00:00I think it's worth sort of stepping back slightly and looking at where we are relative to the spring statement.
00:05It was five months ago where we got a little bit of a hint of what may come this week.
00:10And I think fundamentally coming into the week, it's about fine-tuning rather than a fundamental change is how the market is positioned.
00:17And I think if you look at maybe the market signal or the wisdom of the crowd,
00:22the aggregate expectation in the market is really for one of sort of steady as she goes in terms of market positioning.
00:29If you look at cable, it's relatively trapped within a range.
00:32If you look at gilts, even though it was a bumpy week, it's still within the 440-460 range, which is consistent with where it's been this year.
00:41I think the more interesting picture is really the short rates and what the Bank of England might do in terms of delivering a cut in the December meeting,
00:49which is priced for 85% if you look at...
00:51Do you think the gilts market is trading off the Bank of England, not the politics, not the budget?
00:54I think the...
00:56We actually picked this up earlier from one of your earlier guests.
00:59The central bank positioning in terms of the Fed, the Bank of England, what the ECB have already done,
01:06is really underpinning valuation across equities and in fixed income.
01:10And I think that is not the most important thing this week,
01:13but it is a reassuring underpinning to what valuations are in the bond market at the moment.
01:19Does that show up in the equity market too?
01:21Well, equities had a pretty good run in the year to date.
01:25Volatility is relatively stable and fairly low based on historical standards.
01:33So I think, yeah, to some degree, it's clearly not going to be a really strong start to the week
01:39because of the risk events that we see this week.
01:41But clearly there is an underpinning and there's been a positive performance this year in equities.
01:46Just coming back to the UK story, just more broadly, just to get an understanding of what happens next,
01:50if the budget does not deliver politically, if Rachel Reeves' position is questioned off the back of this
02:00and by extension Keir Starmer's, is that more significant than the Bank of England?
02:07Isn't the Bank of England just going to react to that?
02:11Isn't the Bank of England reactive to the politics and the fiscal story rather than being the lead here?
02:18I'm just trying to understand how the sequencing works.
02:20Yeah, I think what delivers politically is what's right for the economy.
02:24And clearly there's got to be a balance between business and growth,
02:29which there's clearly an agenda that the Labour Party have been very clear on,
02:34and some tough choices.
02:36And those tough choices are a result of the fiscal backdrop and where pricing is at the moment.
02:41But I think, you know, what would be success?
02:43Success would be fine-tuning.
02:45It would be delivering within the mandate, within the fiscal rules,
02:51and ensuring that the market is calm and that's well-received.
02:56And I think that's generally what the market is set up for this week.
02:59So walk us through what that credible, what is a credible indicator of success here?
03:04From the investors you speak to, what would they say is,
03:08OK, it's 4 p.m. on Wednesday.
03:11Rachel Reeves has said her spiel.
03:14This is a win.
03:14What would that look like?
03:16Market pricing around where it is at the moment.
03:19I think that's the key.
03:20If you look at 10-year guilds.
03:21But what do they need to hear?
03:22I think they need to hear that some modifications have been made
03:27that are proportionate, that are not too radical,
03:31that deliver both on the growth agenda as well as making tough choices and fine-tuning.
03:37I think if we get that outcome, market pricing is consistent with that.
03:42Of course, there are markets that are used for hedging that risk,
03:47and that's maybe something we can get to in a second.
03:49But overall, I think success looks like pricing currently where it is.
03:53Let's talk about that.
03:54Let's talk about kind of event risk.
03:56We've got the polymarket story now developing with you guys.
03:59You're partnering up.
04:00I'm curious to know how you see events like the budget developing
04:05and what products are going to be available
04:06and kind of how events like this are going to change
04:10as a result of my ability maybe to look at risk events differently
04:17now that I can kind of bet on single events almost.
04:20Bet is the wrong word, but I can take a position on a single event.
04:23Yeah, well, I think derivative contracts in general
04:25are based on events.
04:27They're driven by pricing and risk events.
04:29And, you know, if you look at the futures and options market,
04:32which has had a tremendous growth at ICE in recent years,
04:35it really connects small, medium, and large investors
04:38in one single market with one price signal.
04:41To my point, the wisdom of the crowd.
04:43And I think if you look at, say, the ICE-Sonia market,
04:46which is really the benchmark for interest rates.
04:48But these aren't specific event contracts,
04:50which it feels like we're moving towards.
04:52Yeah, I mean, there is a natural evolution,
04:55particularly on the retail side, towards those very specific bets.
04:58But really in the institutional space,
05:00the bit of the business that I represent,
05:03we have seen tremendous growth in Sonia.
05:06We're up 73% year over year in terms of open interest.
05:09In Gilt, we're up 50% year over year in terms of open interest.
05:12And that's a signal that investors, both small, medium, and large,
05:15are turning to the derivatives market to lock in those price risks
05:18and look to those markets to allocate their portfolio.
05:22And that's really what's been driving the business.
05:24A wider trend, actually, that's been going on across equities
05:27and in fixed income is the role of the option market.
05:30That's really been the driver of the growth this year
05:32in the ICE interest rate business.
05:34We're up 96% in terms of open interest this year.
05:37We're on track for a record year in terms of transactions in UK markets.
05:42So I think that that picture is a sign of market health,
05:46a sign that our customers are turning to us to hedge these price events,
05:50these risk events coming this week.
05:52And I think from there you can extract an even richer signal
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