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Speaker 1: Bloomberg Audio Studios, podcasts, radio news, The Titans.

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Speaker 2: Off Finance Gathering and reout. This week, we're mostly upbeat

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Speaker 2: on the prospects for the US economy, but are concerned

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Speaker 2: about more sluggish.

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Speaker 1: Growth in Europe.

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Speaker 2: I'm really happy to say that Ron o'hanley, the State

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Speaker 2: Street CEO, is joining me right now, and he says

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Speaker 2: that the top challenge is the lack of global growth. Well,

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Speaker 2: Ron is joining it now for an exclusive conversation.

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Speaker 1: I guess we're putting words into your mouth before we've

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Speaker 1: even started the interview.

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Speaker 2: Let me just start off by asking you about how

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Speaker 2: some of the conversations you've been having here are going.

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Speaker 2: You are just telling me that this is probably your

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Speaker 2: fifth or sixth time that you've been attending the FII.

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Speaker 3: Well, Jamana, first of all, thanks for having me, and

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Speaker 3: I will say that the mood here is probably more

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Speaker 3: optimistic than it's been in a while. If you think

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Speaker 3: about this time last year, there was a great concern

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Speaker 3: about a global recession, and I think the good news

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Speaker 3: is that we've avoided that. There's certainly been uneven economic

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Speaker 3: performance across countries, but we've avoided that. But as you

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Speaker 3: noted in the opening there. I do think the challenge

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Speaker 3: now going forward is growth and will there be sustained

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Speaker 3: growth across the globe and if not, what can we

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Speaker 3: do about it?

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Speaker 2: Where you see the major headwinds coming from, and then

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Speaker 2: the global context.

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Speaker 3: So I think that there's a lot of headwinds to it. Firstly,

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Speaker 3: we're still suffering from the residual inflation. Inflation has come down,

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Speaker 3: but that's certainly getting in the way of some global growth. Secondly,

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Speaker 3: there's some very important factors that will be potentially a

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Speaker 3: challenge to growth. One of them is deglobalization. And if

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Speaker 3: you think about it, certainly from my entire career up

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Speaker 3: until recently, I and everybody else in my industry benefited

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Speaker 3: from global integration that is peaked and we're now seeing

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Speaker 3: a reversal to that, all for good reasons, new supply

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Speaker 3: chains and things like that, but that will be an

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Speaker 3: impediment to global growth.

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Speaker 1: It's really interesting you.

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Speaker 2: Bring that up because I had an exclusive conversation yesterday

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Speaker 2: with the Minister of Investment here in Claudy his agency

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Speaker 2: Kadada Dada, and obviously the Kingdom has been very much

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Speaker 2: focused on attracting FDI into the country and The question

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Speaker 2: I post to him is whether this concept of geoeconomic fragmentation.

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Speaker 1: Increasing tree bears around the world will.

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Speaker 2: Act as an impediment for money coming into the country.

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Speaker 2: And he said he thinks that some of those concerns

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Speaker 2: are being overplayed because ultimately we have.

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Speaker 1: No choice but to be a globalized world.

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Speaker 2: Supply chains are extremely globalized and it's going to be

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Speaker 2: difficult for that to change in reality.

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Speaker 3: And I would agree with Ellie's comments. It's I'm not

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Speaker 3: suggesting that we're going to go back to something pre

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Speaker 3: nineteen seventy, but the point being is that it's not

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Speaker 3: as an to grade it as it was, and we

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Speaker 3: have to make some trade offs. Now, what's going on

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Speaker 3: here in Saudi is if you think about where Saudi

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Speaker 3: has come from, it was largely an exporter of capital.

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Speaker 3: What you're seeing now is there's enormous, enormously interesting investment

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Speaker 3: opportunities here in Saudi and here in the region. So

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Speaker 3: while the Saudis are still exporting capital, they're also importing

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Speaker 3: capital because it's such an attractive FDI environment.

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Speaker 1: Yeah. Well, let me talk specifically about the State Street.

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Speaker 2: Now.

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Speaker 1: Earlier this year, State Street reopened.

