046 Exchange Invest Weekly Podcast

Transcript

Stunning results from B3 as Exchange Invest celebrates its seventh anniversary. India permits primary listings overseas as ESMA allows short selling once again, while CME offers a shock closure of their trade repository business. There's also surprise as Ashley Alder extends his tenure as Hong Kong's top regulator, while the CBOE has bought Virtu’s former ITG Canadian ATS Match now.

Overshadowing it all however, the Senate in the USA have passed a bill with worrying consequences for Chinese listings.

My name is Patrick L Young Welcome to the bourse business weekly diges:t it's the Exchange Invest Weekly Podcast.

We begin this week with not so much a parish note as actually more an amusing PLY tale. Coming attractions Ladies and gentlemen, it seems I have finally made it To top tier TV drama, at least momentarily. Devils is a big budget Sky Atlantic financial drama series, which has been sold to 180 territories worldwide, including the UK and the US, and features big name stars such as Patrick...Dempsey. However, coming soon to a screen near your TiVo will be one Patrick Young, who has a cameo role in at least two episodes. Naturally having now made it to a Cinecitta production, I have instructed my management to seek out some more meaty roles.Who knows, perhaps we can at least parlay this into co hosting one of Italy’s legendary spettacolo. That said, the clear deep in the money bet is that I will be back here next week presenting the Exchange Invest Weekly Podcast as usual, musing on how what was once 15 minutes of fame for the Andy Warhol generation is now a low latency sub 30 seconds in the modern digital age.

The breaking news from the CME last week as fortunately the West Texas Intermediate contract actually managed to settle in an almost orderly market admittedly with incredibly low levels of open interest before the end of that contract’s life. Rather, the trade repository business. CME Group will close their European and Australian repositories winding down, Abide financial and Nex regulatory reporting businesses as well as their other European and Australian trade repository franchises by 30th November 2020. I fundamentally don't understand this logic. Could the CME management not even sell those? Let's face it last week, we were talking about IHS Markit buying the Singaporean TR Catena.

In terms of COVID this week, well, it's the Covid-ien China crisis that seems to have taken over. First up, NASDAQ were tightening their listing rules and restricting IPOs by Chinese firms in the wake of the luck and coffee disaster amongst others. However, the ominous portents from the Senate this week was the bill that could delist Chinese companies from US stock exchanges. Instantly the Chinese kicked into action: they've been urging firms to list in London in a renewed global push of that Alliance. While meanwhile the South China Morning Post was musing: will Hong Kong be the winner? Even the saber rattling by the US will be sufficient to encourage listings in other international financial centers presuming the legislation gets no further, Hong Kong and London will be the obvious likely beneficiaries.

Reopening of the floor will take place next week after the Memorial day long weekend into which this podcast is being recorded. The New York Stock Exchange will be reopening a socially distanced floor To go alongside various option floors, already we've got the P coast in San Francisco open. And also indeed the NYSE Amex options floor is going to open alongside NASDAQ, Philadelphia exchange and various others. The simple fact though is the New York Stock Exchange remains the iconic trading floor. Symbols matter in a challenging period when some markets have lost credibility through omission. The physical nature of a floor adds the human face of trading, the physical nature of the NYSE floor amounts to the epicenter of modern capitalist free markets. Seeing the bell ring at NYSE above even a socially distanced group of brokers will be a major psychological philip to the economy and also marks another moment for all the parish to applaud our overall remarkable uptime during the crisis delivered by so many brilliant tech and ops staff across all of the leading exchange names of the parish. Reopening after the Memorial Day weekend will be a good time for the gastronomically inclined Stacey Cunningham and her team to raise a glass of milk in the absence of an Indy 500 winner and toast the return of this iconic venue confirming what we have known in digital terms for the past 10 weeks: the world's best markets are open, trading and able to offer a full suite of services thanks to their digital excellence.

In terms of results this week or impressive, B3 were little short of spectacular; the Brazilian market recorded a 38.7% increase year on year with EBITDA up 61.6%.The Warsaw Stock Exchange similarly impressed: they were up in the double digits as well as the Moscow exchange up 29.3%. Similarly, we saw good numbers from Indian Energy Exchange up 20% in the final quarter of their year, and indeed a 54% explosion in consolidated net profit for the Bucharest Stock Exchange. Dubai Financial Markets finished the week's results with a profit jump of 24%. In Q1. excellent news all round, Deutsche Boerse: They've said acquisitions are going to play a major role in their strategy. Teodor Weimer in a prepared speech, which was delivered to shareholders at its annual shareholder meeting said the exchange operator would be presenting the strategy in the fourth quarter when the fog of the crisis has cleared up. That is, of course the strategy which was flagged about three months ago to be delivered at the end of May: indeed next week but now it's going to be put off towards well the end of the year.

“For today,” said Weimer “just this much, acquisitions will be playing a major role.”

Strategy postponed! Gutless, toothless, incapable or merely trying to avoid an announcement until CEO Teodore Weimer gets a rumored role as not merely DB 1's chief executive, but the Deutsche Bank chairman. The other DB role seems to be off as we record this podcast because Weimer has stated he's very eager to manage to stay in post DB1 until his retirement which marks very pleasantly a contract that will overlap beyond his 65th birthday. The truth is, by all means, DB1, keep the strategy secret, but please don't waste our time trailing something you cannot reveal. This farce going on for months and months and makes DB1 look ridiculous.

Deals this week, there were rumors that Abu Dhabi may be in talks with Dubai in order to financially support a bailout of the Emirate. That's been denied across the board and therefore presumably kills also the rumor which instantly rose to life of possible mergers between some of the Dubai bourses and the Abu Dhabi exchange.

