057 Exchange Invest Weekly Podcast August 8, 2020

CCP safety row sparked by Sir Paul Tucker. CBOE delivers decent results along with the Intercontinental Exchange and many others in the parish while LSE disappoints, and indeed LSE, Borsa, Italiana news spins out, CBOE, complete their MatchNow purchase and a surprise in India as Ajay Tyagi’s contract is renewed as head of Sebi

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

We begin this week in CCP land. There was a fascinating statement by the previously little known Systemic Risk Council. Their chairman is none other than Sir Paul Tucker, the former deputy governor of the bank of England.

“The Systemic Risk Council considers that the proposed guidance is not fit for purpose. (Referring to an FSB white paper on CCP resolution). As it currently stands since it does not provide a clear, internationally agreed solution to the problems of procyclicality and the current inadequate incentives embedded in plans based on clearing houses’ existing rules.”

This came on the scene, same day, as CCP 12, the global clearing house counterparty body, published their primer on credit stress testing...one of their latest white papers helping make a safer market overall. So Paul Tucker is an influential thinker and his being frustrated by the FSB process is going to promulgate quite a debate in the CCP world methinks. This systemic risk council itself which I think a few had heard of before, has a body of august and in many ways sound folk, but it also, I would have to note, appears to lack a single serious CCP executive name on its top body, which strikes me as a somewhat well systemic, risk.

Over in Budapest. Congratulations: 30 years of freedom, the Budapest stock exchange, remains open for business three decades after it reopened following the 50 year pause provoked by the evils of the dark era of communism.

Slightly shorter board closure: trading on the Zimbabwe bourse resumed. After that strange, closed down a number of weeks back, nonetheless Old Mutual are still not trading on the exchange...They seem to be moving their listing in Zimbabwe anyway, onto the mooted Victoria Falls exchange, which this week published some new regulations that are going to therefore dictate how you will be able to list in a country starved of foreign exchange in a US dollar denominated equity listing.

Over in India, power exchange, PTC, the power trading corporation, they have got the nod to set up the third power exchange with a launch likely by the next financial year.

Nonetheless I E X, the Indian energy exchange retains the lion’s share of some 95% of the day ahead contract market.

Over in New Jersey, they're still talking about the possibility of a quarter penny tax on stock trades.

A lot of nonsense being discussed there about the fact that trades can't possibly move away from the safety of Mahwah and the many data centers that are in and around New Jersey through which the pulsing of America's stock trading takes place. The proposed A4402, an item of legislature, perhaps could be best nicknamed the “Get Wall Street, Moving Out Of State).”

Over at the Indian Energy Exchange. They're planning a gas ventures sale, which could be rather fascinating altogether.

And to results this week, ICE topped their quarter, two earnings and revenue estimates with another quite smooth beat. The results call itself was oozing with a pipeline of potential as the empire of the Intercontinental exchange was outlined.

If I run for instance, a competitor index franchise, right now, it would be amongst those feeling career stalling frissons down the spine as Jeff Sprecher and his team ran through their potential future growth areas with a welter of encouraging growth statistics.

Over at the London Stock Exchange, not such cheery news: a year on year, fall in operating profit in the first half.

Ultimately LCH goes from strength to strength, the rest of the group. That's a bit “Meh” basically. There were three altogether, disappointments of really serious note in the parish during the quarter of this earning season, the Chicago Mercantile Exchange and the London Stock Exchange Group. At the same time, LSEG updated us on the all share acquisition of Refinitiv and we'll get to that in just a moment, but for the time being, let us recall that the U S Department Of Justice has closed their investigation into the merger without remedies as was essentially expected.

That said there was no word on whether or not the US Department Of Justice did so, closing this book while stifling a chuckle. LSE is desperate to acquire what amounts to a poor asset at an excessive valuation.

Fabulous numbers also came the way of the Singapore Exchange, superb net profits overall with an excellent jump that defeated all of the analysts.

And at least shows there's life in the old dog of the Singapore Exchange yet after the recent disappointment of losing the MSCI indexes.

Tradeweb, equally excellent numbers all round. And while we did have disappointment from DB1, just across the border in the Benelux countries, and also France, Euronext produced some stunning numbers altogether, which caused the share price to go into orbit.

Elsewhere we had numbers from the Toronto Montreal Exchange, and indeed also Thomson Reuters. They managed to exceed the forecast, but in, well, what amounts to essentially a homily for the history of the Reuters franchise and indeed arguably the Refinitiv franchise too... nonetheless their operating profits fell while exceeding those analysts forecasts.

