FIA Chicago 2024 & Boca50 — Recap & Key Takeaways
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Ali Curi: Markets ConversatION is an ION podcast where we discuss topics of importance to capital market, participants with product owners, subject matter experts, and industry leaders. 

Don Byron: The buzz at our different conferences that we've had, particularly at Boca, centers on the potential impact on market structure that could challenge some of the traditional ways that it works. And we do things tradify as of course the term there, challenging the tradify and the potential to revolutionize various segments of our market structure, such as 24/7 trading, clearing and settlement. And on that settlement side, of course is tokenization. Two things which we'll be talking about here. 

Ali Curi: Hi everyone, and welcome to Markets ConversatION, I'm Ali Curi. On today's episode, Francesco Margini from ION Markets and our special guest, Don Byron from the FIA. They will share insights on the recently held FIA conferences in Chicago and FIA Boca.

We'll get a quick overview of the expos, as well as dive into the event highlights, key themes and topics, notable speakers, and highlight the main insights and trends discussed. There's a lot to go over, so let's get started. Francesco Margini, welcome to the podcast. 

Francesco Margini: Oh, hi. How are you? 

Ali Curi: I'm doing well, and joining us today is our guest from the FIA, Don Byron.

Good to see you, Don. 

Don Byron: Hi. Thank you. Glad to be here. 

We're happy you're here. Now, Francesco, tell us briefly a little bit about your background and your role at ION. 

Francesco Margini: I run product management for ION Cleared Derivatives division. I've been with ION for 17 years and I got about 30 years experience in electronic trading across fixed income and listed derivatives. Prior to ION, I worked for banks and exchanges, namely LIFFE and MTS Markets, the Fixed Income Exchange now part of Euronext, where I was Deputy CEO. 

Ali Curi: Don, I understand the FIA is the host and producer of the industry event we're gonna be discussing today, and I wanna hear a little bit more about that. But first, tell us about your role there. 

Don Byron: Yeah, thank you. I have been with FIA for a little over five years now. My roles are, I am the global head of industry operations and execution for FIA and then for our DMIST affiliate, our standards entity, I am the executive director there. I've been in the industry for a little over 30 years. Started as a runner at the Chicago Board of Trade and worked my way up through the markets there, through electronic trading.

I was involved in the very early days of electronic trading, and then since then, I've held various roles throughout the front office, middle office and back office technology and business side of things for clearing member firms, for technology vendors, et cetera. So my rounded out experience there has been very helpful in this role here at the FIA.

Ali Curi: Great, thank you for that. Now please share with us a brief summary about some of the things we're gonna be discussing. The industry events themselves, the FIA Futures and Options Expo in Chicago, and more recently the FIA Boca 50. What were the main objectives and themes addressed during the conference?

Don Byron: The two different conferences our Chicago Expo's been going on for over 40 years. It's both a trade show and a conference where we discuss industry challenges focused mostly on the operation, technology, and trading side. Obviously, the Chicago community has a long history there in futures trading with the Board of Trade and CME and others.

Our Boca Conference this year was the 50th anniversary of our Boca Conference. Historically, it's been a very high-level, senior level, C-level, attended event, and this year across both events, the themes that emerged was, the three big themes are; industry growth and increased volumes and impact of innovation on market structure, regulatory piece, et cetera.

Then more, this is more on the anniversary on the Boca side of things, is the impact, potential impact of deregulation on geopolitical events, et cetera. And I know we'll cover some of these things a little bit later on. 

Ali Curi: Great, we look forward to it. You moderated a panel in one of the conferences, I believe. Tell us a little bit about that and we'll circle back with more questions. 

Don Byron: I moderated a panel on 24/7 trading, which has become a very hot topic across the board. And what's interesting is in this particular case, it was mostly buy-side on this round table. And the four themes that emerge from there is, the complexities of data and how to manage that in a 24/7 environment where settlement is speeding up. The interoperability of existing technologies and processes, the call to standardize or collaborate on best practices where possible. And then, the accounting for the impact on operational processes and teams across the globe, speeding of settlement and the innovation and the modernization will have on the industry as a whole.

Ali Curi: Great. Well, Let's start diving into some of those details. Francesco, let's start with you, because despite the uncertainty in global markets right now, there was definitely a sense of optimism in Boca regarding the state of clear derivatives and future prospects. How do you explain this? 

