036 Exchange Invest Weekly Podcast

Transcript

Only a week ago at the start of the sequence gathering data for this podcast, I was reporting MOEX results and an E-FX acquisition on a quiet day. A quiet day Ladies and gentlemen, if anyone can remember what that was, it seemed at that time as if people were holding back news ahead of justifying their expenses for a trip to the sunny southern parts of the USA.

Ho hum how things have turned out in the parish.

True Euronext have launched a stock scheme for all staff.

The Nasdaq deep data pivot continues.

But indeed, what a difference a week makes!

Market structure works with aplomb. On another series of crazy days, The Small Exchange gets a DCM status and now we end the week with closing floors, flight bans and exchange staffers across the parish working from home. It's been a tectonic week in markets and indeed a tectonic plate moving energy markets that partly reflects the stock markets’ panic, this may yet presage a very different world indeed.

Welcome back. It's the bourse business weekly digest with me Patrick L. Young. Welcome to the Exchange Invest Weekly Podcast. Things have got so crazy recently

I've taken to appending parish notes to the beginning of the regular daily subscriber missives this week. Each is a variation of the same core vital message. “It's been a remarkable day of trading, a remarkable, record breaking day of trading and volumes and open interest; another robust performance by the technology and operations dervishes of the parish: Keep up the good work one and all in the parish of markets.”

This has been a remarkable ongoing test of our technology.

And so to our top story, as COVID-19 dominates the headlines across the world. The virus has achieved something even the advancing technology from two decades of “Capital Market Revolution!” could not. The CME Chicago Mercantile Exchange floor has been closed. It's a temporary precaution of course. At the same time as the LME have been looking at alternate arrangements. And indeed, the New York Stock Exchange has been taking various steps to keep coronavirus away from the trading floor at a time when indeed their offices have been closed in other parts due to staff testing positive

Indeed, it has been a week of mass cancellations of meetings. Just last week, lots of people were looking forward to their lovely weekend in the sun at Boca Raton, the rats mouth, in Florida, but rather the FIA had to cancel when the bankers suddenly pulled out en masse. And indeed there are travel bans by organizations such as the conservative Swiss Exchange SiX and thus FIX EMEA has been called off. And indeed, perhaps the most ironic of them all, the US Council For Foreign Relations canceled a meeting in New York on ‘doing business in a time of coronavirus due to, well, fears of COVID-19.’

Looking ahead to next week St Me’s Day, the Festival of St. Patrick looks like being one for the solitary drinker. Looks like a smaller crowd for the traditional Irish delicacies across the world.

And indeed, there have been further rate cuts. Following on from the Federal Reserve last week, of half a point. The Bank of England, the old lady of Threadneedle street cut rates this week in accordance with the global central banker panic. Now that's a virus which is apparently only communicable amongst wonkish QE frat boys, but ultimately, it threatens all humankind. With a variety of different symptoms.

And that brings us neatly to the topic of results.

Moscow Exchange produced slightly improved numbers for the course of the full year of 2019. They're recommending that no less than 89% of that net profit will be paid out in dividends, and they've also acquired a significant stake in an e-FX trading platform. Elsewhere. TP ICAP squeaked in with slightly better results as well. Overall they were reporting record volumes amidst the market turmoil.

We have a new public company coming to the parish the Nigerian Stock Exchange at last has been demutualised.

There is indeed a rich irony to the fact that the first NSE to go public is Nigeria and not India's remarkable National Stock Exchange. But that of course, well, it's a whole Netflix box set in its own right, of podcasts in order to manage to get to the bottom of how India's incredible revolutionary Stock Exchange has ended up being somewhat sidelined on the race to become a public company.

There was one interesting deal this week, the NASDAQ pivot to big data and indeed Big deep Data continues.

NASDAQ have acquired the institutional investment FinTech, a firm called Solovis is going to be paired with their E-nvestment within the Nasdaq suite to deliver investmental data portfolio analytics and monitoring across public and private markets. It's another neat incremental bolt on to the NASDAQ portfolio as the solid Adena data pivot continues.

Meanwhile, in data overall very interesting news, Reuters reported it as “British watchdog enters a tug of war over market data.” The transatlantic data war is heating up. Because the UK FCA is considering investigating that hot pixel potato of financial market data they want to review on data in wholesale markets. It's a call for input available on the FCA website to try to better understand how data and advanced analytics are being accessed and used the value afforded to market participants and whether those are competitively sold and priced.

The FCA is going to use that call for input to determine whether it needs to do further work to address any harm that it identifies.

