055 Exchange Invest Weekly Podcast (July 24, 2020)

Excellent results from NASDAQ and MarketAxess propel results season forward in the parish. My name is Patrick L Young Welcome to the bourse business weekly digest. It's the Exchange Invest Weekly Podcast.

Clearing, as has often been the case, leads: this week CCP 12 of the global body of clearing houses had an excellent report “CCPs show strong resilience despite COVID-19.” It reminds the world about the importance of well managed CCPs. And indeed, kudos to the members of CCP 12, who have all performed excellently in this space during an incredible period of volatility. Moreover, CCP 12 must be applauded for pointing this information out: markets work, the plumbing for derivatives is robust. And if we don't remind the world Let's face it, this just gets taken for granted.

Over in the US stock market NASDAQ vice chairman Ed Knight and the Center for Capital Markets Competitiveness EVP, Tom Quaadman released an excellent article this week via Law 360.

“The SEC’s proxy advice reform would benefit the economy.”

“The US faces major long term challenges when it comes to business creation and entrepreneurship. Since the 2008 financial crisis, we haven't seen the same historic rate of business being started,” their article began. “In addition, over the last two decades, the US Chamber of Commerce study revealed that there has been a steady decline roughly 50% in the number of public companies in the US. In other words, we aren't seeing businesses start and grow in the same way we used to.

This is troubling, since growing businesses have historically provided the innovation and job creation that we so desperately need today. public companies are more vital than ever. “

Well, amen to that must read commentary. Without some work here the US public markets will suffer atrophy, where they already are lacking content due to regulatory impositions, holding companies private for longer. And thus we need the SEC to make progress so we can all share the global prosperity and have broad public markets funding businesses to employ Main Street and provide investments for our pension pots. This is an excellent contribution to this vital debate for the parish.

Meanwhile, in Europe, the Swiss Stock Exchange boss Jos Dijsselhof jumped into the debate “don't fix what's not broken,” rejecting the plans from a certain cadre of cash equity people in London to try and cut European trading hours. Equally the Hungarian stockbrokers Association unilaterally oppose the European plan from London to shorten trading hours.

Back to NASDAQ, they've signed a very interesting pact with the Singapore Exchange to smooth the dual listing process, a good idea to seek more Sino centric listings as well as indeed, tying up with the SGX, one of those Southeast Asian exchange powerhouses.

Indeed, as the NASDAQ index made new highs in the USA last week, it was a good week for parish stocks, particularly the multi Commodity Exchange - MCX - of India, which was up no less than 17%. Meanwhile, Hong Kong exchanges, they were soaring on news of Ant’s move to provide a dual listing with Shanghai: that's Ant Financial, the FinTech arm of the massive Alibaba combine. Well, who would have thought it? ...A $200 billion listing can suddenly help transform your stock of course. It's a sign of things to come in the Hong Kong market, particularly given the recent spats between the USA and China, which of course might harm the NASDAQ SGX pact signed this week as well.

Meanwhile, the Financial Times cemented their reputation as sadly a declining business. They noted that Hong Kong exchanges have reclaimed the crown of the world's most valuable exchange group. The tragedy is not that they're inaccurate per se. They just happen to have been well, the best part of two weeks late compared to the same story being reported in Exchange Invest. If you're spending your several dollars a day on the Financial Times. Why aren't you spending $250 a year in order to read Exchange Invest and get more accurate news more quickly about the parish of bourses?

Over in results: NASDAQ, their second quarter 2020 results were fabulously resilient across all possible elements of the business firing on all cylinders there. And indeed also, a fabulous mention goes to MarketAxess. They had a stunningly strong second quarter 2020 with record revenues of $184.8 million.

Elsewhere, Euroclear their first half numbers showed a resilient performance against the COVID-19 backdrop for the well still rather mutualist entity which sooner or later is going to be priced out of the banks in what of course I have been referring to as a Great Game, which is going to be upcoming in terms of major events in the near future.

LMAX, the privately held foreign exchange based platform: they recorded record results. And indeed there were good numbers as well through from the Uzbek Commodity Exchange for the first half of 2020.

Over in the brokerage end of the world Charles Schwab, Interactive Brokers all giving us sound numbers. One unfortunate set of results this week: the Zimbabwe stock exchange, their profit slid 50%. Moreover, they slid 50% in the challenging environment to December the 31st of last year. Now bear in mind the fact that recently we've had headlines like “foreigners desert Zimbabwe stock market” up against the fact that the market itself as we reported previously has been forcibly closed by government intervention recently.

