039 Exchange Invest Weekly Podcast

Transcript

Euronext won't bid for BME leaving an electronic vote for the Spanish exchange shareholders on the SiX bid which comes with full BME Board approval.

Helex: great results just as tragically, the recessionary tides are lapping around the Greek foreshore once again.

New Zealand exchange will separate their commercial and regulatory arms.

Euroclear blink on price hikes.

While there is further confirmation that Jeff Sprecher represents good value for ICE and much much more.

My name is Patrick L. Young Welcome to the bourse business weekly digest: It's the Exchange Invest Weekly podcast.

Episode 39 of the Exchange Invest Weekly and my how the world has turned on its head...not just since we launched... - Gosh - since we launched issue 36 or 37!

The old trope that ‘policemen move in groups of three: one to read, one to write and one to keep an eye on all those dangerous intellectuals allowed to roam the streets,’ deserves an airing.

As in many countries, particularly the UK, the police force has descended into idiocy. drones have been following a couple of Ramblers in some of the most isolated spaces in England. There's as good an example of moronic state overkill as any of us can think of.

In the current frenetic atmosphere. Rumor has it that in some nations if you're walking the streets in the company of two easter eggs, you may be guilty of a felony group meeting.

Certainly the one thing that is clear in the course of the past week is that in many nations Two's Company and three is indeed a felony.

In some respects, news flow has reached an eerie calm across the parish. We have done the first round of shouting to protect our markets...While few announcements are being made right now as everybody is in locked in.

Interesting times. And once again, our parish ops and IT teams deserve huge plaudits for their remarkable uptime achievement during this crisis.

FESE the European Federation of Stock Exchanges was amongst the leaders in the course of the last week crying out for open free markets. Something which of course is a clarion call for Exchange Invest

Unprecedented times but exchanges are prepared they underlined in their messages. Bourses are prepared with the coronavirus and these extreme conditions. This of course, in response to a rather disingenuous questionnaire from the AFME Banking Association, trying to shift attention away perhaps, from banking where we know there is a creator strewn landscape of damage across their monopolies of dealing, and let's not even get into lending: We'll talk about that later.

In contrast, exchanges are demonstrating their strong management and planning. Note too that exchanges such as Aquis are open without a single person present in their London or Paris offices.

It was great to see FESE the European Securities Exchange Federation politely and robustly pushing back on unfounded accusations of exchanges being anything other but well prepared to deal with these crises. Bravo to the European Association of Clearing Houses (EACH) who have profoundly helped advocate for central Counterparty clearing in only a few years of their modest boutique Industry Association being in existence.

Closing the markets is not the answer as indeed was the subject of many articles this week, perhaps most notably by NASDAQ's chief economist Phil MacIntosh.

Meanwhile, not only did the New Zealand Stock Exchange hold a successful AGM remotely, but the most encouraging news was a vote of confidence: the purchase of stock by their Chairman James Miller amongst other board members. Director purchases of parish stock are a stubbornly rare quantity as many execs have just hoovered up their stock grants and not invested over the years.

To that end James Miller shows leadership of not merely NZX but also the New Zealand market, buying stock ahead of a New Zealand general election and against the background of Corona chaos. NZX is pushing ahead with its plans, and it clearly has solid support from its leadership which is great to see. At the same time, no sooner were NZX and MOEX, the Moscow exchange as well as the Johannesburg exchange, and others talking about virtual annual meetings than all of a sudden a campaign group Share Action was urging the United Kingdom to keep virtual annual meetings a temporary phenomenon. In this regard, I happen to think the world has just changed and that may restrict the extent of AGM in the future. Virtual is a very sound alternative for smaller companies with diverse geographic shareholder basis. And equally this trope that older folk cannot go digital I find a grossly irresponsible slide on Third Age citizens. #everydayageism if you like.

Despite the efforts to keep bourses open across the world, some did shutter. Bangladesh has closed until April the fourth. Equally, the Colombo Stock Exchange was closed for a week for the first time in its history, and indeed remains closed at the time we record this podcast. At this juncture. I do believe that Amman and Jordan, Nepal, Palestine, Colombo, Chittagong and Dhaka are the world's exchanges that are fully closed down, while on restricted hours we have the Indian commodity exchanges, the Belgrade Stock Exchange, Jakarta Stock Exchange on the Zimbabwe exchange.

