London, Thursday 16 January 2020 – Dr Urs Rüegsegger, Chairman of the World Federation of Exchanges (“WFE”), the global industry group for exchanges and CCPs, yesterday delivered a speech at the WFE’s Annual Reception, which took place in London, following the WFE’s first Board meeting of the year.
“Ladies and Gentlemen,
We had a highly productive Board meeting today which enabled us to consider how we confront the challenges ahead and take advantage of opportunities to best position our industry for what is anticipated to be an interesting 12 months. Whether it is trade wars, equivalence and recognition issues or other forms of cross-border obstacles, geopolitical matters are disrupting the free flow of trade in an unhealthy manner. Unfortunately, this seems increasingly to be a fact of life, and regulators have recently signalled a tougher approach. But the WFE will continue to promote the best possible cross-border trading environment and international co-operation, because that is a tried and tested concept that has proven to have benefits for everyone. Meanwhile, we will have to be vigilant with regards to other, more immediate threats to well-functioning market infrastructure. I will come back to this in just a moment.
Market infrastructure is the lynchpin of the marketplace. It is the central hub which binds competing sides in a safe, efficient, fair and reliable market environment. Our industry must be as united as other sectors – if not more so – in defending this mandate. I fear that the strength of investment in lobbying made by some sectors of the financial services industry is an attempt to drown out the essential, practical and realistic approaches and behaviours that those in this room adopt and represent.
With all that I have said, you may be expecting a more assertive WFE over these next 12 months. I would not discourage that expectation.
For instance, it will be a further extension from our 2019 work. We started last year putting down a significant marker on the topic of market data and how it is priced; and finished the year by announcing a major work programme on the crucial importance of accurately identifying the incentives of various parties in and around central counterparty clearing.
However, we are not just saying this because we like the sound of our own voice. Unfortunately, as time has passed, the memories of the 2008 crisis fade. As a consequence, the narratives have shifted, and it has become necessary for us to ensure more balance and accuracy in the discourse around significant public-policy issues.
There is a theme running through these distorted pictures of the world. Increasingly some quarters take for granted the hard and very precise work done by exchanges and CCPs. Instead, they seek to appropriate for themselves the value created – and created uniquely – by exchanges and CCPs.
To be clear, the arguments we are seeking to correct, and face down, originate from the desire to preserve profit margins for certain parts of the industry rather than from the wish to build a strong and resilient economy.
The reality is that exchanges and CCPs generate strong benefits for society – what economists call ‘positive externalities’ – as well as generating returns for their owners through the efficient delivery of valuable services. (It is irrelevant whether those owners be shareholder, customer or state; fully a third of our membership base, including SIX, is not listed.)
Looking ahead, we will need to continually reemphasise and explain why exchanges and CCPs do what they do; why they were integral in the post-crisis response; why markets are able to function in a fair, effective and safe manner; and why high investments by market infrastructures are necessary to maintain that status.
We face competition in what we do and that competition is welcome, but it must be overseen by supervisory authorities who take a balanced approach.
In striving to achieve these aims, the WFE will have an open door to working hand-in-hand with our partners and their expert teams. And I hope that we can all collaborate for the wider benefit of the markets and the economies we serve, even when currently buffeted by geopolitics.
N.B. This is a transcript of the speech, so please check against delivery.