Therefore, I don't really believe anybody needs to burnish their CFA credentials to appreciate that, these 2019 results rather look like the good old days of the Zimbabwe Stock Exchange, at least for the time being.

Of course, in parallel to the Zimbabwe Stock Exchange. Frankly, it strikes me as little short of miraculous incentives will be required to get anybody looking to invest in a Zimbabwean stock exchange in the near future simply because we cannot rely on the government not to intervene.

Deals news this week, Euronext received clearance from the Danish FSA to acquire up to 100% of the securities of VP Securities, the Danish Central Securities Depository.

Elsewhere, the European Union's regulators have halted the LSE Refinitiv probe awaiting data. According to a spokesperson. “This procedure in merger investigations is activated if the parties failed to provide in a timely fashion an important piece of information that the Commission has requested from them. Once the missing information is supplied by the parties. The clock is restarted and the deadline for the Commission's decision is then adjusted accordingly.”

More delays ladies and gentlemen leaving LSE management becalmed once more while the world moves on around them. This could be a fair investigation by the EC, it could be gamesmanship. Whatever the realpolitik, the London Stock Exchange group is exposed.

The National Stock Exchange of India NSE their large transfer agency business indeed it's the largest transfer agent player in the Indian marketplace. CAMS, has got the nod from Sebi, the Indian regulator to float in an IPO... those papers were first filed in January.

In new markets we heard about the Dream Exchange. The Dream Exchange is backed by Cadiz Capital Holdings, they've partnered to create the first ever minority owned stock exchange in the United States of America.

Meanwhile, if you're looking for some reading during lockdown, don't forget about my latest book Victory or Death. We know COVID-19 is a killer, but can it kill your career? How can you fight back? Well, one good way is to be reading my tome.. 20 years old from the excitement of the original FinTech best seller Capital Market Revolution, “Victory or Death - Blockchain Cryptocurrency & the FinTech world” is an easy read explaining the differing and diverging roles of banks and exchanges, so that you can help understand the winning business models of the New World Order and place in perspective just what Bitcoin, blockchain and cryptocurrency mean for markets, amongst other trends.

It's a binary world, your career will sustain or collapse in the next stage of the digital marketplace. 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 that tome to arrive, before you get to reading Victory or Death, why not drop by IPO Live, that's my new weekly live stream coming to you on LinkedIn and YouTube. It went out last Wednesday for the first time and it'll be back this coming Wednesday at 6pm London time that's 1300 hours New York time discussing all sorts of matters of moment the recordings online nigh on LinkedIn and also YouTube devoted to The wildly exciting COVID-19 centric topic of Fluconomics: that's Episode One of IPO Video Live

Meanwhile, in crypto news this week “Coinbase and Bitstamp's long term plans may include lower trading fees” went the story well, I added a typo alert in Exchange Invest this week. If you read the statistics Well, a Binance platform is being lionized for charging 0.1%. We can all trade a significantly larger amount of exchange traded derivatives on IBKR for under $1. Cryptoexchanges are obscenely expensive. This Coinbase platform at five times the Binance platform I mentioned a moment ago is surely unsustainable. But the worst news is that Binance at 0.1% is at least 10 times more expensive than the largest legacy digital brokerages in the world of exchanges of ETD and yet those brokers like IBKR have a handy markup on top of the wafer thin legacy exchange traded derivatives exchange fees.

Crypto markets are expensive, and therefore arguably inefficient. A great reckoning must surely be coming to the pricing of all of them. And indeed, if you think that the world of cryptocurrency exchanges has run away and become surely a parody of itself in the hype, there was a fantastic article from the BBN Times you've never heard of the BBN Times well, it's one of those sites that seem to give you lots of ideas how to run your own business and indeed derive some money from side hustles and things like that.

“Just like a fine wine, a crypto based business is only going to get better with time” ran the introduction to an article which was entitled “10 reasons to run your own crypto exchange business.” It has to be said when the point of sites like the BBN times are offering you the opportunity to build your own Amazon side hustle or build your own crypto exchange business, then I think I'm probably actually more likely to be running away from the crypto exchange marketplace rather than seeking to engage with it.

The Futures Industry Association released their first half 2020 data, it told us something that we were all readily expecting: spectacular numbers, greater than 32% growth across the world of exchange traded derivatives in the first half of 2020.