Francesco Margini: Futures industry has been experiencing significant volume growth since COVID in 2020. The expectation is that this positive trend will continue also during '25 and for years to come. The reasons for the high volatility, the high volumes, is due to the persistent inflation, the uncertainty about the pace at which central banks would now reduce interest rates. Especially after the announcements made by the new US administration regarding the tariffs and the potential impact on prices and global trade.

So volatility is expected to persist due to the unpredictability of future growth and interest rate trends. So the common view is that interest rates would not return to near zero levels for many years to come. All these two things combined so that persistently high volumes and high interest rates have resulted in increased profitability for the sell side execution and the clean business, so all the large banks, brokers and FCMs across the globe. And these internals created very evident market trends. So from one side, there is an increased appetite from existing FCMs to invest in the business. So driving a new wave of acquisitions and adopting more modern technology to expand their product offering and scale up their business in line with the ongoing volume growth.

But they're even going beyond clear derivatives because some very large non-bank brokers and FCMs are now entering a space that was traditionally occupied by the banks, so FX, fixed income and equities. 

And also on the other side, there is a kind of, the direction it travel[s] is the other way. So we see new sell side market participants entering the market. So after years of reduction in number of FCMs and intermediaries, we can now see like other actors, like securities firms across all the regions, especially Asia, were expanding the business to offer execution and clearing services in cleared derivatives. And this is also evidenced by the increasing number of application for exchange membership by new firms and their need to adopt appropriate technology to support their execution and clearing capabilities.

At ION we have a quite a privileged view on the market trends across the sales side because we have a very large customer base and we have an extensive offering across different asset classes in capital markets. So we can clearly detect ongoing trends based on what customers are planning to do with us and new prospect customers contacting us to inquire about solutions that can help them to expand their offerings.

On the buy side, and when I'm talking about buy side, they're really talking about broad spectrum. We can see increased adoption of derivatives products across different asset classes, so increasing use of energy, metal, derivatives. We see crypto obviously, and we see a massive increase participation on the retail side, especially in Asia with India's, probably you're aware, kind of an exemplary case.

So there's definitely ongoing explosion of retail-oriented products, which is also facilitated by the removal of entry barriers, thanks to significant advances in from a technology perspective. So there's a very pervasive offering of mobile trading apps by tens of brokers globally, which make it very easy for, anybody really, to trade derivatives. Which is very different from a situation about, let's say, 10 years ago.

There's also much quicker onboarding KYC processes, which are now thanks to technology are now highly automated. So it's much easier to have a kind of a speedy onboarding process and be able to enable or to trade derivatives on these trading platforms. There's definitely a lot of interest around equity options, including very new popular products such as weekly, daily expired options, which give retail customers the ability to gain significant exposure with a relatively small investment and deposit of margin.

And of course, in case of daily options, there's zero margin. And then we can see massive success of micro futures, which are effectively a copy/cut of existing contracts with much smaller notional size. So this trend is continuing 2025. With new launches across the US for example, just to mention CME and launching February.

Also micro agricultural products, after a set of micro futures that were launched in the previous months and previous years. But also in Europe is trying to catch up. And Euro next made an announcement about, for example, the launch of micro bond futures. And again the idea is to attract interest from a retail customer base.

Final consideration, I think on this aspect is must be based on the volume spike in crypto cash and derivatives following the US presidential election. And the stats published by exchanges not only indicate the new record volumes, but there's a very large increase in the retail client activity and proportion to the overall volumes.

This demonstrated by the increase of micro Bitcoin derivatives versus notion of Bitcoin futures. This trend is expected to continue. There have been recent announcement by multiple exchanges about new products being launched in the cryptocurrency space, so CME, Coinbase, SGX, and CBOE, the whole will announce plans.

That's what we heard during in Boca. Plans to launch perpetual futures contracts on crypto. So again, trends; cryptocurrencies, retail participation, retail kind of tailored products. Generally more extensive adoption derivatives across the board is definitely something that is evidenced the fact that after more than a decade of consolidation, the sell side when interest rates were zero and volatility was very low and very low market growth, the clear derivative indices booming again across all the dimensions; exchanges, product offerings, broader market participation across sales and buy side.

Most importantly, record market volumes. Now, clearly, let's see if this trend continues, but the expectations that the situation is positive, a context for the cleared derivatives industry will continue definitely for quite a few years. 

Ali Curi: Yes, definitely. A lot of things that we're gonna have to keep an eye on. Don, share with us some of your takeaways.

