Road Trip to IDX: ICE's Edmonds Weighs In On Treasury Clearing, Tokenization

Our road trip to the International Derivatives Expo continues with this conversation with Chris Edmonds, President of Fixed Income and Data Services at Intercontinental Exchange. Chris highlights how markets have handled recent volatility, citing the impact of the Israel-Iran conflict and US tariff policies. Edmonds noted that the industry has managed volatility well, with processing reaching 1.3 trillion messages in a single session. Chris also looks back on the lessons learned from  FTX's clearing proposal and shares an update on the progress of ICE's Treasury clearing solution. Finally, Chris expresses what an honor it has been to serve as one of the co-heads of the Mission (Im)Possible Kilt Challenge that is rasising funds to benefit Futures for Kids.

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Transcript

(Note: This transcript was created using AI. It has not been edited verbatim.)

Sean McMahon  0:07  
Hello everyone, and welcome back to the Modern Money SmartPod. I'm your host, Sean McMahon, and right now it's day two of the International derivatives Expo. We're coming to you from London, where we're gathering insights from some of the leading minds in financial markets. And joining me right now is Chris Edmonds, the president of fixed income and data services at ICE. Chris, how you doing today? 

Chris Edmonds  0:30  
Very well. Thanks for having me, Sean. 

Sean McMahon  0:32  
It's good to be here. Good to chat with you again. I believe we connected in Boca a couple years ago, indeed. And so I want to ask you, how's IDX treating you so far? What's the, what's your, what's your read on this fine gathering?

Chris Edmonds  0:44  
You know, it's interesting. You see a desire of people to get back and and get in. I was having a conversation with someone downstairs, actually a competitor and a former client in his previous life, and he's like, had to tell my staff, you know, get out and go meet with people at the end of that like, you know, what are you doing sitting behind zoom or whatever, and they've been great tools for all of us to work with, but I don't think anything replaces the human connection, and that interaction is important for all of us, so that's why I'm here. Been on a been on a bit of a travel swing for the last couple of weeks. But you know, coming here and seeing some new faces and familiar faces is certainly important for our business.

Sean McMahon  1:22  
So you've been on the road, what kind of locales you've been visiting?

Chris Edmonds  1:26  
So in the last two weeks, I've been in Hong Kong, Abu Dhabi, here in London, got a couple more stops to go before I go back to my own bed and hopefully not eating out for a few days.

Sean McMahon  1:35  
Well, for someone who just said advised his staff to get out and meet people, I guess you're walking the walk, not just talking to talk.

Chris Edmonds  1:42  
Without question, without question. Firm believer that people do business with people, no matter what the technology is at the end of the day that empowers us to do it more efficiently.

Sean McMahon  1:51  
I gotcha. So the chatter at IDX, are you hearing anything that's kind of caught your attention?

Chris Edmonds  1:57  
I think right now, market volatility, you know, everyone wants to understand how it is impacted, you know, FMI, financial market, infrastructure providers like ourselves. What does that look like? Obviously, with with the conflict in Israel and Iran that erupted last weekend, you know, people set some massive records. That's on the back of what we saw with the reaction to the US tariff policy coming into place. So it's, it's been a very sustained year of volatility along the way. I think some are asking the question, is that the new normal is that, is that going to take a break? Regulatory pieces are still a bit uncertain as people react to, you know, other countries making moves. So all in all, great for the futures industry, great for the folks here at this conference. We all should be taking advantage of this opportunity and making sure that we're creating value and servicing the clients in an appropriate manner, and making sure that they're educated on why and how we're doing that there are some changes, whether it be margins and things that nature that just have to react to the market events at a macro level. That doesn't mean there aren't questions that they have concerns with, and we should be here to make sure they have all the information they need. 

Sean McMahon  3:09  
Yeah, I want to dig in for a second on market volatility. You know, you just mentioned the conflict between Iran and Israel, and obviously, earlier this year, we had market volatility related to tariffs and, you know, other influences. So you know, how have markets held up in your estimation? And you know, would you say it's an A, B, and then what's it looking like behind the scenes?