In deals this week, CBOE Global Markets completed the acquisition of the Canadian ATS MatchNow that was acquired from Virtu a couple of months back. But the big news of course, was the U-TURN:, the London Stock Exchange is considering selling the Milan Bourse to secure its Refinitiv takeover.

So that's a disappointing U- turn all round as LSE look to now sell core assets in order to pursue what amounts to an increasingly dubious deal for Refinitiv. At the same time, the macro factors behind this may even suggest that neither DB1, nor Eurnext will ultimately, get a look in once, if, presuming! ... the Milan bourse is actually offered for sale. However, after months of denial, the one damaged item here is LSEG management credibility. Once again

Euronext, they completed their acquisition of VP Securities and in the crypto markets. The race is on to IPO. INX, they're looking at an IPO. They've scaled down the target to $127 million. We learned this week at the same time. Hong Kong based crypto from Digi.Next, they're going to get listed on NASDAQ in September.

Meanwhile, also aquas.IO, they're looking set to potentially be in that leading group, if not the first to list as they go public through a backdoor listing on the NASDAQ via one of the many SPACS, which of course have been the flavor du jour, or at least the flavor of the last quarter or so.

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Product news this week, the options clearing corporation OCC are welcome.

They're lowering the cost for users of U S equity derivatives markets that pulse through their CCP, joy reigns across the single name, options business, and somewhat beyond over in Hong Kong, they launched the second tranche, a neutron of it, MSCI futures, contracts. Those are markets, which they managed to essentially whip from under the nose of the Singapore exchange just a few weeks ago.

Elsewhere WisdomTree they've changed benchmarks in one of their ETC products for West Texas, intermediate crude oil. Moving away from the CME’s, somewhat challenged Cushing contract. They're now using a Bloomberg WTI crude oil, multi tenor access return index.

Of course readers, viewers, listeners, depending on which media you're interacting with extended invest. We'll note that in issue 1770 on 26th of May Exchange Invest reported that Wisdom Tree is shutting its oil ETPs. After shell had terminated a swaps deal. We talked about that at the time as being a clear backlash in the aftermath of the Cushing crisis, as the wisdom ETPs were shuttered.

Indeed. Other stories about the issues of the oil market. There were a couple of good numbers in Bloomberg this week. Talking about high people, made money on that negative oil price crash. A $500 million jackpot when oil prices went negative and ultimately saved the results of several oil majors, including perhaps most notably shell and Total during the last quarter.

Meanwhile, the Singapore exchange they're bouncing back, they've launched some fabulously innovative international REIT futures. The first such products in Asia, looking at real estate investment trusts over in China. Hog futures are set to make debuts, but people think that they're going to face big challenges according to reports and writers.

And in India, the National Commodity Derivative Exchange MD Kumar has said, he's exploring the introduction of an edible oil index technology news.

This week, the consultation has closed on the chest replacement timetable over the Australian securities exchange ASX. Some might say that the ASX managed to insert the word Pyrrhic into PR with them. The press release that noted that 91% of CHESS users are able to meet the proposed go live date of April 22. Which is a date of April 22. I'm pointing to a significant delay of several years over and above what was originally proposed. Curve fitting is alive and well, one might argue, but at least ASX seems to find a date when they might be able to rejoin the free markets of the world without having to throttle their trading because of settlement constraints as occurred during the Q1 COVID crash and will subsequently indeed underpinned by a 90 minutes from the Australian regulator ASIC, defending the field ASX to upgrade their systems, particularly the hyper venerable chess system. It was interesting. However, to see CEO, Dominic Stevens of the ASX quoted on the release, whereas normally we've been used to seeing deputy CEO, Peter Hiom fronting the delay announcements.

Anyway, hopefully we're going to see chess finally replaced by the digital asset system and we can all move on. Over in India, MCX is leading the way amongst the exchanges planning to roll out direct market access to retail investors. That's of course a direct market access, which is actually illegal under things like MiFID in Europe.

I wonder, will we see a spot of deregulation in the future?

Charles Schwab, they made a big announcement. Of course, we know that they're buying TD Ameritrade. They are going to adopt the Think Or Swim trading platform as part of that TD Ameritrade acquisition.

In crowdfunding news this week, Metro bank, they have acquired the P2P lender, RateSetter. They're looking actually at the idea, they may buy more such P2P lending platforms in the future. The deal has a bargain basement price tag of 2.5 million Pounds.

