On behalf of the Observatory for Responsible Innovation and Mines ParisTech, the organizing committee would like to thank all participants to the conference on “Debating Responsible Innovation in Finance”, held yesterday, 30 November 2011, in Paris. Their contributions translated into an immensely productive and intense exchange. On the overall, the conference counted on more than a hundred participants: professionals from the financial services industry, journalists, elected representatives, members of regulatory bodies, students and researchers. An updated version of the finale program is available here. A more fine-grained report, with video excerpts of the discussions, will be made available here soon. What follows is just a very brief summary.
The conference started with a welcome address delivered by Benoît Legait, Director of Mines ParisTech. The initial round-table discussion was devoted the problem of “dangerous externalities”: how to tackle negative unforeseen consequences of financial innovation, how to calibrate the introduction of new products and services in the markets, how to test them, how to account for their benefits and their dangers. Shyamala Gopinath, former Deputy Governor of the National Reserve of India, discussed the Indian regulatory experience. Sarai Criado, from the European Commission, directed attention towards critical cases such as ETFs (exchange-traded funds), hybrid complex MTNs (medium-term notes), sovereign CDS (credit default swaps) and liquidity swaps. Andrew Palmer, from the Economist, chaired a lively discussion with the participation of members of the audience.
The second round-table discussion tackled the specific case of high-frequency trading (HFT) and automated trading at large: the controversy on its benefits and on its contribution to liquidity, the dangers this practice can prompt in terms of feedback loops and unintended consequences, and the difficulties it poses in terms of regulatory assessment. The discussion was chaired by Irène Inchauspé, from Challenges magazine, and counted on the viewpoints of Yann Muzika, former practitioner in this area now at Magnet Investment Advisors, Charles-Albert Lehalle, a specialist of high-frequency trading at Crédit Agricole Chevreux, Oliver Burkart from ESMA (European Securities and Markets Authority), Jean-Pierre Zigrand, economist at the London School of Economics, and Yuval Millo, a sociologist of finance, also from the London School of Economics.
Michael Power, Director of the Center for the Analysis of Risk and Regulation at the London School of Economics, provided a series of commentaries on the morning sessions, with a focus on what financial innovation could learn from the governance and assessment of innovation in other areas, from technology to medicine.
The third round-table discussion, titled “responsible actors”, shifted attention to the pressing issue of incentives: not only bonuses but incentives at large, and their capacity to foster responsibility and irresponsibility in financial, economic, regulatory and political behavior. The discussion was chaired by Delphine Liou from BFM Business TV and contributors to the debate were Pascal Canfin, Member of the European Parliament, Jean Pierre Mustier, Head of UniCredit Corporate and Investment Banking Division, Loïc Fery from Chenavari Investment Managers, Olivier Godechot, sociologist at the CNRS and Paris School of Economics, and Nicolas Véron, Senior Fellow at Bruegel and a member of the Peterson Institute.
The fourth round-table discussion introduced the topic of “democratic innovations”: the idea was to discuss measures that could strengthen a more participatory approach to financial innovation and oversight, with a deeper understanding of public scrutiny and collective responsibility in the face of risk and uncertainty. The discussion, chaired by Elsa Conesa from Les Echos, focused on the viewpoints of Michel Péretié, CEO of Société Générale Corporate and Investment Banking, and Valérie Rabault, Head of Market Prospective and Business Risk at BNP Paribas, with the participation of Stéphane Delacôte, Alexandre Pointier and Marc Lenglet, members of the Observatory for Responsible Innovation, in their capacity of former practitioners from the financial services industry.
Bruce Kogut, Director of the Sanford C. Bernstein & Co. Center for Leadership and Ethics at Columbia Business School, offered a view on the afternoon discussion, with a focus on the present situation in the United States.
Participants in the audience also provided key contributions to a debate that proved most challenging and constructive.