Chris Edmonds  3:31  
Look, I think we've performed incredibly well as an industry. We haven't seen the level of required margin get higher than what it was during COVID. So that was, you know, the market reaction during that period of volatility was significant. People ask some questions. I do think it's interesting going into the quad, which tomorrow, what that will be, and then you have the Russell rebalance at the end of the month. All of those things will go into that. But I was part of a conversation last night, with the amount of preparation going in that not to repeat some of the more uncomfortable positions in times previous, we've learned from it. And I'm proud of the industry for, you know, taking those lessons in and making sure that we're better prepared. Is it perfect? Nothing's ever perfect, but we can't let the enemy of perfect be good here. And I think, all in all, with what we've done, the amount of processing, my colleague Lynn Martin at the New York Stock Exchange, you know, we're processing in high peak on the tariff reaction is 1.3 trillion messages in a single session. Wow. I mean, so the amount of technology that you have to have the amount of investment in technology in order to provide that very positive client experience doesn't go away. The velocity increases. We talk about things like panel this morning, Don Wilson was talking about the need to move collateral more efficiency, more efficiently and at a greater velocity. All. Things very true around that, and as the market continues to evolve and grow, you can't do that without making the investments in technology. And as I've said to a few around the world in the last couple of weeks, as an industry, we're only as good as the worst operator, and so we do have an obligation to hold everyone accountable, because we don't need a black eye as an industry, and I think people are taking that responsibility incredibly serious.

Sean McMahon  5:27  
Yeah and you mentioned kind of the importance of just making sure everything gets done and avoiding those black eyes. You know, I talked to FIA president and CEO Walt luken last week, and he was touting that, that amid all this volume, you know, there's been fewer failed trades than at other points of peak volatility.

Chris Edmonds  5:42  
So, yeah, that's, that's the moment of pride I mentioned a little bit earlier. I mean, we should all take that not only as a sense of pride that we've, we've gotten through that piece of it, but also understanding that we continue to evolve and learn what it takes to service this industry and for allow the macro community to manage risk. I mean, that's the business we're in at the end of the end of the

Sean McMahon  6:01  
day. Yeah, it really highlights, you know, the importance of clearing, right, just making sure everything is operationally sound. And I want to use that segue to, you know, kind of go back to a conversation I had earlier this year with one of your colleagues, Paul Hamill, about Treasury clearing. And, you know, ICE is really making making progress on that. Where are you in the process of launching that, and do you still expect to have that ready by the end of the year? Because I believe that's what Paul was kind of saying, that that was your plan, no matter what regulatory wise ISIS plan was be ready to go at the end of this year. 

Chris Edmonds  6:31  
Yeah, so maybe I'll clarify a big statement. We can't do it without regulatory approval. But yeah, I didn't mean that. So let's start mandate. 

Sean McMahon  6:39  
Yeah, I didn't mean that. I mean, like, I think the SEC is pushing the mandate back to the end of 2026

Chris Edmonds  6:45  
Yeah, yeah, it's going to be ahead of that. Yeah. So our idea about this is, you know, we had, we had the original date that came with the change in the rules ICE in our history, we tend to do pretty well when there's some catalytic change in the in the industry that requires reaction. If I look at the landscape today, then those who have publicly announced they're going to compete in the space, no current approved offering is compliant with the rule. So regardless, the industry has to adapt to this changing place, whether it's with an incumbent or other entrants like ourselves coming in to take advantage of this and very, very kind of what we did in the CDS market post the great financial crisis, and that's why we chose to enter this space at this time. So there's an opportunity to earn, create value and earn the trust that we have, you know, enjoyed for the last 15 plus years. On that side, 25 years as ICE as a whole. So one of the ways we do it, when it's sort of in our Eco, our DNA at ICE, is we don't really like to talk about what we're going to do. We like to say, Here it is. And so if I think about a client who's got to make a decision as to what service they're going to to use in the New World Order, post rule coming in, giving them the ability, well before they are mandated to be there, to not just look at it on paper and talk about the theoretical piece of it, but to actually use it, do I think everyone's going to immediately, overnight, move in that direction? No, but it's real and it's tangible, and that is a different experience than waiting to the last minute and saying we're here on mandate day and that that's really why we're so committed to delivering that technology solution, again, pending regulatory approval, but by the SEC and making that available and letting the customer decide they'll give us some feedback on that, we'll put that back in and and continue to evolve in that like we have every other solution in the 25 year history of ice. But you got to start somewhere. We believe we have it right. We believe we have a bit of innovation here that is different than what others are offering. The market will ultimately determine that, but we're committed to doing everything we can to earn that business and getting there as fast as we can with a credible solution. Is what Paul is is driving, and Stan Ivanov runs ICE Clear Credit, and that's what they're focused on each and every day. And I do whatever I can help them along that.

Sean McMahon  9:25  
I love what you're saying about, you know, getting that out there early for clients. So not only can they use it, trial it, but also give you feedback, because then you're in a world where it can be tested and optimized before it even has to be out there, ahead of the mandate. 