Great news for yield curve lovers. There's something to base your mortgages on these days in the US dollar environments. Tradeweb markets and ICE Benchmark Administration have introduced Tradeweb ICE CMT rates. It's another very, very cool innovation from the IBA team. It's got excellent parents and makes for a fascinating impact on financing especially longer term into things like the mortgage market and related issues over 10, 20 and 30 years.

Elsewhere, Bloomberg, they've been publishing calculations related to the IBOR fallbacks. It's an excellent resource which has been studiously generated and checked across multiple departments and disciplines within Bloomberg. I would suggest the hand of my good friend, former LIFFEr and long standing practitioner and parishioner Jonathan Seymour is clearly fingerprinted across the DNA of the output. At the same time. Refinitiv have launched their term SONIA reference rate prototype, the clear duplication of benchmark efforts between Refinitiv and its putative future parent LSEG. Subject to of course, European Commission approval is the latest of all troubles for what could I be surely a doomed deal with the EU antitrust looking to be lining up to perhaps sink it or at least delay it to the point of excessive financial pain?

Meanwhile, Refinitiv management we hear refuse to recognize their own inadequacy and excessive girth instead preferring to sack sales folks. Worrying stuff all round. Fair enough. The sales team at Refinitiv might be a bit bloated. I mean, Refinitiv had something like two and a half thousand people in sales and marketing until recently. That's more than all the people who work on every aspect of the data business within ICE for instance, but even so, proportionate to the company's bloat, I don’t see the problem being inside the marketing department compared to others higher up?

Deutsche Boerse, they're still somewhat embarrassed by the remarkably rapid Phoenix like descent into hell of Wirecard. They've produced new rules to expel insolvent companies quickly - strikes me it was remarkable that any big exchange group such as for example, Deutsche Boerse, could not have thought ahead to the risk of a sudden market collapse and a top tier listed company. I mean, EUREX as a CCP does that very well, thinking through all the possible eventualities, but clearly the cash market folks are stuck in their binary box of potential outcomes. It's good to see Deutsche Boerse acting now but the lack of foresight is a cause for concern. And there is indeed of course the risk that other exchanges have the same gaping legacy rule loopholes. Meanwhile, presumably the audit consultant fraternity are circling above the offices of DB 1 and STOXX to check what else might have been omitted from their stock inclusion processes for their various indexes.

One Piece of interesting new content coming along: the owner of the auction website in Poland Allegro, a putative exchange, if ever there was one, that's Poland being one of the few markets where in fact eBay is not dominant... Allegro has, I believe, a 79% share of the e-commerce market in the 40 million nation of Poland in the center of Europe.

Meanwhile, two pieces of good news this week for the Hong Kong Exchanges Group. They've obtained US CFTC permission for the 23 MSCI Asia and emerging markets index futures contracts, which they recently managed to license under the rules of the incumbent exchange, then trading them, Singapore. At the same time their huge news, of course was the arrival as I mentioned earlier of Alibaba’s payments arm ANT Financial, which is seeking a dual listing alongside China in Hong Kong. as Charles Li, the chief executive, the outgoing chief executive of Hong Kong exchanges noted “Ant’s move, affirms Hong Kong's role as the world's leading international IPO market.”

Fairly difficult to argue with when you've got well, just one slug of business coming along, that's going to be worth something like $200 billion. It's a huge boon for Hong Kong. It's a huge frustration for the New York exchanges as they are de facto macro sidelined by political stresses.

Elsewhere third piece of news in the Hong Kong universe, they're going to get a new tech index to track Alibaba, Tencent and peers. That came, of course, in the same week that actually it emerged that given the recent massive rise even the NASDAQ index in the USA is being influenced to a remarkable degree by something like half a dozen US tech stocks.

Therefore with Hong Kong seeing the future in Chinese tech, we move across to well, somewhere on the steppes: the Astana international exchange AIX, they've launched a regional equity market segment and moving slightly further west still, good news from Moscow: Russian lawmakers have backed the plan for retail investments in foreign shares, meaning that US and other stocks will be available via the MOEX platform within the course of the next month.

Technology news this week Bursa Malaysia they had a bit of a whoops nasty they had to close their platform down in the middle of the afternoon 3.30pm last Thursday, but they ultimately were able to reopen on Friday morning. No clarity yet as to actually what went wrong although all the vendors involved are clearly looking very carefully to try and find the source of the embarrassing outage.

