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Notes from the WFE General Assembly: Four Mega Trends for Market Infrastructure Operators


By Magnus Haglind, Phil Mackintosh, & Paul McKeown

Recently, we spent a terrific few days with our fellow exchange industry leaders in sunny Malta at the World Federation of Exchanges’ General Assembly, hosted by the Malta Stock Exchange.

The Annual Meeting is an invitation-only event, where leaders of global exchanges, regulatory authorities, the buy-side, industry experts from academia and the media congregate to tackle major issues surrounding the exchange industry. The conference tends to range from a briefing on “what’s trending” and “what’s next” to broader (policy) discussions around the relevancy of public markets to household financial security and economic prosperity.

While a lot was covered, here are a few takeaways on some of the recurring trends that were top of mind on-stage and on the sidelines.

1. Macro Environment and Readying for the Next Wave of Change

In light of the global pandemic over the past two years, market operators have been focusing inward, giving priority to resiliency, employee well-being and keeping their markets running with a dispersed workforce. And while the markets are certainly not immune from the knock-on effects of major geopolitical or economic events, they’re now positioning themselves to look forward and be prepared for the next wave(s) that shape the capital markets. A few hot topics shaping these waves include:

  • Liquidity and fragmentation: while fragmentation is increasing, search costs (for liquidity) are not included in regulators’ search for competition. Less and less on-exchange liquidity means less setting prices, less matching directly with other investors. That, in turn, could hurt the role of centralized exchanges in minimizing investors trading costs.

    Overwhelmingly regulators appear to agree that public markets, with companies doing public accounting statements, and prices for assets in continuous markets, and real investors able to trade with each other at the best prices, are all “good” – but policy tends to be focused on competition, which leads to segmentation and often significant regulatory differences that create uneven playing fields.
  • ESG: There has been a rapid rise of and focus on carbon markets and ESG scoring and indexes. Assets are growing, but acceptance by regulators globally is not, and data standards remain complicated and inefficient.
  • Retail investors: We are seeing a significant increase in retail activity globally. This is particularly driven by direct access via apps, which has changed how retail investors trade and how exchanges need to interact with retail liquidity.

2. The Definition of Digital is Changing

Last year, when we conducted a market infrastructure operator CIO-focused study in partnership with Celent, agility was the number one focus when planning for a future technology state. Following agility, was product creation, customer centricity and regulation/resiliency rounding out the top four.

From our conversations last week, agility remains front and center, with a combination of the other three topics making regular appearances.

As the market landscape continues to rapidly evolve – whether it's servicing new clients or the institutionalization of digital assets – many market infrastructure operators are also evolving their business and technology infrastructure to prepare for new investor demands and/or a post-COVID capital markets landscape.

For example, with the rapid rise of ESG, carbon emissions pricing is a particular area that regulators globally are starting to focus attention on. As such, many regulators have already started to mandate that carbon credits be centrally traded on an exchange. Managing this type of endeavor often requires a unique approach and a comprehensive digital market infrastructure (and complementing services).

This is just one example, but given the global focus on ESG, the conversations we’re having with other market operators indicate that many of them are proactively positioning themselves—especially building or acquiring new digital infrastructure— to manage this growing area of business that has a significant impact on financial markets as well as the environment.

3. The Opportunities and Challenges of Institutionalizing Crypto

Not surprisingly, all things crypto were top of mind both on and off the official agenda. As crypto becomes further institutionalized, WFE members are finding potential use cases, including areas such as illiquid asset ownership and custody. Crypto trading is also a legitimate challenge given that blockchain has high latency and—typically— central limit order books (CLOBs) and trading are usually separated from the blockchain.

Also in focus:

  • Market structure: The nature of crypto markets poses unique challenges. For example, the lack of a central limit order book – or the challenge of creating one – in a decentralized marketplace can hinder the ability to provide the best prices to customers. Several distributed marketplaces leverage market quotes, filling customer orders based on published quotes from elsewhere.

    With the rise of crypto, 24/7 markets are becoming the new normal. Most crypto markets already are 24/7, yet many coins are very illiquid and expensive to trade. Despite this, many market operators predict a consolidation of coins and, more specifically, the increasing importance of stable coins to both payment processing and also crypto trading (as the other side of trades). In the future, we may eventually have “Fed coins” with the need for increased efficiency on commercial transactions.
  • Regulation and security: Defining crypto has proved to be challenging, and defining jurisdiction is even harder. Crypto operates globally and 24/7. Firms have more flexibility to change jurisdictions and can do so as regulations increase.

    We are seeing a lot of new approaches to regulation, creating a “patchwork” across countries and even within different regulatory organizations (e.g., Treasury/CFTC/SEC in U.S.). For example, spot crypto trading is often a different regulator than derivatives. Yet, the bulk of crypto trading remains derivatives, which might be easier to regulate via banking sectors.

    While the regulatory approach to crypto varies by region, there is a joint focus on standardizing how to protect investors in a world which has no statements and no trade confirmations (as it is all “on the blockchain”). There remains a clear and urgent need for “TradFi-grade” investor protection to safeguard against fraud, losses, hacks and other nefarious behavior.

4. Markets are Getting Serious about Cloud Application and Adoption

Much of the General Assembly discussion surrounding the cloud focused on where it is used (i.e., increasingly closer to actual matching engines) and how it is used (i.e., “rent vs. buy” hardware, plug-n-play apps). While crypto and other non-financial marketplaces are often cloud-native, the majority of public markets are on their own personal journey when adopting the cloud across their operations, with an end game squarely focused on mission-critical trading. And for some, the cloud remains a “nice to have.”

This view could start changing as cloud service providers (CSPs) continue to expand their footprint globally, giving market operators, particularly those in certain frontier markets, an opportunity to scale up and down and to add services based on client on demand. Leveraging the cloud provides a practical, off-the-shelf and structured scalable infrastructure as these exchanges evolve their business models.

As we kick-off the final quarter of 2022 and welcome 2023, having this opportunity to huddle as a global community of market operators, regulators and ecosystem partners makes our industry stronger, better connected and primed for the opportunities and challenges that will shape the capital markets of tomorrow.

Magnus Haglind


Magnus Haglind is Senior Vice President and Head of Products, Marketplace Technology within the Market Platforms division of Nasdaq and is responsible for roadmap and product portfolio management of a broad suite of mission critical market infrastructure solutions provided to capital markets.

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Phil Mackintosh


Phil Mackintosh is Chief Economist and a Senior Vice President at Nasdaq. His team is responsible for a variety of projects and initiatives in the U.S. and Europe to improve market structure, encourage capital formation and enhance trading efficiency. 

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