Financing the Future: WFE’s view on creating public policy to promote long-term investment


London, 18 September 2023 – The World Federation of Exchanges (WFE) has published a white paper today on the role ‘market-based finance’ plays in people’s futures. Inspired, in particular, by how share markets combat the effects of inflation, ‘Financing the Future’ examines the importance not just of long-term investment, but of having public policy that promotes it, rather than works against it.

The WFE notes that market-based finance and credit channels play distinct and complementary roles in supporting economic growth, acting as twin engines, and that regulatory and other policy could do more to respect that distinction, as present policy shows signs of confusing the two.

A key part of the paper’s purpose is to look at the nature of short-run risk, contrasting it with concerns about systemic stability that can arise in the credit world. We challenge the idea of applying prudential rules to markets that are only appropriate to credit and banking channels. In credit channels, risks can easily become systemic in nature and require measures such as capital rules. In market-based finance, this is the rare and manageable exception, and in all other cases the wrong type of rules are not just unnecessary but damaging.

False equivalence between the two very different forms of finance has already led to perverse outcomes, including the LDI crisis of 2022. It threatens the operation of the collective investment schemes through which most people have access to long-term returns.

Share markets have performed well over time and through recent turmoil, such as the pandemic. In 2020, these markets were resilient in both new issuance and the ability to continue to buy and sell stakes in companies as the economy continued to evolve.

Market-based finance includes bonds – which bring a further dimension to investor possibilities while avoiding some of the opacity of credit markets – and derivatives, which bring the flexibility to fine-tune risk profiles over horizons chosen by investors, whether individuals or collective asset managers. But shares remain the key to financing the future.

Nandini Sukumar, CEO at the WFE, said: “Both credit markets and share markets have a place in the financial system and are needed for different financing requirements. To enable share markets to deliver their potential in funding future growth opportunities (including net zero transition), the appropriate policy support is required.”

Richard Metcalfe, Head of Regulatory Affairs at the WFE, said: “The WFE believes that a clear and coherent risk-reward analysis should lie at the heart of public policy towards all forms of finance. It is wrong and counterproductive to take the risk-reward characteristics of one part of the financial system and apply it to another part, whose different profile makes the system safer and sounder.”

You can download the full report here.

For more information, please contact:

Cally Billimore +44 7391 204 007

Communications Manager [email protected]

About the World Federation of Exchanges (WFE):

Established in 1961, the WFE is the global industry association for exchanges and clearing houses. Headquartered in London, it represents over 250 market infrastructure providers, including standalone CCPs that are not part of exchange groups. Of our members, 34% are in Asia-Pacific, 45% in EMEA and 21% in the Americas. WFE’s 90 member CCPs and clearing services collectively ensure that risk takers post some $1.3 trillion (equivalent) of resources to back their positions, in the form of initial margin and default fund requirements. WFE exchanges, together with other exchanges feeding into our database, are home to over 50,000 listed companies, and the market capitalisation of these entities is over $100 trillion; around $140 trillion (EOB) in trading annually passes through WFE members (at end 2022).

The WFE is the definitive source for exchange-traded statistics and publishes over 350 market data indicators. Its free statistics database stretches back more than 40 years and provides information and insight into developments on global exchanges. The WFE works with standard-setters, policy makers, regulators and government organisations around the world to support and promote the development of fair, transparent, stable and efficient markets. The WFE shares regulatory authorities’ goals of ensuring the safety and soundness of the global financial system.

With extensive experience of developing and enforcing high standards of conduct, the WFE and its members support an orderly, secure, fair and transparent environment for investors; for companies that raise capital; and for all who deal with financial risk. We seek outcomes that maximise the common good, consumer confidence and economic growth. And we engage with policy makers and regulators in an open, collaborative way, reflecting the central, public role that exchanges and CCPs play in a globally integrated financial system.


Twitter: @TheWFE


For more information, please contact:

Cally Billimore
Manager, Communications
Email: [email protected]
Phone: +44 7391 204 007
Twitter: @TheWFE