Don Byron: One comment following up on Francesco's comments on the volume and increased volume. One interesting thing that I recently heard is, as we all know, in March, 2020, the spike in high volume and high volatility due to the onset of the of COVID, set many exchanges set records for volumes over that time period.

And interestingly enough, recently heard a stat that said that those days would be only barely in the top 50 now, in terms of record volumes. Which is a really good indication of just how much volumes have increased over these last few years, in particular within the industry. The buzz that our different conferences that we've had, particularly at Boca, centers on the potential impact on market structure that could challenge some of the traditional ways that it works and we do things. Tradify as of course, the term there, challenging the tradify, and the potential to revolutionize various segments of our market structure, such as 24/7 trading, clearing and settlement. And on that settlement side, of course, is tokenization, two things which we'll be talking about here. And then really the other piece of it is that while these are great, their fundamental questions still need to be addressed. And from policymakers, market participants alike, and no doubt that these ideas are innovative and many of them are going to happen at some point, it is important to debate the trade-offs and risks that come with those. And then lastly, in my view, what I've been sharing recently is that I think the current acceleration of innovation and technology reminds me of when I started my career, and specifically I pinpoint 1995 when from the trading side of things in our industry, most all of the trading itself during the day was still floor-based. There was electronic trading, but it was mostly overnight. 

And then from a personal perspective, yeah, I think I'd just gotten my first mobile phone, which was a big brick phone, and I think I'd just gotten dial up internet in my house at the time. And you fast forward only eight years later in 2003 and all of a sudden a majority of the trading at that time was either already electronic trading, already is already heading in that direction, and all of the innovation that's come along with that. 

And then you think about from a personal perspective, I had a, I think a Nokia flip phone at that point, I think most people had phones at that point. And also dial up internet was not only did most people have at least dial up internet, I actually looked up the stats at that point. Twenty-five percent of those actually had high-speed internet at the time. If you think about it, eight years is not a long time, and I feel like we're about to head into that wave and it'll be really interesting and fascinating to see where we are eight years from now. 

Ali Curi: Great. Thank you Don. We'll circle back with you in just a little bit to expand on some of these other takeaways.

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Ali Curi: Francesco, the increasing adoption of cryptocurrency products was another topic that was covered at the Boca Conference. Now regarding the move towards 24/7 for derivatives, where does cryptocurrencies come into play? They're already leading the way, so what is your take on the latest developments on this area?

Francesco Margini: Yeah, there's definitely a lot of talk, not only in Boca, we talking to our customers and already inquiring about our capabilities to extend supports to 24/7, and our view is that this movie is inevitable. So there is already a clear demand for this in the crypto derivative space, but it's only a matter of time before you extend to other products, other derivatives products.

There is important though to highlight the fact that there's very significant technical and operational challenges that for the industry that should be not underestimated in this trend towards a 24/7. First is that the technology platform utilizing the industry have very diverse architecture design, and some of which are quite dated and may not be capable of operating under a "no lights out" approach, let alone 24/7.

So some of them therefore, will require complete overhaul and therefore significant investment. Also, very importantly, there is a very significant difference between extending the trading clearing operational window to cover also the weekend, and an operational model where there is zero downtime, so meaning true 24/7 all year round.

This is important because applications and hosting infrastructure, they require some downtime as part of the operational cycle when switching trading dates, for example. And also for upgrades of all kinds, including hardware upgrades, application security patches, new operating system, software version, new application version, et cetera, et cetera.

Every single weekend during the year, there are changes applied across the technology stack, hosting, trading, and cleaning applications. This is not an significant challenge to overcome. We don't expect to see zero downtime across the industry for quite some time due to the need to have it invest in infrastructure and technology by exchanges, a market participant that provides us to achieve this. Especially underpinning our solutions, there are literally tens and tens of applications and providers they we rely upon across different areas. Therefore, the entire ecosystem we need to align around the new target model. If we extend this to the whole industry, we'll be talking about hundreds of different providers and solutions.

So such a large investment can only take place on the back [of] significant demands, and most importantly would take time. So generally, the expectation is that we expect the traditional 24 times five operational window to be extended in near term to include the weekend. However, there will be some downtime and this would effectively allow to leverage existing technology without undertaking massive technology changes in investment.

There already been announcements around the extension of trading clearing by some trading venues and exchanges with regards to crypto derivatives reflecting the ability for market participant to trade the underlying cash 24/7. But the weekend clear window will only allow to perform basic clearing operations such as trade booking, give ins and give ups and perform risk management.

