050 Exchange Invest Weekly Podcast

TRANSCRIPT

The Swiss Exchange completes its Spanish acquisition. London Stock Exchange could be on the receiving end of a mega antitrust review. While the Hong Kong exchanges are celebrating 20 spectacularly successful years as a public company on their own market. Exciting technology news as serial entrepreneur, Nils-Robert Persson returns to the parish and indeed, exciting news emerges from down under: could the Australian Stock Exchange actually be open to settlement competition? My name is Patrick L Young, welcome to the bourse business weekly digest: It's the Exchange Invest Weekly Podcast.

Beginning with parish notes this week, plaudits to Hong Kong exchanges marking their 20th anniversary as a public company. That was a good day for markets and indeed we applauded this week to the US stock exchanges who brought their case against the totalitarian stupidity of the SEC with a penny pilot which threatened to leave US markets with “one nation two systems” as an experiment where as we know previous efforts by the SEC to push progress have brought us such gems of dysfunction as reg NMS.

As you will know if you're a weekly or indeed daily reader of the Exchange Invest Newsletter. Every edition begins with a little history lesson appropriate to the issue number. This week's podcast coincides with issue 1792. Of course, 1792 was the year when the highwayman Nicholas Pelletier became the first person executed by the guillotine in France. However, of more interest to the parish: under an American sycamore tree in Manhattan, New York 24 brokers and merchants signed the Buttonwood agreement Named after the tree, it read,

“We the Subscribers, Brokers for the Purchase and Sale of Public Stock, do hereby solemnly promise and pledge ourselves to each other, that we will not buy or sell from this day for any person whatsoever, any kind of Public Stock, at a less rate than one quarter per cent Commission on the Specie value and that we will give a preference to each other in our Negotiations. In Testimony whereof we have set our hands this 17th day of May at New York. 1792.”

Of course the modern NYSE has changed a bit since then (its inflection points curiously involve several key M&A events but that Buttonwood tree was witness to one of the most powerful events in commercial history... and with it, it helped to create Exchange Invest, a couple of centuries down the line.

As I mentioned earlier, the appeals courts in the USA ruled in favor of the stock exchanges in their fee fight with the SEC. It's interesting to note the judges were appointed by, respectively, Presidents Carter, Obama and Reagan... not always a mix super conducive to disagreeing with regulators. After two strikeouts and a fortnight of legal actions, one is minded to ponder in the event of a third strike is the SEC out?. For perspective, we recalled this week in Exchange Invest Daily the powerful and poignant Stacy Cunningham Wall Street Journal opinion piece at the commencement of these proceedings brought by NYSE, NASDAQ and CBOE who were ”suing the SEC to protect the stock market.” It remains a very pertinent read to this day. And indeed, on CNBC the NYSE President Stacy Cunningham was discussing the reopening of her markets and in very, very measured tones she provided an overview and a background to the court ruling against the SEC and how in many other areas. relations are entirely cordial with the US regulator and the stock exchanges.

Over in Brussels, the EU eased some rules for foreign clearing houses as a sop to the United States of America thus hopefully avoiding threatened retaliation when the European Union was trying to be hyper protectionist, as its paranoia over the possibility of Britain being successful after Brexit has grown. Over in Australia, an interesting case, the boss of the Australian anti monopoly organization has stated that Pexa’s monopoly must end. This is hardly relevant directly to the parish of exchanges as Pexa is in fact, a new digital settlement house for property transactions However, they have a strongly backed competitor Simplii which is indeed sponsored by, and has a huge investment from the Australian Stock Exchange.

With news that the ASX backed Simplii are trying to promote competition and clearing and settlement of property, it's great news that the ASX is there for promoting competition in the clearing and settlement arena. With that news that it's pushing forward in the digital conveyancing space for real estate. I very much look forward to their opening up competition in the clearing and settlement of financial products where as we know their CSD systems have recently caused the entire market to be constrained. Hopefully the Australian ACCC competition body will be expedient in ensuring both conveyancing and financial transaction clearing and settlement are open to competition soon.