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Speaker 2: It's the buy office, and you know, tons to consolidate

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Speaker 2: your asset management service as the ones that you provide

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Speaker 2: in the region is a buy and riat offices as

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Speaker 2: a result, what was behind them?

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Speaker 1: Yeah, So.

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Speaker 3: We have a lot of people that live in Dubai.

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Speaker 3: They were working out of Abadhabi and Abadhabi is still

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Speaker 3: very important to us and that is the regional headquarters

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Speaker 3: for us in the in the UAE, but we took

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Speaker 3: it vantage of the DIIFC. It's an attractive place for

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Speaker 3: investment professionals and so where we've cited our investment business

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Speaker 3: there in Dubai.

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Speaker 2: Yeah, and actually we spoke to as the CEA president

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Speaker 2: at the time of the opening.

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Speaker 1: It was really good to speak to her. You provide custody.

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Speaker 2: Services with some of the biggest asset managers around the world.

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Speaker 2: I just wonder how you're catering your offerings towards some

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Speaker 2: of the Middle East clients that you.

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Speaker 1: Have around here. Are the requirements different?

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Speaker 3: So I don't think the requirements at at aggregate level

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Speaker 3: are different, but certainly there's different requirements when it comes

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Speaker 3: to data where data is, how data is being custoded. Secondly,

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Speaker 3: there's an interest in being able to take a look

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Speaker 3: at the data not just in terms of how do

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Speaker 3: we perform in the past, but what does it mean

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Speaker 3: in terms of how we're going to invest differently in

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Speaker 3: the future. And this is where some of the introduction

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Speaker 3: of AI and how we think about in an investment

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Speaker 3: process will be very interesting.

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Speaker 1: That's interesting.

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Speaker 2: So you're already using AI as a tool to increase

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Speaker 2: productivity and enhance the services that you offer.

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Speaker 3: I think that I would say that like most were

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Speaker 3: early in this, because there's a lot of precautions we

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Speaker 3: need to take around data privacy, data integrity. But yes,

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Speaker 3: AI is increasingly a tool that's augmenting what the investment

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Speaker 3: professionals are doing and basically enabling them to get to

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Speaker 3: a decision or a new investment idea, or evaluate a

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Speaker 3: new investment idea much quicker than they could before.

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Speaker 2: When you think about the business as a whole, I

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Speaker 2: think in the past we've spoken about wanting to increase

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Speaker 2: your lending capabilities. Can you just talk us through where

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Speaker 2: you see the biggest opportunities for growth there?

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Speaker 3: So, I mean we are largely a fee for service business.

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Speaker 3: If you think about what we do, we manage money

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Speaker 3: or we service those that are in the investment business,

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Speaker 3: pension funds, sovereign love funds. But some of those activities

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Speaker 3: actually require the extension of credit. Sometimes it's for intra

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Speaker 3: day or overnight liquidity.

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Speaker 1: So all of.

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Speaker 3: Our credit activities for to support our clients in the

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Speaker 3: businesses that we're in.

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Speaker 2: And does that change in a region where some of

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Speaker 2: these middleased clients are actually flushed with liquidity and you're

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Speaker 2: sitting on a lot of cash.

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Speaker 3: Yes and no, Because for any given transaction, they may

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Speaker 3: be flushed with liquidity, but that liquidity isn't available to

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Speaker 3: actually finance a particular transaction. So not really is what

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Speaker 3: I would say. I think it's to be able to

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Speaker 3: provide that liquidity for our clients is actually quite important.

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Speaker 1: Sure enough. Well, I've got to ask you. We've bought

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Speaker 1: us elections coming up.

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Speaker 2: And I'm going to ask you for your prognosis on

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Speaker 2: who you think is going to come on on top.

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Speaker 2: But from a market's perspective, volatility has started to creep up,

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Speaker 2: and this is expected to be quite a volatile event

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Speaker 2: irrespective of who wins. How do you position your systems

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Speaker 2: for that?

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Speaker 3: So for us, we spend a lot of time answering

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Speaker 3: questions of our clients or advising clients on how they

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Speaker 3: position their own portfolios.

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Speaker 1: Yeah.

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Speaker 3: From a technology perspective, we certainly have focused on our

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Speaker 3: systems and their ability to be stable in something like this.