But trades will only be processed on demand, the clearing cycle, because this is the date where the trades will be booked against. There is definitely the elephant in the room, which is the ability to move cash and collateral during weekends, which is currently not possible because payment systems are not open.

And collateral, doesn't move top day, let alone during weekends. Therefore, there is a need to process the weekend business on Mondays. Now, there's some significant implication from a risk management perspective around this, "What is the industry gonna do?" I think on overall, collateralize in order to compensate for the potential risk during the weekend. Are there more drastic potential moves like auto liquidation in case of significant market moves during the weekend?

Anyways, this is something that is still in the flux and under discussion. However, it's very clear that in order to manage risk effectively, market participant exchanges will need to be able to execute margin calls in case of significant market shifts. And this is the big question, how to achieve that.

Ali Curi: Francesco, thank you for that. Don, what are your thoughts? What are your takeaways from the 24 trading landscape? I think Francesco covered a lot, but there's more. Yes? 

Don Byron: Yeah, he did cover a lot. That was a very good summary of what we've been... discussions we've been seeing, at the industry level as well.

And one additional thing I'll add is some of the further discussions have been around what are some fundamental things that really need to be thought about and addressed as part of going through 24/7. I think is important note too, that Francesco made, that there's gonna be a gradual approach to this.

Most likely we need to figure out some of the things that need to be looked at. And some of those things are intelligent automation, interoperability, the elimination of manual processes to approve efficiency and what type of industry collaboration is going to be needed to help facilitate that.

And that's really highlighting around the interoperability and the management of all the data that's gonna need to go back and forth between all the different participants to support something like 24/7 trading. And in particular, one is of course the collateralization piece and speeding up of settlement is going to require innovation in that space as Francesco pointed out.

Ali Curi: Don, there are options being considered around the use of blockchain technology and tokenization to move cash and collateral in real time, 24/7 trading basically, what we've been chatting about, but what are the latest news coming from FIA Boca Raton conference around this topic? 

Don Byron: I can give some color on that. From what I've seen over the last year this conversation has grown considerably and there's much more awareness of the potential benefits of what could happen. The use of tokenization in collateral management. A couple of the highlights are the ability to reduce friction and cost in moving collateral to meet margin requirements.

Tokenization could reduce the settlement time from, in some cases, days to two minutes. Depending on what we're talking about. As mentioned earlier, it really is an essential piece in moving forward to, in a 24/7, settled-in-trading market, by effectively allowing the clearing and settlement piece to keep up with trading for many of the reasons mentioned before, risk management being, of course, key to all of that.

One of the interesting pieces as well, is that... is the education piece. There are folks who really understand how technol... or the tokenization piece works and how blockchain has been applied in Bitcoin. But there are other folks on the spectrum who may not understand much at all about it. So a big part of this, I think upcoming, that's come out of these recent discussions in conferences, is that there is gonna be an education. "What is tokenization? The process for converting rights to an asset into a digital token on a blockchain." What does that actually mean? 

What real world assets are being, are RWAs are already being, used in a blockchain perspective, and I always, now when I hear RWA in the context of tokenization discussions, it's still hard for me to not think of risk weighted assets, but I'll get there at some point. And the evolution of technology is from the old paper, writing, writing things down and filing cabinet to large databases and, is the next stepping stone then ledger using distributed ledger technology.

What we've seen is an inflection point in the consideration of tokenization through various FIA surveys, industry surveys. There are several pilot programs globally that have tested these applications and the application of tokenization. We know there's support from global regulators and in here in the US specifically. The CFTC's GMAC made a recommendation around tokenization. We know there's momentum there.

And then lastly, just to cover a couple things of elaborate on some of the detailed benefits of tokenization and some of the challenges that will need to be considered in some of the areas. So from the benefits perspective, tokenization, as I mentioned, is faster. With it always being on, you've the ability to send margin and collateral would be effectively 24/7. When it comes to things like collateral substitution, there are some things there that you can do better and faster with tokenization that you maybe can't do today manually. And a big one is that, data shared on shared ledgers does potentially reduce the amount of errors and the need for manual reconciliation, which in a 24/7 real, almost real time environment, manual reconciliations that really don't fit in that equation.

Challenges ahead, I mentioned one of them already being education. A second one is around risk. A big one is the risk. Is the risk fully understood in terms of how it's being managed with through tokenization process? Are there legal considerations that need to be had and discussions that need to be had?