Although it could rise to somewhere around $15 million or beyond, depending on specific earn-outs. Elsewhere Lending Club demonstrated the problems of the P2P industry at the moment with a 90% annual drop in loan originations while they're Q2 earnings missed estimates on low revenues in regulation news this week, a director of the SEC, the American regulator was calling for private markets to open up to retail investors. Well, that does strike one as a bit of a Kettle Pot Black index issue. Doesn't it? I mean, could the SEC perhaps think outside the box and say, do something like open up public markets by reducing some of the overly onerous regulation on publicly quoted companies.

So we could use the existing regulated level public playing fields. Elsewhere US regulators are zeroing in on Binance chain. The SEC doesn't seem to be particularly happy about some of the issues pertaining to Binance, the somewhat nomadic force of cryptocurrency, but again, the somewhat nomadic crypto currency exchange.

... Of course, the question to ask, I suppose, is after tech talk, if the U S closes in on Binance, will they be forced to sell it to Microsoft? #askingforafriend. Elsewhere scandal. And this week the Chinese police took down the $6 billion plus token Ponzi. Arresting 109 people.

Elsewhere, in the UK, great news, the chancellor of the Exchequer has decided to drop CSDR which is going to hugely benefit the UK settlement industry, particularly in ETFs, amongst other assets. Of course, one might say in this complicated environment, could that possibly be a call to action for TAURUS 2? Given the fact that CREST, the UK settlement agency is a part of Euroclear...pending successful implementation, who knows.

In People News this week. As I trailed at the top of the bulletin, AjayTyagi’s tenure as SEBI chairman has been extended for another 18 months. That's the third extension after he was originally appointed for five years, that was cut to three years and now twice hiis position has been extended. Quite a surprise, a shock to rival the Ashley older Hong Kong SFC repo trade just a few months ago where it looked like older was headed to the UK to run the regulator there.

Both of these regulators, Messrs Tyagi and Elder looked to be completely departing until suddenly a new contract surprise emerged. Over at the EGM, which wrapped up the acquisition of the Spanish exchange, BME by the Swiss exchange, SiX. Jos Djisselhof. CEO of the SiX exchange in Switzerland was appointed as thus ensuring direct oversight of the Madrid arm of the SiX empire from group headquarters in Zurich. The Shenzhen Exchange, they have closed the vacancy, which has been open for several months after Wang Jan Jan was promoted to serve as party chief and chairman of the Shanahan stock exchange.

The number two position will now be filled by a leading official from the country's top securities, regulator, Sha Yan. Mrs Sha, we wish you all the very, very best. And finally this week in news white people delighted to see that Michael Spencer, a genuine Grandee Leviathan of the exchange parish has been elevated to sit in the upper house of the UK parliament, the UK house of Lords arise Lord Spencer.

The Cum-Ex scandal continues to bubble along. And indeed this week, it was quite exciting to see even the German banking association was being searched. As investigators continue to chase moles and all manner of other problematic issues pertaining to this which remains one of two significant black holes alongside Wirecard in the German regulatory ambit during the course of the last year.

However, let’s end with one fascinating story. In Mumbai heavy rain, toppled, the signage of the Bombay stock exchange building. Members of Rune Readers' Anonymous may interpret this as an inauspicious sign. Certainly. It's a technical indicator, which even as a former technical analyst myself, I believe to be without precedent in modern markets and on that mysterious and magnificent note, ladies and gentlemen, my name is Patrick L Young.

I wish you a great week in life and markets. Thank you for listening to what amounts, to a Heinz 57 varieties of markets in this episode, 57 of the Exchange Invest Weekly Podcast. Remember the live stream on a Tuesday at 6:00 PM. London time, 1300 hours Eastern time coming to you via LinkedIn and YouTube.

Have a great week in markets.

LINKS:

Statement By the Systemic Risk Council Addressed to the Chairman, Financial Stability Board, Bank for International Settlements on CCP Resolution

Systemic Risk Council

Ex-BoE Deputy Governor Fears 'Utter Mayhem' From Clearing Houses

CCP12 Publishes Primer On Credit Stress Testing - A CCP12 White Paper

CCP12

30 Years Of Freedom: Budapest SE Opens For Business Again (After 50-Year 'Pause')

Budapest Business Journal

Trading On Zimbabwe Bourse Resumes Monday Without Old Mutual

Bloomberg

Trade On Zimbabwe's Stock Exchange To Start On Monday, But With Conditions