Midnight in the Rue Jules Verne

Martin Wheatley's rambling, if interesting speech the other day provided much food for thought. The UK Financial Conduct Authority (FCA) chief executive was speaking at a PR-organized conference in London last week, delivering a keynote that veered ─ wildly at times ─ between retail concerns and high technology issues in wholesale capital markets. High-frequency trading (HFT) was covered alongside mobile payments, cybersecurity with technology incubators in Level 39 and Silicon Roundabout, that cringe-inducing British answer to the Bay Area's tech wellspring.

Indeed, the golden points here were actually in the first half and summary. Wheatley highlighted the difficult role of the regulator when it comes to technology ─ that is, enabling innovation and not standing in the path of advancement, while also trying to resist what he referred to as a "dystopian" future where the growth of tech created a Wild West in which algorithms, AIs and Hugo Weaving run amok. The FCA has come down with a strong case of the Chiba City Blues, apparently.

The second key part of Wheatley's speech, and perhaps a critical way of seeing inside the regulator's grapefruit, is the way in which he framed the future of financial services. It would, he said, be shaped in the future by the engineers and comp-sci students of today, those who have their elbows in the guts of the machinery, and not necessarily the ones who are knee-deep in M&A books at three in the morning on a Saturday. The comments about HFT are relatively throwaway (tighter spreads!), as are those on cyber security, short of saying that everyone should be doing it, and that the FCA has a pretty decent tech base for monitoring markets now.

Regulatory Clouds
Continuing this dystopian theme, the sky above Mansion House was appropriately the color of television, tuned to a dead channel, as George Osborne MP, the UK chancellor, arrived for his annual speech to the City. As expected, he announced a foreign-exchange (FX) market review, although this would be supported by a panel of experts from industry, along with an expansion of criminal penalties for rate fixing. I'm not a lawyer, so I can't say why this wasn't already covered under fraud, but that's just me.

To be honest, while some can argue that mechanisms and processes are favorable to regulation, the fact that the FX market has been largely unregulated is anomalous in the modern landscape, particularly given its size and importance. With the move to electronic trading comes a technology-based way to effect oversight, and even if it weren't for the various scandals that have plagued it over the past few years, this was likely coming anyway.

As a final note, I'll be in Singapore next week for our Asia-Pacific Trading Architecture Summit, and the Buy-Side Technology Asian Summit, where I'll be moderating various panels and chairing both events. If you'll be at the events, see you there, or if you'd like to meet up and discuss issues facing financial firms in the region, send me an e-mail at james.rundle@incisivemedia.com.