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Speaker 3: But I think the most important thing about this election

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Speaker 3: is that there be certainty relatively quickly in terms of

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Speaker 3: the outcome, which you don't want to have is an

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Speaker 3: uncertain outcome for an extended period of time, exactly.

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Speaker 1: Work and test the results. For example, earlier this summer.

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Speaker 2: There were a couple of sort of freak episodes in

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Speaker 2: markets and markets trading beginning of August, beginning of September.

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Speaker 1: You sold those big down days.

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Speaker 2: In the NICK that had knock on effects on global markets.

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Speaker 1: How again, are your systems coping.

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Speaker 2: These increasing varshop events that seem to be happening not

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Speaker 2: just more often, but when they do happen with increasing

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Speaker 2: lot of intensity.

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Speaker 3: Yeah. I think the most important thing from a technological

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Speaker 3: perspective is being able to evaluate what is it that's happening,

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Speaker 3: why it's happening, and then to very quickly be able

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Speaker 3: to go to clients and say this is what we're observing.

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Speaker 3: Oftentimes it's lack of liquidity in a particular segment of

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Speaker 3: the marketplace. Yeah, and again it's hard to believe that

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Speaker 3: when you think about how liquid some of these markets are.

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Speaker 3: But when you think about some of the trading volumes

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Speaker 3: that have occurred in particular instruments on days like that,

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Speaker 3: in fact, you end up with a shortage of liquidity.

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Speaker 1: Yeah. Yeah.

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Speaker 2: And where are you seeing a pickup and trading volumes

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Speaker 2: right now? Which which geographic areas would you say has

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Speaker 2: been the biggest growth?

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Speaker 3: Well right now with the approach of the election, obviously

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Speaker 3: you're seeing a lot in the US and a lot

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Speaker 3: of positioning around that, some positioning around equities, some positioning

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Speaker 3: around treasuries. But in terms of trading volumes overall in

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Speaker 3: the aggregate, I mean, financial economies follow economies, and as

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Speaker 3: real economies grow, the financial economy tends to grow.

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Speaker 1: At a multiple of that.

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Speaker 3: And that's what we've seen in the development of all

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Speaker 3: economies over the past thirty forty years. And so again,

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Speaker 3: you think about a region like this with a very

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Speaker 3: significant outsized growth relative to the rest of the world,

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Speaker 3: you're seeing a growth in the financial economy and a

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Speaker 3: growth in volumes right here in Saudi When you think

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Speaker 3: about the Saudiast stock exchange and the amount of volume

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Speaker 3: that's on that in a very short period of time.

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Speaker 2: I just want to bring it back to the interest

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Speaker 2: rate environments. And of course the Fed have started to ease,

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Speaker 2: they cut interest rates by fifty basis point, but interstrates

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Speaker 2: is still pretty high. And you've got this strength scenario

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Speaker 2: where it seems that the investors are pile into stock

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Speaker 2: markets as stock markets are doing very well, but at

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Speaker 2: the same time our sitting on a lot of cash too.

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Speaker 2: Is that a phenomenon that you see as well, or

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Speaker 2: investors sitting on more or less cash than usual.

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Speaker 3: So investors are sitting on a lot of cash, and

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Speaker 3: what they wanted to see was what was going to

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Speaker 3: happen with interest rates and the intersection of interest rates

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Speaker 3: in the economy. And I think that the central banks,

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Speaker 3: led by the Federal Reserves, have done a really good

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Speaker 3: job in terms of engineering the so called soft landing.

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Speaker 3: And so there is that cash on the sidelines. It's

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Speaker 3: down a little bit, but your point's well taken that

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Speaker 3: there's stile a lot of cash, which we see is

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Speaker 3: an opportunity for markets going forward. Yeah, market has interest

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Speaker 3: rates declined, those volumes ought to go down as that

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Speaker 3: money seeks higher retards.

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Speaker 1: Yeah, well, Ron, we're going to leave it there.

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Speaker 2: It's been really fantastic helping to you. Thank you so

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Speaker 2: much for taking the time to speak of us. That

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Speaker 2: was Ron o'hanley's State Street CEO joining us here at

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Speaker 2: FII