Chris Edmonds  9:38  
We've said this many times in public forums, especially Jeff Sprecher, our founder and chair and CEO, we don't have an R D department. Our R and D department is our clients. And so, you know, you talk about getting out and meeting with people, I've been on the road, meeting with clients at the end of the day. I mean, it's it's great. I get to see my teammates, and they're wonderful. But it's about what the client. Client saying, and our job is to come back, take that and see where we can create a solution that's not yet provided in a way that folks want to see it, that determines value, and earn some money for creating that value. But it is 100% about what our clients need. It's not about what we do in an ivory tower and come back, come down and pontificate, thou shalt now use this. That's that's not our DNA. And I think some of that comes back from the fact that, you know, our DNA is really more of a technology company. We happen to work in the exchange space. We love financial services. We've been here. But everything we do, if you looked at the process inside of ice, of how that goes forward, it looks a lot more like a technology company than it does a normal exchange, safe. That's why we create so much of our own technology out of it. 

Sean McMahon  10:44  
Yeah, I understand. So, you know, kind of sticking with the, you know, the topic of clearing a lot of folks in the market might not remember this, or might not even know this, but, you know, ICE was one of the early voices speaking, you know, about FTX is clearing proposals. Yeah, you know, we're a few years on from that, what have you and the team learned from that period, from that proposal,

Chris Edmonds  11:06  
There's certainly a desire for some to have a paradigm shift, and how we've worked at the I think it was under the banner of decentralized finance at that time, when it first came out, and how it could all work, you know, better. And, you know, let's just start from ground zero, and Ground Zero is it's just going to work this way. It's going to flow. We're going to have the entire ecosystem. I think the thing that was missed at that moment in time, and what we tried to call out, and I spent a lot of time in Washington and round tables having this very public debate with those who brought that to that application forward is there's a reason why we have risk management standards, and yes, there may be more efficient ways to do that, but it can't be at the expense of what we know are tried and true risk management standards. Our job as a financial market infrastructure provider is to do exactly what our rule books say 100% of the time. And if you look at what ultimately led to that failure, there was not a following of the rule book. I mean, it's pretty simple right?

Sean McMahon  12:14  
In the end, I'm not sure there was an awareness of a rule, Chris. 

Chris Edmonds  12:16  
I'll let others opine on that. You're better situated that for me, but I'm maybe I should say proposed rule book, you know, because we sit in round tables and it's going to happen this way or whatever. But that's, that's not what was executed at the end of the day. And if I look at stable coins, we're doing a lot of work. You know, circle had a fabulous IPO with the New York stock exchange a few days back and continued to perform incredibly well. But there's even risk management standards. If we think about it from a standpoint, there could be other stable coin issuers along the way that maybe only want to use the 10 year treasury, just hypothetically as what they backed the stable coin with. Okay, where's the risk management standard? If everyone is selling 10 year treasuries to convert to cash at the same time, there's a knock on market effect. And so, you know, we had some advocacy work going into both the stable and genius acts to make sure that that there wasn't a delta between the collateral we hold in the clearing houses and the collateral likely backing stable coins, to make sure that those there's some rationality when it comes to that, to avoid that type of market reaction. All of that is our responsibility to make sure that, yes, we can innovate, but, you know, not at the point of just blowing everything up and saying, Oh, well, the new the new way is better because it's new. That's not necessarily always the case.

Sean McMahon  13:28  
So you mentioned, you know, stable coins and the genius act, and also some advocacy you've been doing. Are those proposals kind of progressing in a way that you and the team at ICE, like, Are there any concerns? 

Chris Edmonds  13:40  
Look, I think it's, I think the ICE opinion is, it's great that, you know, we're seeing that innovation. It's great that we have some rules. You know, we may not like all the rules. Other people may not like other parts of the rules. I'm not opining on the rules, the fact we have rules, and we know now where the goal posts are, then we'll do what we normally do and but, you know, I think it was last night the Senate passed 68 to 30 their act. It'll go into conference now. We'll let the House passed in April. We'll see where it comes out at that but, you know, look, the movement of collateral more frequently at greater velocity. No one's going to say that's a bad idea. The question is, what are we moving and what's behind it? And I think that will be a bit of an education piece. But, I mean, you know, sands the Federal Reserve saying that fed wire is going to be open 24 hours a day, seven days a week. I mean, you need something in order to facilitate, you know, increased velocity and frequency along the way. 

Sean McMahon  14:36  
So yeah, and you mentioned various forms of collateral, you know what we're moving and so there's been talk of specifically tokenized collateral being introduced into the clearing process, you know, in a bigger way. So what's your thinking on that?