This is going to be essential homework for market structure providers remotely contiguous to the FCA’s remit. One exciting new market this week: the CFTC the American Commodity Futures Trading Commission, have designated the retail focused Small Exchange as a contract market. Interesting. In a time of crazy volatility, will folks, particularly retail folks, want to see every contract mini and micro?

Meanwhile, Euronext open their stock to all staff. they've introduced a first ‘all employee share grant’ aligned with the next three years strategy.” Let's grow together. 2022.” it's a great idea for the parish with, so far as I understand from this: 100% of the permanent staff being eligible for stock. I suppose that's 100% of the permanent staff so long as they don't run the gauntlet of Stephan Boujnah during the course of the three year period. At the same time I must reflect. Of course, when Euronext launched their IPO on their way to independence from ICE, there was actually a paucity of stuff interest in buying the equity in the first place.

In people news this week, rather a lot of it in fact, Deutsche Boerse: they've replaced Hauke Stars on the executive board with Heike Eckert. All the best to Heike, congratulations to her. She's going to be running the newly formed Executive Board Division, Human Resources And Compliance. The cash market which was previously being overseen by Heike Sttars is going to now be rolled into the Trading And Clearing Division headed by Thomas Book.

Meanwhile, in Deutsche Boerse, they announced their candidate for election to the supervisory board, replacing Joachim Faber as we know of course Joachim Farber is standing down as chairman and will be replaced by Martin Jetter presuming the AGM in their finite wisdom decides that he is the suitable candidate on the 19th of May. However, to replace the failed chairman of DB1 Joakim Faber, as his era finally comes to a close, Michael Rudiger is going to be proposed as a Shareholder Rep on the board. Talking of succession plans over in Singapore, the CFO succession is in place, Ng Yao Loong is placed to become deputy CFO, and therefore, in time is going to become CFO taking over from Chng Lay Chew

TP ICAP, they've added another exciting non executive hire you'll remember last year they brought on the veteran Richard Berliand, aman of many great deals, and indeed a few dumb ones when he was on the board of the Deutsche Boerse with deals that they couldn’t make happen. However, Richard Berliand, a senior steward of the marketplace, has appointed as a non exec Mark Hemsley, formerly of LIFFE in Europe and most recently the boss of CBOE in Europe. Interesting to see how that goes and congratulations to mark on his first non executive position after standing down from the CBOE executive role.

Elsewhere, the Saudi Arabian Capital Market Authority recomposed their Advisory Committee. Interesting members throughout but worth noting that Parrish veteran Roland Bellegarde is notable amongst the members of the Advisory Committee.

OCC the options clearing Corporation, they've named two new members to their board of directors both directly replacing other people within the same company. Therefore, Kevin Kennedy, SVP and head of product management For North American market services at NASDAQ has joined the board replacing Tom Wittman who retired last year.

Equally. Thomas Barrett, head of Goldman Sachs, global futures and derivatives clearing services, has replaced Mark Dennard as the Goldman Sachs rep on the OCC board.

Exciting news for women in the wake of International Women's Day but they couldn't actually manage to get the timing perfect for the PR. In this case, the Metropolitan Stock Exchange of India that was the thing that was originally MCX’s stock exchange: They have appointed

Latika S Kundu. She's going to become the first woman CEO of the organization. And indeed I believe she's going to be therefore the second woman to head an Indian stock exchange in the wake of Chitra RamKrishna, who previously ran the National Stock Exchange of India.

Speaking of the National Stock Exchange, well, this is the Australian variation... Remember the other week Isignedthis have made a significant investment in the National Stock Exchange of Australia looking to turn it into an entirely digital based blockchain organization as a result of that investment, their CEO John Karantzis has also become interim CEO of the NSX Australia.

Over in Sri Lanka, the London Stock Exchange group's technology team what used to be Millennium it, they've announced that Feroz Qatar and Rob Brouwer have been appointed co heads of LSEG technology.

In a week of interesting product news and discussion. Gordon Bennett Intercontinental Exchange’s managing director of utility markets hits the nail on the head. “A Global Natural Gas market is starting to emerge,” he discussed with Bloomberg during the course of this week.

Meanwhile, ‘Hong Kong offers market debutantes lessons in IPO success during volatility,’ trumpeted the headline, in the South China Morning Post about this fascinating issue where a Chinese TV producer, had a very successful IPO on the Hong Kong exchange all the time without leaving their office to undertake their roadshow. All virtual. Think about it. Ladies and gentlemen, a roadshow without travel, all video conferenced to make a successful IPO. Now that's a potentially seismic shift for not merely the IPO process itself, and possibly even the DPO / IPO process could end up being run through vastly cheaper intermediaries. How many years will it be before the ballroom talk in Boca turns to “and to think all those years ago, the banks could say in 2020 they weren't coming and we canceled the conference?”

