52
How time flies – it seems like just yesterday that Paul-
André Jacot (he was Chairman of SFOA at that time) called
me and asked me to join him on a trip to Budapest to
meet Gergely Horvath who was about to help building up
a most interesting venture – an independent Association
much like ours but devoted to emerging markets which
was founded in 1997 in Buenos Aires. It must have been
in November 1998 that we made that trip on a cold
November day. We had a very interesting meeting followed
by a very lovely dinner in a beautiful traditional Hungarian
Restaurant. In that short time an interesting relationship
was built up that was to last for years to come.
We both shared the same idea – to be an independent
platform where not only ideas were discussed and
presented, but also networking was very important. We
were cognizant that the two organizations shared the
same goals and ideas but represented different segments
in the same markets and thus needed their own spaces
– but in the same building. The interchange between
established and emerging markets is important both for
the exchanges and their market places. It was like in a
family – let the kids profit from the experiences of the
parents. There is no need to make all the same mistakes
all over – there are plenty new challenges waiting out
there with lots of pitfalls. Thus the idea was borne to have
an Emerging Market Forum preceding our traditional
Bürgenstock conference, held every September on the
beautiful hill overlooking Lake Lucerne. The themes
discussed were of great importance to emerging
markets. Later they could join the “big boys” during their
conference. This allowed the participants not only to
participate in those discussions but also to participate in
all the great socials events and build the groundwork for
the network that is necessary for a successful business.
In September 1999 we held the first Emerging Market
Forum with two topics discussed: “Electronic vs open
outcry” and “Inter-Exchange Co-operation”. Those
discussions were very successful and the Emerging
Markets Forum became a staple of the conference
and attracted not only represent-tatives from the new
exchanges, but established exchanges quickly realized
that there was a lot in it for them as well.
The AFM conference always had a sweet spot in my heart,
although I attended my first only in 2004 in Budapest
(before it was Paul-André’s field). I always found it a
unique conference with surprisingly strong attendance
even in faraway places. Various young exchanges came
and went, but I am sure many profited from the many
interesting discussions.
I certainly hope that going forward AFM will continue
to grow and find proper support, which no doubt is
getting more difficult. Unfortunately a great market place
has been usurped by the financial markets. Historically
derivatives were part of the value chain of a commodity
and exchanges (and their clearing houses) had as main
theme to be a very strong part of that value chain.
Derivatives meant risk management. With a launch of the
financial products in the 1970s and the emancipation of
the financial sector slow change took place. Speculation
became the buzzword and pushed the risk managing
aspect in the background. Financial derivatives serve a
different need than commo¬dity derivatives – replication
and facility to trade is more important than price finding
and hedging. I realize the “big boys” will not agree with
me, but it is so!
Along came demutualization and made things worse. Of
course, under the old set-ups many exchange functioned
more like a country club – but in the interest of its
members. With demutualization all of a sudden the main
interest of an exchange was to generate profits for the
hungry shareholder and stakeholders are often forgotten.
Instead of centralizing liquidity (which is so important for
good prices) it is spread among various exchanges in the
name of competition (no one could explain that yet to me
– why is it better to have two or three exchanges quoting
the same product instead of concentrating all liquidity
in one??). Instead of facilitating clearing ever exchange
wants its own clearing house for profit optimization and
the share price is more important than the market place.
A nightmare for every broker! The big exchanges are
mostly run by lawyers, CFOs and compliance people (there
are some noteworthy exceptions which confirm the rule).
Gone are the days when you could line up a sponsoring
20
th
Anniversary of the
Association of Futures Markets
– by Paul Meier