In results this week great news from the Dar Es Salaam Stock Exchange. As you'll recall last week, they had an unfortunate day where absolutely no trading happened whatsoever.

Nevertheless, that hasn't stopped them making an excellent financial return 16% return on equity for the year 2019.

Meanwhile, in Deal News this week, the Swiss Stock Exchange SiX acquired the Spanish exchange BME. They got over 90% approvals at the AGM and by the end of the week, they'd squeezed that up to 95% of the stock allowing for “a squeeze out” of the remaining shareholders and thus the BME will be delisted in due course.

Elsewhere, the London Stock Exchange Refinitiv deal is seen to be heading for an in depth EU merger review and indeed the LSE group have said they're offering no concessions to avert this deeper probe. Then again How can the London Stock Exchange offer concessions to what is clearly a political move by the EU relating to Brexit? The irony is of course that the LSE, having been so ludicrously pro remain during the UK referendum and its aftermath may yet cause it some issues getting sympathy in the UK, albeit the British government has a habit of delivering Craven indulgence to the LSEG over and above all the many other exchanges operating in London. The irony is, of course, clearly that the Refinitiv deal itself is already so unattractive, that the EU could do LSEG a favor and save it from its own management.

New markets this week. Well we've got one dead ‘new market’ the Pan African Commodity Exchange that has had its license cancelled in Zambia, it looks as if the dream has finally died. Meanwhile, in Harare, there were concerns from African intelligence service. That's a newsletter and publisher; they were talking about how the debt ridden Harare is sending distress signals through its new Victoria Falls offshore Stock Exchange venture.

Two launches this week: the Indian Gas Exchange powered by GMEX technology has readied itself and is now transacting,.Meanwhile, Broadridge have created a new Artificial Intelligence driven digital execution platform to bring next generation liquidity to corporate bonds.

If you are looking for some reading during lockdown:

COVID-19 is a killer, can it kill your career, or is that the impact of fintech destroying your business? It's a "Victory or Death" world of risk and opportunity.

To understand 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 biggest news of the week, OSC, the Ontario Securities Commission foundr extensive evidence of fraud and theft by the late Gerald Cotten and Quadriga CX. Probably unsurprising. Was it the crypto Bre-X?

Tragic news this week, a 20 year old RobinHood customer has committed suicide after seeing a $730,000 negative balance. Moreover, it looks as if that balance was actually during the course of the settlement of options positions. And ultimately they had in fact, a healthy positive balance overall, it's a tragic tale which leaves many questions not least on leverage.

No rush to judgment but the risk of suicide remains very real across markets whether it was my old friend ‘Tony Montana’ or many others who have sadly seen no better way than to take their lives while trading in our parish. Further to my remarks in the weekend edition of Exchange Invest last Saturday, we already have news of a retail trading tragedy with the suicide of a young investor in the USA using RobinHood. The Parrish needs to be thinking ahead to preserve damage to structure if, when we see a massive retail investor implosion, there will often need to be strengthen the management to avoid knee jerk reactions. Meanwhile, our sympathies with the family of this young man who tragically took his life over his trading positions.

In products this week, the Bank of Canada, they've announced their libor replacement overnight benchmark Corra and Corra features are now trading. Meanwhile, very exciting news from Bloomberg on the terminal. They have urged their youth users to get set for the potential of trading negative US interest rates. And that of course, as we all know, causes all manner of problems with not just the trading systems themselves, but also the pricing of things like options where you need to move to the Bachelier model.

Congratulations to the LSEG, London Stock Exchange is celebrating the 25th anniversary of AIM while Britain has broadened its ban on the retail marketing of many bonds. Tragically, a potentially useful product which could be very beneficial to SMEs has ended up deeply damaged thanks to what appears to have been a flood of very shoddy offerings indeed.

