049 Exchange Invest Weekly Podcast

TRANSCRIPT

Tel Aviv go on strike. NYSE and NASDAQ emerged victorious from a court spat with the SEC while NASDAQ pulls ahead enjoying a bumper crop of IPOs: 44 to 27 against the New York Stock Exchange for new listings so far this year. My name is Patrick L Young Welcome to the bourse business weekly digest. It's the Exchange Invest Weekly Podcast.

Plaudits to Nasdaq, easing ahead of NYSE in the US IPO market, which has a vibrancy that would have been simply unbelievable three months ago as lockdown began. Likewise, Hong Kong is showing a remarkable degree of new issue activity. One issue this week from China was no less than 360 times oversubscribed!. That new issue activity is somewhat flying in the face of many economic fundamentals around the world. True those fundamentals are changing fast in a very, very volatile environment economically. But once again, the flexibility of modern for profit exchanges demonstrates the sound management and key benefits of the exchange model at the heart of digital commerce. NASDAQ leads right now and well done across 71 new listings in the United States of America. They have 44 compared to a very impressive equally 27 at the New York Stock Exchange. And that's before we look at the many successful follow on offerings enabled to prevent more financing in this COVID-19 era in the US capital markets.

In Italy, there is a five star argument. It seems that that party: “The Five Star“ which is descended from a comedian, in disarray, wanting to buy the Milan Stock Exchange. We discussed that last week... Having considered the issue - and given this is Italy and the world's most Machiavellian investment bank Mediobanca are involved. I cannot help but think the motives here are much more ulterior than concerns about MTS trading. The closed minded nationalism of Five Star demonstrates fairly standard closed minded, outmoded left wing thinking so prevalent in Europe. It is killing the economy in Italy and far beyond.

Meanwhile, on a settlement, which I don't think anybody can be too proud of T plus 8 years!. Finally, Turkish government bonds are going to be coming to Euroclear, the Brussels based EU settlement house.

The negative oil mystery carried on this week ‘day traders are a new wrinkle’ went the argument. It was a worryingly misguided analysis suggesting that it was day traders at TD Ameritrade and E trade, as well as those already declared IBKR, who when suffering technical glitches due to the negative pricing in that huge Cushing crisis of more than a month ago, meant they couldn't sell once they realized prices had turned negative. It's a worryingly misguided analysis. At least there is one key takeaway: scapegoating brokerages who were left with a devil's alternative to either implement software changes on ludicrously short timelines or simply not be able to offer trading... That all took place at a time when priority was ensuring market technology functioned during enormous volatility. I would suspect goodwill to CME has drained despite the valuable claims of that entity to have been hugely ahead of the curve when it gave several days notice...And one might argue very muted notice that it all of a sudden enabled negative pricing and a previously untouched rather aged futures contract.

The parish needs to seriously consider its stance going forward, as this sort of article is just the latest clarification of what remains a fundamental product design issue. Moreover, I suspect brokers will consider suspending contracts in future situations where exchanges attempt these mid air engine replacement approaches. Crunchy alternatives are required for exchanges to demonstrate who has foresight and who are just riding the waves amongst the management of exchanges.

More intelligent analysis this week from Energy Intel and indeed the Intercontinental exchange themselves. Essentially it boils down to one thing, Brent is bolstering its position as the price anchor in the global oil market.

Over in Hong Kong, the spat continues Pompeo, the US Secretary of State has been urging global stock exchanges to tighten rules for Chinese companies. Nonetheless, it's a pragmatic and sensible series of remarks we witnessed this week from the Trump administration, as indeed is echoed by the head of NASDAQ at the same time. The Hong Kong exchange says many US listed Chinese firms are planning Hong Kong follow on offerings.

When it comes to EU reform that was a huge topic of discussion this week. Bloomberg led with a headline ‘the Brexit regulatory bonfire begins in the EU’. It's all about research in this case, but at the same time all one can say is Exchange Invest remains the cheapest source of post Business Insights even at our 2020 rates, which came into effect on June 1st. At the same time the EU has said that the UK trade talks will ship the block’s stock market that's Realpolitik writ large: the UK dwarfs the EU’s 27 wholesale financial industry centers and their attempts to corral high level suzerainty over British trade and especially financial trade looks to be up in the air right now.

We also witnessed the final report of the EU High Level Forum On Capital Markets. It's a great report. The problem is we have no confidence whatsoever that the EU can actually get its act together in order to deliver a Capital Markets Union, which let's face it, it has already spent six years achieving nothing

When it comes to deals this week, Deutsche Boerse successfully placed a 600 million euro hybrid bond at an attractive yield of just 1.25%. It can be used as capital which returns us to the heated debate of whether DB1 might be somehow artificially inflating its CCP balance sheet through such debt. While that old argument appears to have died down, it could rise up again as a result of ‘skin in the game’ discussions being led by the BIS on behalf of its banks for instance. Elsewhere, Sebi, the Indian regulator it seems may give ‘in principle’ approval to the National Stock Exchange of India's long awaited IPO. Naturally conditions will be attached. I quote, “The exchange will need to furnish all details of colocation cases including the escrow account where colocation income is parked. Then the difference to investors to decide whether they want to invest or not, according to a source unnamed at Sebi that points to a very pragmatic approach by the Indian regulator to let the market decide on this the one exchange, which has been trying to IPO for well, nigh on a decade now.

In the Ukrainian exchange, the US Freedom Holdings have acquired a 20% stake that's been approved by the local regulator.

Elsewhere China's carbon market exchange has completed its trading platform test. That's a new market coming up in the near future. While at the opposite end of the carbon spectrum, plans are afoot for India's first coal exchange.