Times are changing, and the IPO world is definitely ripe for revolution.

On the next pass expect a great deal more virtualization.

Over in the Bahamas. The Bahamas international Securities Exchange are very close to launching the $3.5 billion government debt market trading, exciting news there as well. Also the case in AIX in Astana. Their first Islamic bonds were listed.

Somewhat concerning news for many foreign exchange platforms: Citi are cutting back savagely on the inventory of markets that they're linking to. They're going to remove something like 30 plus platforms out of the 50-something that they currently trade with in the world of foreign exchange.

Over in regulation, there were a couple of worrying remarks from the UK FCA this week. Top UK firms: those who are listed in the leading UK indices, face tougher climate disclosures. It's a kind of tougher Sarbanes Oxley style rule set for top companies. In some ways, it's understandable but in a lot of others. the creeping element of climate related disclosure in particular is surely a danger to major markets as it layers additional bureaucracy and burdens on exchanges as well as the companies themselves, which will not be required for private companies. The lessons of SAR-box have clearly not been learned by the blob.

In technology, while it has been an incredibly successful week for exchanges in providing universally great uptime and smooth trading,amidst unbelievably choppy markets, some intermediaries had slight problems, most notably, and it has to be said here, one pauses not to have to laugh, Robin Hood.

Why should it be so amusing that Robin Hood should suffer failure? Well, the problem with ‘free stuff,’ as many millennial investors may have just discovered is that it often turns out to be less robust than the things you actually pay for. That said, even for a free app, it looks as if Robin Hood fell victim during a two day outage to a somewhat rookie error of insufficient scale. However, it has to be said given the service actually costs nada to the customer, while at least allowing for or ignoring the many embedded costs therein, the truth is the sticker price is zero. The idea that something with this zero sticker price will stand up as robustly as say, the likes of IBKR which costs real money to trade on.... Does show the vast difference between paying a few cents and just feeling modern adjectives like “free,” “entitled” and “woke” amount to standard means to operate commercially.

As indeed I mentioned last week, it looks like Robin Hood's day in court is coming even sooner than I previously expected. I was looking for it during the downturn backlash when folks realize their orders were well being executed for “free” while actually being flogged for a pretty penny to some intermediary. However, this mishap looks to have accelerated that whole process. The ambulance chasing lawyers are already gathering with gusto and looking at the raw meat of a class action lawsuit. Given this degree of current client anger, it looks as if this may be a Robin Hood scene more redolent of one of those bad days with the Sheriff of Nottingham.

That brings us to Bigworld Ladies and gentlemen, well, Joe Biden he remains the first Biden in 1000 generations to generate such a remarkable comeback in the Democratic primaries during the course of the last week or so. My only worry remains that Joe Biden's brain seems to be in an ongoing process of self isolation from his voicebox.

Elsewhere, Lebanon, they've jumped ahead of what actually may turn out to be a remarkably busy activity during the course of the next year or so given the current market times: Lebanon, they've defaulted on their dollar denominated debt. Over in Venezuela, the government is going to let companies raise capital in dollars as President Maduro liberalizes the economy. This of course, is an opportunity for the Chavista shambles to end up being written off as not real socialism when the final epitaphs are produced from what is ultimately the smoldering wreckage of the Venezuelan economy.

Elsewhere, the UK had a massive money splash budget, which we'll see how that goes given the way that the economy is well under fire all round, throughout the world. So ladies and gentlemen, that leads us to the final split, in a fascinating week from markets. The many who ended up ultimately thinking, “gosh, I get the chance to get another whole week's work done,” and the few who were simply disappointed that they didn't have their several days in the sun at the rats mouth. Whatever happens in COVID-19 world we'll be back next week, looking once again into the business of bourses. Thank you. for joining me for the Exchange Invest Weekly Podcast. My name is Patrick L Young.

LINKS

CME To Close Floor As Precaution

CME

Cme Group To Close Chicago Trading Floor As A Precaution Due To Coronavirus

CNBC

London Metal Exchange To Test Alternate Ring Trading Site On Friday

Financial Post

NYSE Takes Steps To Keep Coronavirus From Trading Floor: Memo

Reuters

Deutsche Boerse Has Some Working From Home As Coronavirus Precaution

Reuters

SEC Becomes First Federal Agency To Ask DC Employees To Work From Home Over Potential COVID-19 Threats