At the same time, there was a kerfuffle in India, as it took SEBI several days to write and request that Indian exchange staff were allowed freely to go to work or not, therefore, encumbered by locked on provisions. At one point in time it had seemed as if the Indian market wanted to close its own exchanges, but actually the truth was the brokers were simply stressed because their brokers couldn't get to work in order to focus on servicing their clients. That reduced the broker stress when Sebi wrote their letter. But then again, if we look at the current schedule of shutdown and lockdown in India stock exchanges, thanks to the Easter holiday and a cluster of other Indian holidays, they're actually only going to be open 11 out of the 21 days during the current scheduled lockdown.

That said, one must look at the macro picture and say, perhaps we're going to be locked down for a little bit longer than 21 days? Hopefully not. Meanwhile, the Multi Commodity Exchange of India was offering up to three times salary for those willing to work from their offices instead of working from home.

While there have been huge outpouring of support across the parish for open free markets, one market has stood out, unfortunately, the chief of Euronext Stphane Boujnah is backing the short selling ban of ESMA and various other European regulators. Oh dear, folks may wonder if Mr. Boujnah is just a French government puppet after these remarks, that certainly seems to be the gossip on the street in major financial centers like London at least. Certainly it doesn't suggest Euronext is actually an active participant in free markets. At best, this news is profoundly disappointing.

That of course brings us to the BME deal. And here we now know firmly that Euronext have missed it. They released a statement this week saying they would not make a counter bid for Spain’s BME. The Swiss exchange SiX had secured the support of the regulators CNMV as we mentioned last week, and also the Spanish government, as well as unanimously the board of the Spanish bourse BME have backed the bid. We only await to know what will be the Vote: probably an electronic Extraordinary General Meeting to decide the fate of the Spanish exchange. But at the same time, it seems difficult to believe that the Swiss exchange is not going to end up being victorious given what is now a rather giddy premium in what is a very volatile market that they have offered for the stock of the BME. Euronext have admitted defeat on this particular deal. That's clearly a bitter blow to the Stephan Boujnah strategy, as his deft acquisition so far of Oslo and Dublin are tiny compared to the substantial BME operation and indeed BME can transform SiX into a cross asset vertical European powerhouse with one foot in the European Union and one very large foot outside as well.

Elsewhere in deals this week Kotak Mahindra bank and a subsidiary have sold stakes in the former Commodity Exchange ACE. They've sold around 20% of their stake, although terms were not disclosed.

With rather unfortunate timing elsewhere in the parish, Euroclear wanted to raise some fees on their customers in the UK and Ireland. There was no word officially from Euroclear until a couple of days later, they decided they were going to reevaluate this tariff increase after an outcry amongst the buy and sell side of the United Kingdom and Ireland markets.

Slightly interesting news from what is usually the rather dough plodding campaigning of the CME Group board elections, one of their nominees has asked and suggested that the firm should start mining Bitcoin. The idea of internalized power supply rather reminds me of the brilliant car manufacturer Ettore Bugatti who was annoyed by the behavior of a particular French electricity utility. He built his own generator. When his power was self sufficient, he invited the hapless electricity company rep to view Bugatti’s power plant. Before Mr. Bugatti himself - manufacturer of the eponymous amazing automobiles - sent the man from the electric company on his way with a contract cancellation notice and indeed what one might say in English, ‘ a flea in his ear.’

Retail investors have been opening accounts with aplomb of late, various stories talking about that, but nonetheless read larger in terms of volume that the stunning performance of Interactive Brokers without seemingly any form of tangible failure in their systems throughout the course of a very busy month with their amazing 24 hour uptime :month on month volumes from February into March were up 46% and February was no slacker while year on year March on March, they Interactive Brokers transacted 127% more business without as I say any noticeable reliability issues. It's a great result for IBKR which remains the brokerage poster child of electronic integration 20 years after the Capital Market Revolution.

Meanwhile, if you're seeking inspiration in these hyper volatile times for markets where career paths are often looking decidedly imprecise, I have a recommendation. If you're trying to get a handle on how technology is affecting life and markets, there's a new book to help you. 20 years on from the excitement of the original FinTech bestseller Capital Market Revolution, it's time to look at some of those loose strands hanging around which need a spot of perspective, whether you are an exchange parishioner, a FinTech professional, or anybody just trying to stay abreast of where technology is driving investments and finance, “Victory or Death, blockchain cryptocurrency and the FinTech world,” is an easy read, explaining the differing and diverging roles of banks and exchanges, explaining the winning business models of the New World Order and placing in perspective just what Bitcoin, blockchain and cryptocurrency mean for markets. It's 70,000 words of pure play PLY pith, patiently discussing matters of moment and revisiting the original trailblazing first FinTech best seller “Capital Market Revolution!” which when published in 1999, proved - even if I say so myself - rather prescient.