Chris Edmonds  14:51  
I believe, theoretically, I understand the use case, but the history of. Of we'll call it the digital space. And, you know, very large aims have become incredible companies along the way. In the beginning, they had some, they had some tough issues on the customer service perspective, right? Your grandmother goes down and has a bank account, and they look at their statement, and they come back and they're like, $200 is missing. You want to pick up the phone and call someone, where's my 200 bucks? I don't know that that level of customer support is solved in a tokenized piece. Our CTO asked me the question many times like, Okay, why do we need to put that? Why do we need to create a token, put it on a chain? What's the difference between that and a database? And the answer is, there's not really a difference, except for the accessibility points of accessibility along the way. And so we look at that from a very critical perspective of, do we need to do that? Some customers will say, yes, a lot of that, and I run the data business for ice, right? A lot of that is what is the underlying reference data that's driving how that tokenization process works. In order to determine where value is moving between the counterparties and transaction, if we have a difference in the interpretation of that data, someone needs to step in and say, This is the golden standard that we're gonna operate. And you know, you win and I lose. In that case, for whatever given mark to market it would be. I don't know that all of that is fully appreciated. I think there are some interesting proofs of concept that have come along of some very standardized products there. But if you go, I'll take a shot at giving you an example, if I look back at what caused the great financial crisis and the lack of standardization when it came to the appraisal process of real estate, and one of the things have been talked about a lot is tokenizing real estate, right? We've made a massive investment in the US real estate market on the software side over the last five years or so. So we have great data that comes to that. But if the data that went in, if the point of origination, there was an issue, we know from what we learned in 6789, that when it gets through the system and it's finally discovered, it's somewhere else down the line, there's a lot of stuff that's happened in between there that's caused a lot of pain. 

Sean McMahon  17:24  
Yeah, it's the old, you know, garbage in, garbage out,

Chris Edmonds  17:27  
It is. So it's only going to be as good as the data. That's good for me. I'm in the data business, but, you know, understanding how that data is being used, I think, will ultimately determine the value that tokenized effort along the way on something that is highly liquid. You know, everyone understands. I can look at it, you know, I'll use our 10 year treasury again. 10 year treasury. I know that you got trace reporting all those, you know, belts and suspenders around that that is a different function than someone's, you know, three bedroom, two bath house on a private lake in nowhere, Ohio, becoming a piece of collateral because it's part of an MBS along the way. 

Sean McMahon  18:05  
Just not enough, you know, uniformity, I guess, yes, yeah. And with real estate, obviously, sometimes the values in the eye of the beholder 100%

Chris Edmonds  18:15  
I mean, look at Mar a Lago. You know, judge said it was worth one thing, and think it's worth a little bit more. 

Sean McMahon  18:20  
Now, I more now. Well, listen, I appreciate all this conversation about, you know, some of these intricacies of the markets, but before we get out of here, tonight's gonna be a big night for you. It is. IDX has their annual gala dinner to benefit futures for kids and you, along with Alicia Crichton from Goldman Sachs are, you know, I guess co heads of the mission. Possible kilt challenge? Yes, are we going to be seeing you in a kilt tonight, Chris?

Chris Edmonds  18:47  
You will see me in a kilt. And for those who ever need a kilt, there's actually a store in Atlanta called the Atlanta kilt store that I had to find since I moved to Atlanta. And all folks from Scotland, there only Scottish products and a great education as part of the process to get there. I just hope I remember everything about how to put the thing on tonight before I go up on that stage and I get it right.

Sean McMahon  19:08  
I think everybody wants you to remember how to put it. 

Chris Edmonds  19:11  
My wife's going to be in the audience. I know she's going to want to make sure that I get that right. We duct tape around it somewhere. But let me just take a quick moment. You know, this industry, the history of the industry itself, has always been one of incredible generosity, if you look back at how the floors operated, you know, for hundreds of years in the community they built, and how they supported the community, wider community around them. To me, I see this as an extension of that long history of giving back and letting the future generation understand what we've created as an industry and how we want to use that to empower them so then ultimately they take care of us. Right? It's it becomes a very virtuous circle. So happy to be a part of it. I was a bit surprised when Walt and Alicia called and said, we're going to do this thing together. I. Don't know how it was me, but I'm going to ask that question after the event tonight, but it's been a great experience. I think we'll we'll set a new record tonight, and we'll pass the torch on, and hopefully those in the future continue to evolve and grow this thing for the benefit of the charities around

Sean McMahon  20:20  
Well, it's certainly a wonderful effort for an incredible cause. So thank you for me and everyone else in the industry, and that about wraps up our time right now. So thank you for stopping by to chat during what's obviously a very busy few days here in London and a busy whirlwind tour for you it sounds like.

Chris Edmonds  20:36  
Yeah, awesome. Thanks for having me. 

Sean McMahon  20:37  
That wraps up our conversation with Chris Edmonds from ICE, be sure to watch this podcast feed for more episodes from the International Derivatives Expo brought to you by the Futures Industry Association.