At CME Group’s 10th annual Global Financial Leadership Conference in Naples, Florida, on Tuesday, a panel discussion centered on risks and opportunities in global markets took some unexpected turns. Lorenzo Bini Smaghi, Chairman of Societe Generale, opened the event by predicting a market correction in the next 12-18 months and warning the audience that when the market shock finally arrives, it will be greater than many expect. Markets and individuals should not rely solely on central banks to address income inequality, according to Smaghi, who is also a member of the European Central Bank’s board of directors. “Monetary policy does not create wealth, it only tries to shift it,” he added.
Vinnie Viola, Chairman Emeritus of Virtu, turned his attention to a recurring theme at GFLC: cybersecurity and its implications for markets. Clearinghouses have been a “wonderful luxury” and invention for politicians, according to Viola, but they now pose a market risk owing to inherent cyber vulnerabilities. “Markets should be concerned about clearinghouse cyber vulnerabilities,” Viola added. Adam Schenck, managing director of Milliman Financial Risk Management, repeated Viola’s concerns about clearinghouses, calling them “too large to fail.”
Viola concluded the panel discussion by encouraging the audience to pay attention to megatrends, offering examples such as how the ability to produce oil is surpassing demand and how mobile phones are increasing people’s potential to be creative all around the world. Market systems, according to Viola, would struggle to keep up with the dramatic influence computer power and algorithms will have on markets.