The Korean agricultural online exchanges “saving time and money for producers and retailers” went the headline in Pulse News having digitized wholesale transactions of agricultural crops. And finally, in the new markets coming up this week Angola has established a diamond hub and an Angolan diamond bourse.

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Lots of news on Cum-Ex this week. Most excitingly, the German finance ministry plans to extend the statute of limitations to 30 years on this fraud. No one is getting out of here, unscathed.

In the US, there was jubilation amongst the US exchanges led by NASDAQ and NYSE. They got a court win on the 2018 SEC ruling in the data feed debate. That battle was a clear setback for the SEC rather poor approach to this whole issue. Indeed, there was an excellent article by NASDAQ chief economist Phil McIntosh, this week “NMS II why forced competition actually costs investors more.”

Elsewhere one strike this week the Tel Aviv Stock Exchange: a dispute over employee bonuses has shut the exchange during the course of its Sunday trading day which started the week in Israel. Of course, trading was resumed by Monday but the shadow remains over TASE, which has long been subject to strike action over the years, whether in private or indeed public ownership.

In product news this week, the Chicago Board Options Exchange: their futures exchange is planning a launch of mini VIX futures. That's actually a reissuance of a product that they offered between March 2009 and February 2014. Seems logical as full sized VIX futures are now beyond the retail trading community. And there is presumably vast demand as the likes of Bloomberg CNBC TV gush about the VIX endlessly as the apotheosis of Product.

Given ViX ought to be likely superseded soon in a big data world, it's no bad idea for CBOE to try to milk the product to give a larger retail following and then hope to accelerate the move into a next generation product more seamlessly.

In Shanghai, they've unveiled the trading rules for their Low Sulfur Fuel Oil futures contract, while Romanian lawmakers have disappointingly, voted to postpone IPOs of state firms by two years. That's of course a huge disappointment because the Bucharest Stock Exchange ranks amongst the smallest in the central and southern Eastern European region with a market capitalization of nearly 9.5% of GDP in 2019. London Metal Exchange: they're looking into low carbon aluminium trading and the National Commodity Derivatives Exchange of India, they've developed rainfall index which hopefully will be the basis for weather derivatives in the near future. Turquoise Plato, they have readied the launch of a “trade at last” for the closing auction. And the Indonesian government is mulling the issue of diaspora bonds towards the end of this year.

As I hinted earlier in the show Netease was that incredible follow on listing in Hong Kong It got, as the South China Morning Post noted, ”a lot of love” from investors: selling the amount of stock on offer by 360 times.

Technology news this week, the National Stock Exchange of India was hit briefly by a technical glitch which is very unlike its usually near hundred percent uptime but at the same time they made the seismic announcement of the week in technology: they're going to withdraw the NOW trading platform. That's their front end connecting them to the brokers and traders through the market. Ultimately, it is a huge boost, some might say Pyrrhic victory for what used to be called Financial Technologies. The company now known as 63 Moons, the original vehicle of jignesh Shah is already offering its trading software at a 50% discount in order to hoover up the remains of the market given the fact that its product Odin already has something like 70% of the connectivity market in India.

Elsewhere NASDAQ ventures invested in the automated financial crime investigations fim Caspian: very intriguing investment in a growing segment there while NASDAQ Basic Canada has launched in the cloud. It's a cost saving data product, which just shows when you don't actually try to impose centralized almost kleptocratic rationalization of data in a communist fashion, the exchanges themselves can come up with lower cost more efficient alternatives.

In People news this week, the bounce back of Ashley Alder continues. As you'll remember, Mr. Ader was retiring as the boss of the Hong Kong regulator just over a month ago. After being mentioned as possibly the boss of the FCA, he suddenly reappeared with a wonderful new contract to keep running the Hong Kong SFC. Now he's been reelected as chairman of IOSCO, the International regulatory body.

Tragic news as one of MCX’s staffers succumbed to COVID-19. Bourse operations were unaffected but this poor 36 year old chap had stayed in the exchange for six weeks to run core operations during the initial phases of the lockdown. It's a very sad tale of a team who were isolated within the exchange, and unfortunately ended up infecting each other with COVID-19.

One other unfortunate piece of health news, the Hong Kong activist investor and former non-executive director of the Hong Kong Exchanges Group, David Webb is stepping back from his role as really the ultimate corporate governance arbiter in the independent field in Hong Kong. He's diagnosed with prostate cancer, and we wish him all the very very best. Nobody can doubt his devotion to wishing to improve market standards, and we wish David every success and good health in the future.

Ladies and gentlemen, we arrive at the end of a very quick gallop through the world of bourses. There were hundreds of other stories of course in Exchange Invest this week to which you can subscribe and receive the daily pith every day. However, I'll leave you with one sad tale of well, no trade at all. There was shock and surprise during the course of this week when one whole day's trading at the Dar es Salaam Stock Exchange recorded a volume of zero. Fortunately, the next day looked better with some trading taking place but at the same time… Well, on a disappointing note from the African continent, a “mysterious and magnificent” continent. This is myself, the mysterious and magnificent Patrick L Young wishing you a great week in life and markets. Thanks for listening. This has been the Exchange Invest Weekly Podcast number 49.

LINKS

Nasdaq Overtakes NYSE In Coronavirus-Era IPOs

Wall Street Journal

Nasdaq Sees A Strong IPO Market Through Fall

Nasdaq

Refile-Italy's 5-Star Locked In Row Over Milan Bourse Takeover Plan - Sources

Reuters

Turkish Treasury Agrees With Euroclear For Access To Local Govt Bond Market

Reuters UK

Turkey Joins Settlement House Euroclear After 8-Year Talks

Turkey Agrees Deal With Euroclear To Open Up Bond Market To Intl Investors

SeeNews