Financial Markets Experts Discuss Opportunities and Challenges at Annual Psaros Center Conference

The Georgetown Psaros Center for Financial Markets and Policy at the McDonough School of Business hosted its annual Financial Markets Quality Conference (FMQ) on November 15, 2023. Leading policymakers and industry leaders discussed key policy and regulatory issues impacting market structure, artificial intelligence (AI) and the financial sector, climate disclosure, digital assets, and crypto markets.

“Financial markets are going through a real transformation. There’s a focus on AI and crypto, digital assets, and market structure issues,” said Reena Aggarwal, Robert E. McDonough Professor of Finance and director of the Psaros Center. “During this growth period of private markets, data has become a huge asset. As a result, our policymakers and regulators are trying to understand how to regulate these evolving markets.”

The annual event began with a fireside chat with Rostin Behnam (C’00), chair of the U.S. Commodity Futures Trading Commission (CFTC), which was moderated by Emily Wilkins, Washington correspondent at CNBC. During the conversation, Behnam highlighted the main focuses of the agency, the possibility of another FTX fraud situation, and market dynamics.

“Another very interesting component of what we’ve been doing and dealing with at the CFTC has to do with external changes to market structure and new market registrants,” said Behnam. “Whether it is crypto, climate-related issues, or new products coming to the forefront that are interesting and innovative, but in some respects, can conflict with existing law and risk management.”

David Schwimmer, CEO of the London Stock Exchange Group, delivered a keynote speech at the event where he discussed AI, the digital economy, and private markets. Schwimmer said that growth in private markets has grown out of more than two decades of unusually low interest rates. 

“Cheap capital has pushed the total assets under management of private markets to a gargantuan $11 trillion,” said Schwimmer. “And as the interest rate cycle shifts and capital becomes more expensive, there is a real risk of trouble in this opaque, illiquid, and occasionally highly leveraged part of the markets.”

The conference also featured panel discussions on market structure, digital assets, and climate disclosure. Some topics addressed in the panel discussions included the latest proposals for market structure reforms by the U.S. Securities and Exchange Commission (SEC), the importance of comprehensive climate disclosure strategies, and the latest ups and downs of cryptocurrency legislation and regulation.

The first panel of the conference was moderated by Stacey Cunningham, board member of the New York Stock Exchange. Panel members included Sapna Patel, head of Americas market structure and liquidity strategy at Morgan Stanley; Jeffrey Davis, senior vice president and senior deputy general counsel at Nasdaq; and Jim Angel, associate professor of finance at Georgetown University’s McDonough School of Business. The discussion focused on the future of market structure reforms, maintaining investor trust and confidence in the markets, and AI. 

Since 2020, the markets and their investor base have shifted. As AI increasingly played a role in the growth of the retail investment sector, we have “this new generation that was investing in the markets that had different tools at their disposal, and that made it attractive for them to not only get into the markets but stay in the markets,” said Patel. “And that’s good for our marketplace. That’s good for our country to a certain degree, so we should be encouraging that.”

The conference also included a regulatory and policy roundtable, moderated by Michael Piwowar (MBA’94), executive director of The Milken Institute Center for Financial Markets. In this session, commissioners from the SEC and CFTC engaged in discussions around topics such as AI and regulation, digital assets, and climate-related matters. 

“AI has been in our financial markets for a long time in different areas. It’s generative AI that has caused a lot of conversation,” said Christy Goldsmith Romero, a commissioner at the CFTC. “As financial regulators, we shouldn’t fear technology. We must increase our capacity to understand what responsible AI is. We need to promote dialogue to understand how to use it to minimize harm.”

Following the regulatory and policy roundtable, attendees heard from three Members of Congress for a policy view on financial issues. Moderated by David Leonhardt, senior writer at The New York Times, the panel featured Congressman Bryan Steil (B’03), Congressman Jim Himes, and Congressman Mike Lawler, who shared insights on the U.S. economy, financial markets, and the current political climate.

This year’s FMQ Conference featured other notable speakers, including Senators Mark Warner and Cynthia Lummis; David LaValle (C’99), senior managing director and global head of ETFs at Grayscale Investments; Daniel Gorfine, founder of Gattaca Horizons LLC; Jason Monk, director of capital markets and digital assets product strategy at Invesco; and Hope Jarkowski, general counsel at New York Stock Exchange, among many others. 

The Georgetown Psaros Center for Financial Markets and Policy is dedicated to fostering timely discussions related to global financial markets and delivering innovative thought leadership on critical policy and regulatory issues.

“We use our expertise to help both policymakers and market participants,” said Aggarwal. “We provide objective, research-driven, and trusted expertise. We act as an intellectual honest broker driven by research. We serve as facilitators and educators for policymakers and the broader community.”

Watch the fireside chats and panel discussions from the 2023 FMQ Conference on the Psaros Center’s YouTube channel.