And then on the technology side, is it interoperable not only within the blockchain itself. So there's so many different change in ecosystems within the blockchain world. Also, how do they interoperate with our current infrastructure and our current front to back ecosystem and technology stacks within all of our members firms.

So there'll be a lot of discussions that'll need to be had around that as well. This will be an ongoing topic for quite a while, it seems, at least from the indication that we've got from industry discussions. 

Ali Curi: Oh yes, there definitely will be many other conversations around these topics. We're fortunate that the FIA is leading with education and addressing the challenges that are ahead. We'll have to invite you back for an update at some point. 

Don Byron: Thank you. I'll be looking forward to that. 

Ali Curi: Francesco, let's go back to you. What's your overall take on FIA Boca 50. And what are some of your closing thoughts?

Francesco Margini: The closing thought is that we are experiencing very interesting times. The current market conditions have created a massive trading activity and interest from all type of participants. So the traditional institution investor, the new retail wave, trading firms, producers, hedges, all have a strong interest also in trading new instruments in asset classes.

Also, we should not forget how certain firms have established themselves as kind of providers of liquidity. So we have large firms acting as market makers and providing continuous liquidity in especially in options in these type of products. And again, and they've made a very big difference in terms of promoting trading activity.

Now, all these interest and potential has also spurred the race among existing and new exchanges to launch new products that can attract significant volumes and we see very numerous announcements and there's an increasing number of exchanges who are reaching out to us to make sure that all the new product launches are supported day one on our solutions.

So again, this is very evidence of the dynamic times that we are experiencing. We shouldn't forget also, the fact that technology, as mentioned by Don before, is now playing a significant role in this context. Technology not only on the side of making sure that it can support growth and cloud computing, the ability to scale up performance, volumes, and ease of access, web and mobile. But also new technology that can really accelerate innovation and evolution of a market structure.

And this is where we see finally after years of talking, we're trying to find use cases for new technologies like blockchain and AI. But now there's definitely at last some real use cases and practical examples on how blockchain can bring the market to the next level of evolution. And we really see this as new technologies as enablers of innovation and accelerators of innovation.

Again, there's gonna be lots of changes and very interesting changes in the years to come in the cleared derivatives industry, and we're really excited to be here now, to be part of it. 

Ali Curi: I'm glad that you mentioned the opportunity and growth. It's not all about the challenges, right? There's also room for opportunity and some momentum forward.

Don, what are your closing thoughts and your overall take on the conference, and can you give us an early scoop on any hot topics the FIA is considering for next year's event?

Don Byron: My closing thoughts from the conference itself and from recent discussions really is, and Francesco hit it on the head, is that innovation and from our perspective, from an FIA perspective, from DMIST or Standards Body perspective, is how can we help facilitate, and the discussions and the education piece of it. In both our conferences and our events, but just in our work as well. And I think through the fact that some of the things we're still trying to solve today from an FIA perspective, from a DMIST perspective, are creating standards and best practices around innovation that occurred 20, 30 years ago. Where maybe at the time there just was not a way to, or a mechanism to really collaborate.

One of the pieces of feedback we get from all different participants in our membership and in outside of our membership. Is there a way that the industry can collaborate together on some of these things to create best practices or standards or interoperability where possible, to foster the innovation and promote growth?

And that's one of our key objectives and of across FIA and all of our affiliates. So we're excited about the opportunity. There's definitely not gonna be a dull moment coming up here in the next few years as not as if there ever is in our industry. There's always something fun going on, including at Boca 50.

One takeaway I learned is that. It's really good to be a seventies and eighties rock band and still be around and being able to perform, because we had Cheap Trick perform at our 50th Boca Conference. And it was it was a great experience. It was really cool. Walt Lukken, our President & CEO really enjoyed it in particular, and that was as my takeaways on that.

But no, in all seriousness for future, our future conferences discussion, I think they're all gonna revolve around that from all the different areas that I mentioned earlier. 

Ali Curi: Gentlemen, I thank you for your insights and your visit, Don Byron, Francesco Margini, thank you both for joining me and I hope you'll visit us again. We're gonna need an update. 

Francesco Margini: Thank you. 

Don Byron: Thank you, appreciate the opportunity to be on the podcast. 

Ali Curi: Thank you. And that's our episode for today. You can follow ION Markets on X and on LinkedIn. Thank you for joining us.