THIS SEPTEMBER, with just a few quick taps on a smartphone, an individual purchased £500,000-worth of gold bullion. The transaction took place on an app called BullionVault and more than 46 pounds of gold were transferred from Zurich vaults to the smartphone user. Importantly, it didn’t require a broker, an exchange, a clearinghouse or any of the regulatory apparatus that typically exists for such transactions.
Could you have imagined this kind of transaction even ﬁve years ago? That’s the nature of innovation—it’s the driving force that makes what once seemed impossible into something commonplace. And advances in technology have put the power of innovation on overdrive. Last century, economist Joseph Schumpeter termed this force “creative destruction.” He described how free markets—through innovation and technology—have the power to create vast improvements for society but at the cost of displacing existing ways we do things…and sometimes painfully so.
Last century’s love affair with the automobile gave rise to the car industry but simultaneously reduced railroad workers from 2.1 million in 1910 to less than 200,000 today. Today we call this idea “disruptive technology,” but it is the same force that Schumpeter described some seventy-ﬁve years ago that allows our economy to be reinvented over and over again.
Our industry has long embraced the power of innovation. Finance in its basic form is about moving resources from those who have them to those who need them at an agreed upon price. In our industry, our forefathers needed ways to buy and sell their crops at a predictable price in all four seasons. This led to forward contracts, then futures, then options and then swaps—shaping and reshaping how businesses manage and price risk for the last century and a half.
This innovative spirit is one of the reasons I enjoy our industry so much, especially in the midst of the current era of transformation. Technology and automation are affecting all aspects of our business, from trading to back ofﬁce to clearing.
Our human instincts are to resist change and feel nostalgia for how things used to be. This summer marked the end of an era as CME closed most of its trading ﬂoors. In this magazine, we celebrate the history and individuals that helped to deﬁne the age of ﬂoor trading. And while it’s important to mark this occasion, progress has helped our markets to thrive, with more activity and volume than ever before. Our industry understands that in order to survive, we must continue to evolve and embrace this “creative destruction.”
At Expo this year, FIA is doing its part to support innovation by highlighting the transformative companies of tomorrow in our Innovators Pavilion. The Pavilion will feature promising startups with innovative ﬁntech solutions that have been chosen by a panel of industry experts. Our aim is to encourage education and connections between entrepreneurs, investors and the users that can beneﬁt from their services.
I’m looking forward to learning more about these innovators and to seeing how current trends in our industry will grow and develop in the coming years. Here are the trends I’ll be watching, but I’d also like to hear from you—what do you think is driving innovation in the ﬁnancial services sector in general and the cleared derivatives industry in particular? Tweet it to us at #FIAInnovation and we’ll feature your responses on www.MarketVoiceMag.org.