Please outline the three most important macro trends that you believe will impact the market infrastructure industry in 2019.
We expect 2019, like 2018, will be a complex and interesting year. Geopolitical issues are at the top of the list of themes that we expect will be closely followed by exchanges and other institutions within the financial market infrastructure.
Geopolitical issues and associated risks are likely to keep the markets in a high-volatility environment. That’s not bad for Cboe Global Markets, since as an exchange operator we are in the business of hedging and offsetting risk.
Risks that I would highlight include Brexit, and the chance of a larger global economic slowdown. Brexit, for example, is an idiosyncratic risk -- no one knows how it will pan out, particularly over the longer term. Trade tensions and/or an economic slowdown in China, to cite the second example, is a broader risk.
Closer to U.S. interests, we are following trends in regulation. Prudent market regulation is good for the financial and commodity markets, but the problem is the potential for overreaching. Market data is part of that – we need to be careful that additional regulation of market data is not done in the name of “Main Street” without achieving any real savings for investors.
The WFE’s Sustainability Principles (launched in October 2018) and annual ESG survey show us that more and more exchanges and CCPs are taking a leadership role in promoting the sustainable finance agenda. How is your business taking a more sustainable approach to the financial system?
Cboe’s environmental social governance (ESG) programs are still in their infancy, but we are moving ahead and expect to ramp up efforts further in 2019.
Initiatives we’ve already begun are under the umbrella of environmental and social initiatives, including offering pre-tax public transportation and implementing business recycling, repurposing and waste management reduction programs.
Being good citizens also means that we strive to support our associates and better serve our industry and community through human capital development, volunteerism and policies.
So far we’ve enacted policies that foster wellness by providing gym facility subsidies, healthy snacks at our offices and active workspaces with standing desks. More importantly, we’ve conducted studies to promote gender and diversity equality and fair wages for all associates.
Cboe also provides a matching charitable contribution program and encourages our associates to volunteer in the community. In addition, we host volunteer events at our office locations, such as our Working in the Schools (WITS) partnership with Chicago’s John B. Drake Elementary School.
A member of the WITS board of directors, I am impressed with the way the program’s educators, volunteers and investors join forces to help students from 90 Chicago schools build their literacy skills and self-confidence.
Cboe also is a 20-year supporter of Econ Illinois, an affiliate of the Council for Economic Education, a provider of economic and financial literacy education programs for schools, individuals and families.
New this year is an employee recognition program, which honors individual employees who have exceptional records of volunteerism with public commendations at Cboe Town Hall meetings.
In your view, what’s the technology most likely to disrupt global capital markets in the next 12 months?
Artificial Intelligence and machine learning are disruptive and interesting technologies that bear watching.
At Cboe, both AI and machine learning are expected to be part of our commitment to enhanced data and analytics that we provide to customers, as well as used to make strategic decisions. It’s hard to tell AI’s full impact, but it’s likely to continue to inform and improve investment decisions by asset managers and trading decisions made by trading firms.
What are the key strategic initiatives you’re working on at the moment?
We are strongly focused on promoting the utility of our proprietary product set in this rapidly changing and uncertain market environment. Whether it’s VIX options for tail hedging, VIX futures for tactical trading, or any of our highly liquid index options products for shaping investment outcomes, Cboe offers tools this market environment demands.
You also will see us putting resources to work in creating new enhanced data products, analytical tools and indexes that support engagement with our proprietary products. We’re also pursuing initiatives that bring us closer to the end-user, allowing us to better deliver the benefits of our full range of traded products.
In terms of our broader market offerings across U.S. and European equities and FX, we expect to continue to invest in our underlying technology to help ensure we continue to provide the best user experience of any exchange group globally.
Last year Cboe completed the migration of Cboe Futures Exchange and C2 Options Exchange to Bats technology, implemented a new index platform and converted SPX to hybrid trading. This year we’re finishing the final stage of our tech migration, moving Cboe Options Exchange to Bats technology, which is scheduled for 7 October 2019.