It was time for a repricing and debt issuance left right and center. Obviously with the Federal Reserve underpinning the financial markets and particularly the credit markets, it's a time for cheap Bonanza loans. Therefore Intercontinental have priced $2.5 billion in notes. They're going all the way out to 30 years out: a long term rate which is no more than 3% on the 30 year notes and 2.1% on the 10 years, redeeming a 2.75% note which is expiring at the end of 2020. That tickles the yield curve neatly in favor of ICE and indeed, various other parties have been doing the same this week including MSCI who priced somewhere around a billion dollars worth of unsecured notes due 2031. Elsewhere the Canadian dark pool trading platform Match NOW has been acquired by Chicago's CBOE. Virtu, were looking to sell Match NOW after their ITG acquisition, and after a few months shopping around, CBOE have bitten something which they can pay for with cash on hand, and it gives them a hefty alternative trading stake in Canada. And indeed a regulatory base that might be of interest to its assigned bolt on for CBOE.

If you are looking for some reading during lockdown, 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.

Twenty 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 now driving investments and finance.

“Victory or Death” - Blockchain, Cryptocurrency & the FinTech World is an easy read explaining the differing and diverging role 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, pacily discussing matters of moment and revisiting the original trailblazing first fintech bestseller “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 Death” 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 while you’re waiting for your copy of Victory or Death to arrive, after the podcast try our Pugcast: IPO-VID, In Patrick’s Opinion comes to the small screen, with a series of investor videos with my guest star Toby the Pug.

In crypto land this week Coin Market Cap have updated their exchange ranking system: an interesting update it now includes web traffic. Curiously, that means Binance ranks first. Why is that curious? Well, because Binance bought coin market cap a few weeks ago, and now suddenly they seem to be coming out on top of the rankings. Elsewhere Binance have registered some domain names with the Chinese government. Are they returning to China? Will that prove to be another location where Binance won't have an HQ?

Elsewhere Bitcoin derivatives exchange BitMex has been experiencing technological issues and they've also found themselves on the receiving end of a lawsuit pending previous failures.

Product news this week, HSBC lost about $200 million in one day on the gold market turmoil. There may be only four ways to get off many airliners and 50 ways to leave your lover but there remain an infinity of ways your risk model can implode when markets are volatile. Here, HSBC demonstrates an issue in the gold market where they trade paper and had regional dislocations at the same time. $200 million worth of losses really take some effort..

New marketplace coming to us on June 1st it's going to be the Small Exchange which presumably has their manifesto song. “It's a small world after all” licensed from Disney. However, their stunning news of the week is they're going to have connectivity to the hundreds of thousands of Interactive Brokers users world wide. If they price their data suitably aggressively, it ought to give them huge traction for their micro sized exchange contract marketplace.

The Shanghai futures exchange are going to be recruiting market makers to boost liquidity and NCDEX in India commenced trading in India's first agri futures index, the AGRIDAX, one exciting piece of news from SEBI in India, the government there have scrapped a rule mandating firms must list in India first to go public overseas. That certainly looks likely to excite all of the major players in the stock market world who will be looking to list debt and equity on behalf of those Indian firms.

In regulation news this week ESMA. Finally, the EU blob once again endorses free markets until the next time there is a sell off. Seven leading jurisdictions have terminated their short selling bans. Elsewhere, the Chinese securities watchdog pledged to clean up financial markets. It's not the first time a Chinese CSRC Chairman has said this, but I do believe it's the first time this chairman has said it.

Elsewhere in people news, exciting regulatory revelation, the top securities watchdog in Hong Kong the SFC has been well, pleasantly the recipient of a reversal of Ashley Alder’s decision to leave after nine years, “the scourge of IPO sponsors in Hong Kong” as he's described by the South China Morning Post will stay on for three more years as CEO of the SFC to maintain investors confidence as the COVID-19 pandemic batters “an already bruised economy.” Ashley Alder, presumably played a salary blinder he was mentioned by Sky News in the UK as a possible UK FCA chief only last weekend and with the corporate governance continuity card to play against a background of COVID-19 and the departure of Charles Li as Hong Kong Exchanges CEO. Alder has effortlessly extended his nine year term for another three years. Good luck to him. Elsewhere Martin Jetter has been elected and confirmed as the new chairman of the Supervisory Board of Deutsche Boerse.

And ladies and gentlemen in a week when the UK gilt markets or British government bonds being issued A negative yield for the first time in their history. It's not costing you 0.003% to hold UK July 2023 Gilts.

This has been overlapping with news as the City of London and Canary Wharf prepares to see an influx of workers in the near future as offices are reopening. That indeed in the City of London - the square mile - they're looking to curb cars in order to evade social distancing. Given the congestion and narrow streets mean that the average traffic times in the City of London have perennially struggled to make it above the 9 to 12 miles per hour, which were prevalent when four legged horsepower gave way to the automobile. One could argue regression to human transport in the square mile is not such a bad idea. And on that reflection on automotive transport against two legged and four legged horsepower. Ladies and gentlemen, thank you very much for listening. My name has been Patrick L Young This is the Exchange Invest Weekly podcast. We'll be back next week with all the best bits from the bourse business weekly digest, Exchange Invest. Have a great week in life and markets.

LINKS

Nasdaq To Tighten Listing Rules And Restrict IPOs By Chinese Firms

South China Morning Post

Senate Passes Bill That Could Delist Chinese Companies From US Stock Exchanges

MarketWatch

China Urges Its Firms To List In London In Renewed Global Push

The Straits Times

Will Hong Kong Be The Winner In Us Senate’s Bill To Fence Off Wall St?

South China Morning Post

The NYSE Will Reopen the Trading Floor

Wall Street Journal

New York Stock Exchange To Partially Reopen May 26, With ‘vital New Safety Measures,’ President Says