The Georgetown Center for Financial Markets and Policy and the Financial Times brought together industry experts, academic scholars, and policymakers for the Financial Markets Quality Conference on September 17 at Georgetown University’s McDonough School of Business.
Commissioner of the U.S. Securities and Exchange Commission Michael Piwowar (MBA ’94), opened the conference with a keynote address to a standing-room-only crowd in Fisher Colloquium. He discussed the structure of financial regulation in the United States, highlighting that the debate in most countries is between a “single peak” regulator in which a single entity regulates banks and markets and a “twin peaks” approach with separate regulators for banking and markets. The United States has a “rolling hills” model with multiple agencies regulating similar functions.
Stacy Cunningham from the New York Stock Exchange, Chris Concannon from BATS, Andy Brooks from T. Rowe Price, Daniel Ciment from JP Morgan, and Sapna Patel from Morgan Stanley discussed the recent volatility in August during the panel “Market Stability in the Digital Age,” moderated by Gina Chon of the Financial Times. The panelists had a heated discussion over whether a slower human-moderated opening is better than a faster automated market opening. The panelists agreed that Exchange Traded Funds will continue to become a larger part of the market, and market structure needs to be modified to address the unique aspects of trading these instruments.
In a panel discussion on the “Empirical Evidence on Market Quality,” Krista Schwarz from the Wharton School of Business presented evidence on declining liquidity in the treasury market. Larry Harris of the University of Southern California presented data on the bond market, sharing that 43 percent of trades traded through the best bid or offer in the market, indicating very poor execution quality for investors. Additionally, Charles Jones from Princeton University highlighted problems with pilot experiments in financial markets. The panel, moderated by James Angel, associate professor of finance at Georgetown McDonough, also included Greg Berman, formerly of the SEC, and Erik Sirri of Babson College.
During the luncheon Q&A, Professor Reena Aggarwal, director of the center, asked Nasdaq President Adena Friedman several questions about innovations occurring in the global markets. For example, Nasdaq has started a private market, and is planning on using blockchain technology to record and transfer shares in non-public companies.
The day-long conference ended with a discussion of disruptive innovations, moderated by Guy Adami (B ’86), host of CNBC’s “Fast Money.” Bob Gasser (F ’86), former CEO of ITG; Frank Hatheway of Nasdaq; Kashif Riaz of Blackrock; Cynthia Meyn of PIMCO; and Cromwell Coulson, CEO of OTC Markets shared their insights. Technological developments are expected to be even more disruptive in asset classes other than equities, and in the post-trade arena. Bonds are 20 years behind equities in terms of market structure evolution.
The center, in partnership with the Financial Times, will host the Georgetown Finance Summit 2015 on Thursday, October 22, at the Westin Grand Central in New York City. The summit will focus on how alternatives can provide innovative solutions for challenges faced by the global community in areas such as healthcare, energy, infrastructure, technology, and disruptive innovation. Experts will explore how industry leaders, capital providers, and policy makers can nurture and encourage innovation and growth. To learn more about the event and to register, visit: bit.ly/global_innovation.