Abstract
Jeffrey Sprecher is the perfect speaker to end this program today. As you know, Jeff is the founder, chairman, and CEO of Intercontinental Exchange. At ICE, he has done an outstanding job, from increasing its range of products in the energy markets to covering various other asset classes, such as agricultural credit and climate classes. Jeff has established four clearing houses, and several over-the-counter markets. And he has done this with a unique and trademark style. He is a dynamic leader. He is forceful yet collaborative, with a clear vision of the future and the character to execute on that vision for exchanges. Please welcome, Jeff Sprecher.
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Notes
- 1.
Sprecher went to work at Western Power Group in 1983 after meeting William Prentice at Sprecher’s first job at Trane. Prentice was then developing power plants in the wake of industry deregulation.
- 2.
Significantly, deregulation in the electric industry was underway with enactment of the Energy Policy Act (1992).
- 3.
1996 is a significant other landmark year in deregulation in California. It was the year California began to ease controls on its energy sector in a move to stimulate more competition. The Electric Utility Industry Restructuring Act also became law.
- 4.
Enron Corporation was the famous US energy, commodities, and services company based in Houston, Texas, caught for accounting fraud and that went into bankruptcy on December 2, 2001.
- 5.
Today ICE owns, among other entities including futures and options entities, the NYSE and seven clearing houses. See https://www.intercontinentalexchange.com/about/overview
- 6.
History books recall the electricity blackouts among nearly 100,000 customers in California in the summer of 2000, and more blackouts in January 2001 when Governor Davis declared a state of emergency. San Diego Gas & Electric Company filed a complaint of manipulation of the markets during this “dark” chapter in the life of California.
- 7.
First in first out (FIFO) refers to the sequence of how trades are handled. In finance, it is an asset management and valuation method. The assets produced or purchased first are sold, used, or disposed of first.
- 8.
British thermal units.
- 9.
The International Swaps and Derivatives Association, a trade association of banks and swap dealers. An “ISDA” is also shorthand for a type of protocol/contract they establish in more liquid OTC markets. See http://www2.isda.org/functional-areas/protocol-management/about-isda-protocols/
- 10.
Amaranth Advisors LLC was an American multistrategy hedge fund established by Nicholas Maounis, and headquartered in Greenwich, Connecticut. During its peak, the firm had up to 9 billion dollars in assets under management before collapsing in September 2006, after losing more than 5 billion dollars on natural gas futures. The firm’s collapse was one of the largest known trading losses and hedge fund blow ups in history.
- 11.
See Amaranth Distorted Natural Gas Market, Senate Finds. Matthew Leising, Bloomberg, June 25, 2007. http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aGgLCqUS9XCI
- 12.
The 2008 Farm Bill and regulations implemented by the Commodity Futures Trading Commission designated certain contracts as significant price discovery contracts. See also http://www.wsj.com/articles/SB118273168618646598
- 13.
Refers to the US subprime mortgage crisis, triggered by declines in US home prices that occurred with the US recession of December 2007 to June 2009.
- 14.
Formally known as The Dodd-Frank Wall Street Reform and Consumer Protection Act, Dodd-Frank was passed in response to the Great Recession, and it impacts all federal financial regulatory agencies and almost every aspect of the US financial services industry.
- 15.
See Dodd Dodd-Frank: Title VII – Wall Street Transparency and Accountability, https://www.law.cornell.edu/wex/dodd-frank_title_VII, Legal Information Institute.
- 16.
See Energy Markets Rev Up Dodd-Frank Compliance, Markets Media, October 1, 2012. http://marketsmedia.com/energy-markets-rev-up-dodd-frank-compliance/
The regulated trading of swaps by Dodd-Frank (in particular Title VII) required that certain SWAPS be traded on so-called electronic Swap Execution Facilities, or SEFs. Derivatives exchange, ICE, in summer 2012 began plans to overhaul trading in trillions of dollars of energy contracts, starting in January 2013, and in the process taking important steps ahead of the new financial regulations.
Commentators have noted that Title VII of Dodd-Frank was drafted based on the widely held view that the unregulated, bilateral (OTC) derivatives market was in large part a cause of the 2008 financial crisis.
- 17.
In recent years, the SEC had moved toward more “principles-based” regulation, in which regulatory guidance offers broad compliance principles, entrusting the regulated firms with applying those principles to their own circumstances. Historically, the SEC’s rule-making has been “rules based,” its regulations aiming to prescribe specific and detailed rules for reporting, or other obligations.
- 18.
See Eris Exchange, http://www.erisfutures.com/
- 19.
The Group of Twenty, or G20, is the international forum for the governmental officials and central bank governors of 20 major economic powers.
- 20.
Comprehensive overview of the changes and major areas of concern contained in this presentation, OTC Derivatives and the Dodd-Frank Act, David Kaufman, David Lynn, March 9, 2011. Morrison Foerster http://media.mofo.com/files/Uploads/Images/110309-OTC-Derivatives-and-The%20Dodd-Frank-Act-Presentation.pdf
- 21.
See footnote 16.
- 22.
- 23.
ICE was not in the cash equities business at the time of this conference. However, as of writing in 2015, ICE is a significant player in the cash equities markets with its ownership of the New York Stock Exchange. Also, as of writing 2015, ICE will continue until 2017 to offer futures on the Russell 2000 and 1000 indices.
- 24.
Refers to the financial crisis of 2007 and 2008 and the subsequent “Crash” on September 16, 2008, with the failures of major financial institutions in the US, including, most famously, Lehman Brothers. This occurred as a result of a chain of events blamed by analysts on toxic subprime loans.
- 25.
Basel III is the worldwide and voluntary regulatory framework on bank capital, stress testing, and market liquidity risk and ratios.
- 26.
Timothy (Tim) Geithner served as the 75th United States Secretary of the Treasury, under President Barack Obama, from 2009 to 2013.
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Sprecher, J. (2017). History, Regulation, and the Evolution of a World-Class Exchange. In: Schwartz, R., Byrne, J., Stempel, E. (eds) Rapidly Changing Securities Markets. Zicklin School of Business Financial Markets Series. Springer, Cham. https://doi.org/10.1007/978-3-319-54588-2_8
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