064 Exchange Invest Weekly Podcast September 26 2020

TRANSCRIPT

This week in the parish of bourses and market structure.

Welcome to European free markets where the underbidder gets first ‘dibs’ at exclusive negotiation as MEMX launches and the EU suggests ‘the customer is always wrong’ when it comes to CCP usage, while, grudgingly, granting an 18 month Stay of Eurozone Armageddon..oOr as some others refer to it, Eurozone clearing access in London.

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

Good day, ladies and gentlemen, this is a very brief reduction of highlights amongst the key headlines from the week in market structure. Away from this podcast, all the analysis of the week’s many events and happenings can be found in Exchange Invest’s daily subscriber newsletter: the unique guide to the bourse business sent daily to your inbox. More details at ExchangeInvest.com.

NASDAQ futures are a thing of the past. The CFTC have granted their request to vacate the DCM - that's the designated contract market designation. It looked as if the NASDAQ exchange traded derivatives dream of a futures market had died in recent months when they went down the route of licensing to CME.

And indeed it has to be said CME itself: Where would their product development department be with the addition of judicious outside resources? If it weren't for NASDAQ, for S & P and indeed Eris - the swap exchange platform - CME would have a paucity of new product launches in recent times.

Meanwhile, this was the week of a near volte face of a digital plan to tax trading, as New York Stock Exchange, NASDAQ at all, held solid against the denizens of politics in New Jersey and the bosses of CME and CBOE went to see their local council in Chicago and said, “don't even think about it!” NYSE and NASDAQ plan a Chicago offsite backup trading session... Indeed a week of sessions, to demonstrate that New Jersey just doesn't have to be in their plans at all.

And soon, some legislators in the Eastern seaboard State started backing off the whole notion of taxing trading at the server level whatsoever Presumably to help the non Silicon inhabitants of Mahwah, New Jersey to sleep easier too, at the prospect of still having some jobs.

Meanwhile, over in Zimbabwe, there appears to be a sluggish response to the Victoria Falls Exchange as it searches for an equity partner for the offshore. U S dollar denominated marketplace. That, of course, sluggish response for equity partners is in the wake of the government shutting the main Zimbabwe bourse itself for a few weeks on a political whim. Frankly, who wants to even waste a proposal sketched on the back of a cigarette packet with stability issues like this?

Over in Brussels CCP, capitulation was achieved as was, widely expected. Well, at least if you're reading Exchange Invest or listening to me and my various missives and articles in, such as, Cap-X up to four years ago...soon after the Brexit vote. Anyway, CCP capitulation was achieved with a hugely bad tempered note from Brussels where the EU de facto blamed the clients for using UK clearing houses, regardless of the simple business expediency that they find for offsetting into Europe's largest multi currency clearing house providers.

And the Members Exchange launched, adding to the deluge of new stock venues this month alone. The arrival of any sell side denominated competitor platform, always prompts another round of that sell side upstart Bourse business parlour game: “Make a market on the platform’s longevity!”

T + 18 - 24 months is my opener on time until we can read the headline “Memx closes

If the economy deteriorates further on wall street goes with it. I'll be 12 months offered.

In India. Gift city’s NIFTY exchange is a Gogo! The Singapore Exchange & The National Stock Exchange Of India finally signing an agreement to work together, dropping the previous legal action as a result of Indian protectionism potentially robbing the SGX of liquidity pool they had worked hard to create amongst overseas investors. Plaudits to the SGX’s head of derivatives Michael Syn for his steely negotiating poise in, bringing a resolution here.

In deals this week, it was another frantic busy week for M&A in the parish. All the deals were in Exchange Invest Daily. Herewith the highlights!

Of course, the news of the week was led by project Botticelli, the putative sale of Borsa Italiana by the London Stock Exchange Group to, well by the looks of it, come, what may, Euronext.

Euronext gained exclusive bidder status this week, despite offering significantly less money than either Deutsche Boerse or the leading bidder Six, the Swiss exchange.

Botticelli by the way, is named after a magnificent artist, a household name who allegedly fell under the spell of the deeply moralistic Dominican friar Girolamo Savonarola inspiring Botticelli to abandon his art leaving him in penury without painting and relying on charity. Of course, one could never accuse the London Stock Exchange Group of losing focus on their core business. Could they?

Wherever you are, whatever sort of lockdown. You've got (looming?) ...Maybe it's time for the second way of lockdown, where you are, perhaps you no longer have a commute, but you could need something to read in the bath to relax after a long day at work and indeed plan the future of your career because we all know COVID-19 is a killer, but killing your career is something that's happening in the digital world day in, day out, thanks to FinTech.

To understand how technology is affecting life and markets, there's a new book to help you: that's Victory Or Death, of course, my missive discussing blockchain cryptocurrency and the FinTech world following on from the first global financial technology bestseller “Capital Market Revolution!” which I wrote as long ago as 1999.

It's a binary world. Your career will sustain or collapse in the next stage of digital - exciting developments across the globe. Hence the title of “Victory Or Death” lest You need reminding of the exciting times for finance in which we're living and the precarious possibilities for your career.

Victory or Death is published by DV Books and is distributed by Ingram world wide.

Don't forget by the way to check in on Tuesdays at 6:00 PM London, it's the IPO video live show. Our live stream back issues can be caught on LinkedIn, YouTube, and indeed nowadays, also Facebook. For YouTube. Go to IPO-Vid.

Crypto land this week: Two interesting stories. First of all, the European Union is going to introduce a crypto asset regime by - drumroll - 2024. According to EU documents that have made it into the public domain, via Reuters. This is of course where the European Union goes fundamentally wrong. There are still no signed off crowdfunding rules.

