010. I also would like to take this opportunity to thank our former chairman, William J. Brodsky for the leadership he provided us for the last two hectic years. 

It is important to note that WFE member exchanges play major roles in the economies and societies where they operate. A few members now span several jurisdictions and time zones.  Capital raising and secondary-market pricing remain the key function for the securities and securities options segments; standardized contracts for financial and raw materials products on futures markets provide essential pricing indicators for the world’s economy. All function in a well supervised environment, providing transparency and certainty of execution. 

At the WFE, we have responded to the real need for regulated exchanges to be able to speak with one voice on issues of mutual concern, and be heard before policy makers decide how to adapt regulation for the world’s financial markets in the wake of the economic crisis triggered by the collapse of Lehman Brothers, and the credit markets before that. 

In 2010, the WFE board of directors set three priorities:

  • supporting reform in the regulation of over-the-counter (OTC) derivatives markets, which were a contributing factor in the recent financial crisis;
  • continuing to press for international cooperation and coordination among regulators and exchanges on intermarket mechanisms; and
  • examining the structure of fixed-income markets, in order to evaluate how the transposition of exchange expertise in equities pricing transparency, post-trade, risk management, and investor protection could help these markets recover from the drop in liquidity that they have experienced since the credit crisis now three years ago.   

We think we have made progress in all three areas and will continue working on these issues. 

In May 2010, we published analysis of a fixed-income survey conducted by the Johannesburg Stock Exchange on behalf of the Federation.  The survey found that, by and large, bond turnover volumes increased across exchanges in 2009.  It also found that the financial crisis appears to have had an impact on the trading volumes in fixed-income derivatives markets.  In addition, the survey found that, generally, exchanges appear keen to encourage OTC traders of bonds and derivatives to move their trading to exchanges. 

In June 2010, the Federation became an affiliate member of IOSCO.  The membership was sought for three reasons: to affirm our support of IOSCO’s Principle of Regulation; to salute the collaborative spirit we see IOSCO extending to exchanges and clearing houses; and to underscore our commitment to working with IOSCO to reform global capital markets and assure implementation of IOSCO Principles around the world. 

In November 2010, the Federation submitted a public comment letter to US Treasury Secretary Timothy Geithner urging the Treasury Department not to exempt OTC foreign exchange (FX) swaps and FX forwards from mandatory clearing and execution requirements that are imposed on other standardized derivatives products under the recently enacted Dodd-Frank Act. 

In addition, WFE commissioned a study on OTC derivatives to provide a detailed and unprecedented comparative analysis of OTC and exchange-traded derivative markets with a focus on market size, trade costs and the anticipated impacts of current regulatory reforms. The report, “The Global Risk Transfer Market: Developments in OTC and Exchange-Traded Derivatives,” is the work of the TABB Group , a financial markets research and advisory firm. The report is available on the WFE website. 

It is important, especially now, for the Federation to speak publicly regarding key issues of mutual interest amongst exchanges, and which concern evolving global financial markets.  We will continue contributing to the discussion of financial market regulations and reform, and further expand our cooperation with IOSCO.  It would be helpful to keep the Secretariat informed of any potential developments be it regulatory or otherwise in your market as early “warning” will allow us time to respond should the need arise. 

I look forward to working with all of you and I am sure I can count on your support as the Federation moves forward. 

With best wishes, 


Ronald Arculli

WFE Chairman

Chairman of Hong Kong Exchanges and Clearing