The Global Voice in a Global Conversation

A Short History of the WFE

WFE original logo
FIBV General Assembly in NYSE Board Room, New York, 1973
Where it all began...
Draper’s Hall, Throgmorton Avenue, Birthplace of the WFE - on an ‘unfoggy’ autumn day in London, October 1961

Foundation

The World Federation of Exchanges officially first saw the light of day in London on October 12-13 1961.

The Conference of European Stock Exchanges was the original name of the organisation, whose foundation followed hot on the heels of the European Common Market set up by the Treaty of Rome in 1957 during the golden age of optimism about the value of international cooperation.

In the preamble to the statutes setting up the organisation, the founding members made clear what they were about:

“Whereas, it was considered beneficial to have a more formal organization of organized stock exchanges, the Amsterdam Stock Exchange, the Brussels Stock Exchange, the London Stock Exchange, the Luxembourg Stock Exchange, the Madrid Stock Exchange, the Milan Stock Exchange, the Paris Stock Exchange, the Vienna Stock Exchange and the Association of Swiss Stock Exchanges have decided to create an International Federation of Stock Exchanges.”

While the start of European political integration in the late 1950s provided the trigger for the foundation of the WFE, the organisation quickly expanded beyond its original European member exchanges.

Global Expansion and Name Change

To reflect this, the original title of the organisation was soon changed to a more global one, La Federation Internationale des Bourses de Valeurs (FIBV) and in 2001 at the Annual Congress in Madrid that year it took on what remains its name today, the World Federation of Exchanges.

Article 2 of the founding statutes set out what the founding fathers thought should be the main purpose of the WFE:

“The purpose of the Federation is to contribute to the development, support and promotion of organised and regulated securities and derivatives markets, in order to meet the needs of the world’s capital markets in the best interests of their users.”

Member exchanges defined common aims, produced statistics and studies and provided a forum for international exchange leaders to get together to discuss the common commercial and regulatory issues confronting them all and to share new perspectives on them.

Statistics remain a core competence of WFE and its market data are regarded as the definitive measure of exchange-traded equity, derivative and bond market volumes as well as of market capitalisation. The current team continues this tradition today.

WFE and Global Regulators

Best practice was from the start core to the WFE. Indeed, gaining admission required – and does to this day – the satisfaction of criteria demonstrating the quality of the applicant exchange’s market operations and its regulatory structure.

While the establishment of the WFE pre-dated that of many of today’s global financial policy bodies, the WFE publicly endorsed the establishment of IOSCO – the global grouping of securities market regulators – and its Principles of Regulation and the OECD’s Principles of Corporate Governance. Similarly, the WFE has supported the vital and ongoing work on International Financial Reporting and Audit Standards.

From the start, the WFE ethos has been based on the idea that sound global regulatory standards must underpin the spread of a more globalised financial system and markets.

The WFE has in the course of its five and a half decades of existence helped its members weather some of the most far-reaching transformations in the history of public exchanges. These dramatic changes included the deregulation of fixed commissions and demutualisation as exchanges responded to competitive pressures from the global investment banks and the need to provide better services to their customers.

Other changes which revolutionised the industry included the launch and exponential growth of financial futures in the 1970s, the development of screen-based trading in the 1980s as many exchanges moved to end pit-trading and open-outcry, leaving many traditional trading floors severely depleted or outright abandoned.

In the early 1990s many former communist countries in Asia and Eastern Europe also set up their own national exchanges – some for the first time, seeing exchanges as a key element in the building of a market economy or even an essential attribute for any new nation. Many of these are now fully fledged members of the WFE.

Governance History

From its founding in 1961 to 1975, the FIBV was a small organization largely run by its President. He oversaw the work of just two to three employees based at the FIBV secretariat in Paris.

This changed in 1975 when James Needham of the New York Stock Exchange began the WFE’s first Advisory Committee meetings and launched the organizational structure which in rough outline persists to this day.

This first meeting was held in January 1976 and was composed chiefly of past presidents of the Federation, the chairman of the Working Committee, and other exchange officials and veterans. The main purpose of the committee was review of the WFE budget and determining topics for the annual meeting and general assembly.By the late 1980s, the Advisory Committee was meeting three times per year, a rhythm largely recognizable still today in the WFE’s Board of Directors; and was setting a substantial agenda of subjects of common interest to the exchange industry.

Membership continued to grow. Short workshops and working groups or subcommittees had become a regular feature of the WFE and the then Secretary General Jeanne Abbey was representing the exchange industry before international organizations.

Diversity and Representation

When John J. Phelan of the NYSE became President of FIBV in 1991, the Committee was renamed the Executive Committee and also took on members who had not been past presidents for the first time. More important still, the geographical representation of the WFE spread beyond the European origins of the organization.

In the mid-1990s this global spread of the organization started a debate over how to broaden the representation on the Executive Committee, in order to better reflect this growing global diversity.

The upshot of these discussions was an Executive Committee composed of 14 members split across three time zones, as well as the abolition of any permanent members. The offices of president, vice president, and chairman of the Working Committee were to rotate on a two-year basis across the three broad member time zones.In 2001, when FIBV became the World Federation of Exchanges, the name Executive Committee was dropped in favor of ‘Board of Directors’ in order to reflect the strict sense of oversight - of membership development, budgets, Secretariat functioning, and the business agenda for meetings, special events, statistics and studies - that the organization sought from its leaders.In October 2002, the General Assembly approved a proposal to increase the number of directors to 15. This also involved an even split of the members across the three major time zones. The changes also included a measure enabling the president to cast the deciding vote during board meetings.

Current Challenges and Focus

In the past decade, the continuing rapid pace of market transformation and regulatory change have posed challenges and opportunities for the WFE’s members. They include the rise of high-frequency trading, the growth of OTC markets and dark pools, fragmentation of price discovery and liquidity, innovation in financial technology and the associated emergence of new trading venues which pose a competitive challenge for publicly regulated exchanges.

The WFE moved to London at the start of 2014. A key motivation for the decision was the need to be closer to major customers and stakeholders.

The financial crisis of 2007-08 and the collapse of Lehman Brothers demonstrated the resilience and robustness of many exchanges, which remained vital sources of market liquidity and funding for the real economy as the inter-bank market and bank lending to businesses collapsed. Along with the central banks, exchanges remain a vital surviving source of funding for the world economy.

The G20 put publicly regulated exchanges at the center of their plans to reform the global financial system and to make capital markets more transparent, stable and certain. Policymakers insisted that trades of some OTC instruments would henceforth have to be centrally cleared.

WFE has seen its membership grow significantly in recent years. From its founding 10 exchanges and exchange associations in 1961, the WFE had 52 members by 2010. After Euronext NV, one of the founding organizations of the WFE, became independent and returned to individual membership and the Bahrain Bourse, Nigeria Stock Exchange and BATS Global Markets were admitted in 2014, the official tally stands at 64.