Despite crowdfunding being a decade old. The Capital Markets Union is a Chimera which exists only in Euronext press releases about buying Borsa Italiana, nowadays. And now the European Union has a fluffy ambition to be ready for the crypto world: when Bitcoin reaches adolescence or perhaps - and here, of course, I'm referring to my recent book, Victory Or Death - obsolescence... in the case of Bitcoin.

At the same time Binance, the controversial exchange, which I was about to call Chinese, it certainly has a Chinese CEO, but of course, all we know for certain is that Binance are not based in Malta. Other than that, anything is open to speculation. Anyway, Binance are apparently being sued for aiding and abetting the laundering of stolen funds, according to a Malta based news story in The Shift news this week.

Product news. The Chicago Mercantile Exchange are going to launch the first ever water futures.

Fortunately NASDAQ have managed to calculate the index for them. So therefore the CME’s product development group can rest easy. Once again, using third party information.

Readers may recall that I had an article in the January, 2000 AD edition of the Futures Industry Association magazine looking forward 20 years, which noted how water futures were a leading component of exchange traded derivatives markets by 2020, at least in my, thesis and forward view.

...Clearly I was slightly premature on the vision front, but it's good to see CME catching up with my thinking. At the same time, of course, this once again raises the question, at the start of this discussion: would CME have any product development currently, if it didn't have Nasdaq, S&P global and indeed Eris to thank for their major launches in recent times.

The Ant IPO is gearing up: their nine month gross profit may jump as much as 73% year on year...And those numbers weren't exactly too shabby, as we discussed a few weeks ago in previous times anyway. Meanwhile, Jack Ma’s Ant group, are lifting the IPO funding target to what looks like 35 billion US dollars that raises it easily into record territory if the sales succeeds several billion ahead of the cash raised by Aramco in its IPO just a year ago

Over in technology news, we continued to digest the ramifications of the Ddos attack spree on the New Zealand Exchange while the Tel Aviv Stock Exchange launched a new data hub following in the Cloud trend evidenced in recent weeks from NASDAQ amongst others.

Regulation news this week, the UK sent a warning shot to the many EU banks with positions and organization in the London financial center.

“European Union banks in Britain must have boots on the ground according to Regulatory watchdogs.”

As noted before in Exchange Invest, the substance Wars have been ongoing skirmishes in the European Union for many months, with frequent instances of national EU regulators in the 27 demanding, not merely management responsibility, huge swathes of staff headcount too from all manner of entities: brokers, prop traders, et cetera, already based in the UK, if they want to establish some sort of substantive position in the European Union’s 27. Now the UK is pushing its own angle to preclude EU banks from having only boilerplate offices in the City. There's no mention though, from the UK authorities yet of the nuclear button of bank capitalization, but that clearly remains a Trump card in negotiations.

Meanwhile in India, there was a moment of giddy excitement in the National Stock Exchange co-location fiasco. Might it be drawing to a close as one broker, Advent, was fined for their cloudy HFT activity all those years ago. Are we finally limping in classic Indian justice style to a conclusion of the NSC colo affair?

People news this week, dramatic information from the CCP 12 organization, the global association of central counterparties. They're going to lose their first founder CEO, Marcus Zickwolff who deserves huge plaudits for his role in shaping CCP 12 as the global body for central counterparties. He's been involved with the organization since 2007, when he was, of course, with EUREX and indeed, he's going to be replaced by someone else from the EUREX organization.

Teo floor is going to transition to run the global CCP body.

Back to Marcus Zickwolff. Absolutely enormous plaudits there. Marcus has created a clear direction for CCP 12, as well as a structure, which is like CCPs themselves, coherent, resilient, and makes a significant impact on the market structure for the good of investors everywhere. I wish Marcus every success in the future, as he creates a new advisory business Zire consulting services after several highly successful years, since April, 2017, as the inaugural CEO of the CCP 12 organization.

Meanwhile for those who are interested in how these things work in the obscure world of the British peerage... Michael Spencer the founder of ICAP, the man who sold NEX to CME group just a year or two back: his life peerage, which was recently awarded - and welcome it is too, for his acknowledged excellent work in the parish and in the city of London. Mr. Michael Spencer has been Gazetted in the name, style and title of Baron Spencer of Alresford. Delighted to see this as Exchange Invest has long supported Michael's elevation to the peerage. Arise Baron Spencer! We applaud your many, many achievements.

Oh, and incidentally on a little trivia, footnote of protocol on meeting a peer of the realm. When you address Baron Spencer, you should say “Lord Spencer,” as the standard form of accepted address. And ladies and gentlemen on that bombshell, a mysterious and magnificent note from the wonders of the arcane process of UK protocol:

Thank you for listening to this. The Exchange Invest weekly podcast Number 64 with myself, Patrick L. Young presenting.

Have a great week in markets. We'll be back with the headlines from the bourse business weekly nNext week. And of course, if you're missing these broadcasts, then try the newsletter every day for a greater and deeper sense of pith about the world of the business of Bourses: “Exchange Invest Daily” Monday through Saturday, arriving in an email box near you!

More information from exchangeinvest.com. Again, have a great week in markets. My name is Patrick L. Young. Thanks for listening.

LINKS

CFTC Grants Nasdaq Futures, Inc. Request To Vacate DCM Designation

STL.News

Nasdaq Tests New Jersey Exit Plan In Fight Against Trading Tax

Bloomberg

Murphy: Financial Transaction Tax A Matter Of 'If,' Not 'When'

New Jersey Globe | New Jersey Politics

Lasalle Street Titans Slam Proposed Transaction Tax On Financial Exchanges

Chicago Sun-Times

The Chiefs Of CBOE And CME Have A Warning For City Hall

Crain's Chicago Business