The ICE: their ETF hub has announced the launch of an innovative customer basket negotiation technology, another neat and funky way for you to break down and reconstruct your ETF components. And finally, last but by no means least, we mentioned just the other week Exberry, a new entrant into the software provision of matching engines. They've already got their first client: they're going to be delivering to the London Derivatives Exchange, which nowadays is a crypto asset token based platform. Great news. Therefore, LDX, they're still pushing ahead with their plans moving on from their recent split with their original partners within the GMEX group. And now choosing an exciting new vendor, the Israeli backed Exberry.

In regulation, the European Union has seemingly leaked some documents which have arrived in the hands of Reuters suggesting they're going to ease market rules to help COVID hit companies. This is as rumored previously, it looks like research sops under MIFID II being rolled back. It's fascinating lexicographical point “temporary'' has two different meanings to the regulatory firmament. When adding a new regulation. “Temporary” invariably means that it will be permanent. However, when removing a regulation as a “temporary” measure that means it will actually only be removed for a “temporary” or short period of time.

ESMA meanwhile, they beefed up the news to market participants continue preparations for the end of the UK transition period. In other words, we're headed towards no deal on the exit of the UK at the end of December, because the European Union hasn't really been able to get its act together over some rather imperialist demands that they were making.

Similarly Euroclear have secured passporting rights from the Central Bank of Ireland that's a little box tick on the way to ensuring Irish Euronext Exchange can still settle into Euroclear after the end of EU membership equivalence due to Brexit. The long links there have been between the UK and Irish exchanges, which meant that Euroclear’s London facility was the CSD until now for Irish equity trading.

Elsewhere Capital Markets Union, a good piece of news at last: a little bit of progress even though it's rather too late for so many possible projects. The European Council has adopted new rules for crowdfunding platforms. Hurrah. It continues to move along but painfully slowly desperation of staring EU SMEs in the face after COVID-19. And they're still bereft of a coherent crowdfunding regulatory framework. And this one still has to go to the Euro Parliament amongst others to be ratified. It really needs to be done much, much faster.

In people news this week ESMA Chairman Stephen Maijoor, he's gonna step down in March 2021.

Over the Hong Kong exchange, they hired a couple of top woman managers to oversee IPO applications after a recent bribery scandal. And there were some power moves over at the Ghana Stock Exchange they named Abena Amoah as Deputy Managing Director. One person who however will not be seen around the parish for some time to come: The former adviser to Hong Kong's ex leader Cy Leung has been convicted of fraud.

Barry Cheung, the former boss and moving light of the Hong Kong Mercantile Exchange, a commodities marketplace which managed to burn through a simply colossal amount of money, including it seems at least Hong Kong $30 million of fraud which went to Mr. Cheung and his vested interests. Eventually the authorities shut the platform down in May 2013, which really was a tragedy.

The long standing saga of HKMEX is now concluding. It's such a pity. HKMEX was one of the most lavishly funded markets which never even managed to open coherently, utterly frustrating as it blighted funding for other startup bourses in subsequent years. Now, with a jail term of four years to serve, presumably Mr. Cheung will have ample time to write the book, “Hong Kong Mercantile Exchange, how not to create a marketplace.”

Speaking of marketplaces and failure, The Times this week of London ran a story “losses rise for amateur traders” during the pandemic. That was only one of many which was highlighting what had happened to those people who've been dealing with the leveraged retail brokers. To take three statistics: CMC Markets warned in January that 70.5% of their retail investors lose money that during the pandemic has risen to 79%. Similarly, the last rated IG Group has risen from 68% to 76%. And the winner seems somewhat pyrrhic in these circumstances. Plus 500. Their losers who were previously an industry leading number of 76.4% have ticked up to 80.5%.

On that mysterious and magnificent note, ladies and gentlemen, I'm going to leave you for today. My name is Patrick L. Young. Thank you for listening to the Exchange Invest Weekly Podcast. We'll be back next week.

Links

CCP12 Report: CCPs Show Strong Resilience Despite Covid-19

EUREX

SEC's Proxy Advice Reform Would Benefit Economy, Country

Law360 (Ed Knight, Tom Quaadman)

'Don't Fix What's Not Broken': Swiss Stock Exchange Boss Rejects Plans To Cut Trading Hours

Financial News

Hungarian Stockbrokers Oppose European Plan To Shorten Trading Hours

rmx.news

Nasdaq, Singapore Exchange form pact to smooth dual listings

South China Morning Post

Hong Kong Exchanges Soars On Ant's Dual Listing With Shanghai