It's a binary world, your career will sustain or collapse in the next stage of the digital world, hence the title “Victory or dDeath” lest you need reminding of the exciting times for finance in which we are living,

“Victory or Death” is published by DV Books and is distributed by Ingram worldwide.

Meanwhile, this week I also launched IPO-VID. My initiative aims to help adult investors of all hues and levels of experience who are confused by recent market volatility. The series of brief daily pug-side chats can now be found on YouTube: IPO-VID.

Hellenic exchanges produced great results for 2019; it remains a well managed business sitting amidst a deeply troubled economy, which is simply not going to be helped by COVID-19. Gosh is now the time for Greece to just walk away from the Euro after a decade of pain? I wonder. I do feel a great pang of sympathy for Helex. They're a well managed business which is encumbered by a ghastly economy around them.

In people news this week, the biggest salary news was the Intercontinental Exchange publishing Jeff Sprecher, their founders financial year 2019 total compensation $14.4 million versus $14.5 million in 2018. This represents phenomenal value for ICE, cheap at thrice the price.

Sadly we reported the first death from COVID 19 within the parish this week, the former CBOT trader Carol Brookins has died. She was one of the first women trading on the Chicago futures exchange floors in the 1970s, and indeed our condolences on her passing, given the fact she was also an exchange director of the Climate Exchange under Richard Sandor.

At the Casablanca Stock Exchange, all change there, Karim Hajji the CEO has retired and been succeeded by Tarik San Haji,Tarik Senhaji, a move that is said to not augur well for chairman Hamid Tawfiki’s career longevity.

Meanwhile, on his retirement has Casablanca Stock Exchange CEO Karim Hajji has stepped down as the president of the African Securities Exchanges Association ASEA and he's gonna be replaced by the BRVM CEO who has formerly been the VP of the organization, Edoh Kossi Amenounve

In product news, Shanghai has overtaken Hong Kong as the world's top IPO market, will that survive lockdown at a time when the China bond Connect has seen record trade amidst the coronavirus panic?

The Bank of England and the UK regulators are warning about LIBOR transition, the timeline could be impacted.

Meanwhile, there all forms of default fears sparking up given a fourfold surge in CDs trading according to IHS Markit.

The Pakistan Stock Exchange launched their first ever ETF And meanwhile, the CEO of Binance made what he called a modest forecast, the total marketplace for Bitcoin will become worth $2 trillion. Frankly, I'm not even sure Bitcoin can break through $10,000 other than briefly right now, actually, I think we're further moving towards a post Bitcoin era; issues which I discuss in terms of the Advantages and also the problems lying ahead for Bitcoin in my new book “Victory or Death.”

At the same time Binance have cut leverage tokens because they say ‘users don't read the warning notices.’ Gosh, we haven't had a chance in the Exchange Invest Daily newsletter to deploy the chief of police Reno's memorable Casablanca response for a while, but this clearly calls for his “I'm shocked, shocked” intervention.

In regulation, the SEC Chairman was leading the way amongst regulators unlike his European laggard counterparts. “We shouldn't ban short selling, it's needed for a properly functioning markets.” Hooray

Elsewhere the FCA in the UK they're considering relaxing the MIFID 10% rule that's a case where you have to write to your clients if you're managing a portfolio and the portfolio drops by 10%, within 24 hours, or as UK advisor Andy Bell, the eponymous head of AJ Bell said “using the 10% Rule is like flagging a leaking shower on the Titanic.” MIFID II is a rule that's well intentioned, but it is a blunt instrument. AJ Bell has experienced an increase in the manual effort required to ensure the accuracy of reports. And well, well intentioned but blunt instruments could sadly be used as a surmise of the EU itself nowadays.

In technology news, the London Stock Exchange group are building a distributed ledger proof of concept for equity settlement. There's an acute risk of foolish hubris here I fear for LSE in building this DLT solution at a time when their entire operation will be under unprecedented integration strain from the Refinitiv deal, which looks like a more dubious stretch than ever. True, one of the two major off the shelf packages appears to be itself under delivery duress down under but given SETL is scalably ready to be implemented...what does LSE gain from another project on the management Gantt chart which already looks somehow on a quantum of “it's complicated.”