In technology, one major story this week, Vermiculus financial technology has launched. It's a very exciting piece of vendor news as it's a new venture by some of the old Cinnober team led by their Chairman Nils-Robert Persson. That should be a fascinating new service offering throughout the parish and indeed will keep all vendors on their toes to be as innovative and agile as possible.

In regulation news this week, one of the most worrying announcements from Sebi in a while. They're looking at “one commodity, one exchange,” the idea of centralized single points of trading for individual commodities. Sebi have made a couple of decent decisions recently, a few baby steps forward unfortunately have been matched by a tumble backwards, as the Indian regulator continues to adopt a NEO Marxist zero competition approach to centralizing markets across the continental sized nation with very varied topography and traditions across it multifaceted region. Competition works in capitalism. Socialist planned markets have never worked in India and they're not going to work now.

Elsewhere, an indication as to how the SEBI decision making process perhaps lacks a degree of being nimble or agile, they're finally on the cusp of apparently allowing work from home for brokers. We think this is about 12 weeks late in the current crisis cycle.

Good news from the UAE the United Arab Emirates capital markets have banned insider trading effective from Tuesday, June the 16th.

In People News farewell to the Vienna Boerse CTO CEO Ludwig Niessen who announced his retirement in the same week that Vienna Boerse announced an extended cooperation with Deutsche Boerse systems, their systems provider for their core trading technology. Ludwig will continue to have close ties with the stock exchange and will further advise the company and continue to represent the stock exchange as a member of the Supervisory Board in its shareholdings. The management board of Wiener Boerse are therefore going to consist of Christoph Boschan as chief executive and Petr Koblic as CFO who are going to assume the responsibilities of Ludwig Niessen.

... and in Frankfurt longtime prop trading boss Paul Hilbert has been appointed as managing director of DB1's cash market. While a farewell from the parish, hopefully only temporarily, longtime bourse expert Hannes Takacs has been appointed the new head of the European Bank for Reconstruction and Development in Mongolia. It's a great move for Hannes. I hope he enjoys Ulan Bator but obviously a shame for the parish to lose his skills at least for now.

Taraneh Derayati has been appointed the chief executive at Vermiculus Financial Technology under Chairman Nils-Robert Persson as they announced their dynamic new venture into markets.

And meanwhile on the cusp of the parish, some tragic news with a series of arrests over highly inappropriate transactions by eBay towards some critical bloggers. Did that cause the demise and departure of the CEO Devin Wenig, last September rather abruptly? Well, nobody can be quite clear, but certainly what is clear is that having stolen what looks like a $1 thrift store version of a plotline from a cheesy corporate drama, eBay has ended up looking quite disgusting in every respect. That's a tragedy for anybody's brand.

...And on that tragedy for the brand of eBay, which hopefully is going to bounce back, who knows what it could have been doing, if only we'd allowed Intercontinental to take over that company in the course of recent months? Ladies and gentlemen, I wish you a great week in markets. My name is Patrick L Young signing off on this the 50th edition of the Exchange Invest Weekly Podcast, which as I say coincided with issue 1792, the notorious year when the New York Stock Exchange was founded.

Where will we be in 200 and something or other years?

Well, I'll leave that for all of you to ponder during the course of what I hope is going to be another great week in life and markets. My name is Patrick L. Young. Thanks for listening.

LINKS

Appeals Court Rules For Stock Exchanges In Fee Fight With SEC

Wall Street Journal

Stock Exchanges Win Fight Against SEC Over Trading Fees

Courthouse News Service

Appeals Court Sides With Exchanges In U.S. SEC Fee Row

Reuters

We’re Suing the SEC to Protect the Stock Market.

WSJ

NYSE President Stacey Cunningham On Reopening And The Court Ruling Against The SEC

CNBC

EU Eases Rules For Some Foreign Clearing Houses In Nod To U.S.