And finally in technology this week, BMLL. Those are the fabulously pointy headed quantum wonder mathematicians doing lots with big data out of their HQ in London. They've selected EOSE to bolster distribution of their derived data product. It's a useful collaboration making the BMLL derived data offering available to a wider market audience via EOSE outsourced market data solutions with EOSE acting as an outsourced sales response to support BMLLs market outreach to banks buy side and sell side firms and the hedge fund community globally.

Over in crowdfunding, understatement of the week from Crowdcube, “we expect that raising finance will now take longer than usual.” In the current rush of bonhomie towards our fellow humans, of course, how long will it be before a tabloid launches a campaign to search out, say a real estate broker to say hello just in case society's forgotten them? Well fair enough, maybe not.

Thanks to the coronavirus crisis, part the peer to peer lender in the UK Ratesetter is weighing a sale amidst a funding squeeze how long can the peer to peer lenders last? Indeed, how many crowdfunding platforms as a whole are going to manage to come out the other side of the current crisis I wonder?

“Entrepreneurs need more than grit right now” I read a fabulous headline on Crowdcube. Unfortunately, the blog post in some ways fluttered only to deceive. “Entrepreneurs need more than grit right now they need their customers on the Sunak to back them.” Oh, dear the Sunak. That's a reference to the UK Chancellor of the Exchequer. In other words, this was another plea for a bailout along with, well, everybody else who's an economic actor in the economy of the whole world right now. Frankly, I'm disappointed when I see everybody expecting government bailouts. If we knew how economic cycles would end we'd all be billionaires. The reality is I was hugely premature in noting years ago the length of the US expansionary cycle. And it's kept expanding over several years since those early warnings. But simply it didn't take a lot of brainpower to appreciate at the start of 2020, that the longest economic expansion in US history would probably be taken down by something. And that the rest of the world economy would go with it. I appreciate that the crowdfunding CEO of Crowdcube has to speak to his potential clients and doesn't want to cause upset. But then again, does it really help to mollycoddle millennial entrepreneurs as if they're infants? We have to get over it, get on and survive this one. Asking the government to support everything is the ultimate in Peter Paul robbery repo futility, with an added huge margin of waste thanks to the government in the middle of it.

That said, over in big world, big firms are doing their bit to survive and indeed avoid their liability, or debts. The sports combine co-created by perhaps the most commercially successful Adolf of the 20th century Mr. Adolf Dassler no less have launched a rent moratorium on all of their stores worldwide, as have indeed H&M the German fashion stores too.

At the same time, moving slightly closer towards the parish for the last couple of minutes of today's narrowcast the European Central Bank has been amongst those telling banks within its remit to skip payouts: that means dividends; that means any other payment they might make. And indeed, lots of regulators have said this week, please don't pay big bonuses if you're a bank.

Now it’s clear the imbeciles led by Gordon “save the world’ (sic) Brown, et al got conned when they bailed banks out after the last mega crisis. Now when the real economy needs help, the banks are running for cover. While banks will say all sorts of things to cover their rear ward apertures, the populace see it as ‘we saved you, now save us. The bankers seem to be worried about paying the domestic staff. ...and when I say domestic staff. I don't mean within their branches. I mean, the pool cleaners, the maids, all of the other people that they have in the sort of houses that the average person can't afford but lots of bankers can.

Previously in history, such disconnects have tended not to end well for the previously wealthier party when the mob turns ugly.

Indeed, there was a story this week on Bloomberg about something quite interesting close to abutting the exchange parish; the return of the barter economy went the Bloomberg headline ‘we're swapping eggs for toilet paper,’ some exchanges, those are barter exchanges, groups and collectives have reported a 20 to 35% increase in member signups during March alone.

Now on the macro, the concern must remain that if bailed out bankers don't repent soon of their hubris, they may end up bartering for their kneecaps in front of rather restive mobs. And on that note, ladies and gentlemen without seeking to incite anything, but just trying to report on the facts as we see it as we're analyzing them from Exchange Invest out to the world. Ladies and gentlemen, I wish you a great week in markets. Thanks for listening to the Exchange, Invest Weekly podcast

We'll see you next week: Life begins at 40 podcasts for Exchange Invest indeed. My name is Patrick l Young. Thanks for listening

Show Links

FESE - Unprecedented Times: Exchanges Are Prepared

FESE

UPDATE 1-European Bourses Defend Coronavirus Plans In Extreme Conditions

Reuters

Closing The Markets Is Not The Answer

Traders Magazine

Campaign Group Share Action was urging the UK To Keep Virtual Annual Meetings Temporary

Reuters

Bangladesh Bourses To Remain Closed Till April 4

Dhaka Tribune