067 Exchange Invest Weekly Podcast October 17th

TRANSCRIPT

This week in the parish of bourses and market structure, LSE sells silverware cheap, spooked by EU antitrust as they foolishly obsess over Refinitiv. Meanwhile, for anybody who wants to let TP ICAP buy Liquidnet using $450 million of your money through a rights issue. I can offer you a veritable portfolio of bridges!

In better news, Warsaw successfully lists the largest year e-commerce IPO.

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 news stories from the week in market structure.

All the analysis of all the weeks, many events and happenings can be found in Exchange Invest’s daily subscriber newsletter, the unique guide to the bourse business, which is sent daily to your inbox. More details at ExchangeInvest.com.

Congratulations, the Nobel prize for economics has come the closest to the parish since I believe the memorable win by Martin and Scholes in 1997. Congratulations to Paul Milgrom and Robert Wilson on their work, pertaining to auction theory.

Meanwhile, the European Union's, watchdog ESMA, they're working on a “plan B” to move Euro clearing from London to the mainland of Europe. In reality, when testifying in front of the political classes of the European Union, ESMA boss, Steven Maijoor has to say he has a plan: it's akin to Michael Caine in the back of the bus, dangling on the cliff edge at the end of The Italian Job movie.

Speaking of the London Stock Exchange. Good to see that they're empowering female funders over in Sri Lanka with what they refer to as - close your ears. If you're going to be offended, - “Hatch's kickass series four.” Gosh, that's the best London stock Exchange Group Story of the year after their hiring Peter Jessup.

In Exchange Invest Daily, I felt obliged to asterisk the full corporate title “hatch’s kick ass.” I suspect the bulk mailing software would refuse to send it otherwise. Anyway, it's good to see the LSEG delivering unstuffy messaging somewhere in their sprawling empire of otherwise dismal communications.

Anyway with this kind of modern thinking at LSEG how soon can it be before we can look forward to, ”ODD” Schwimmer, the notoriously out of his depth, Dave, CEO of the LSE group delivering his entire quarterly conference call through memes? Perhaps that's why David Warren announced his retirement as CFO:. He didn't fancy providing the financial overview to a TikTok lip syncing video.

I know, I know. We're just trying to create excitement about what the LSEG comms boss will do in office, albeit if they can successfully establish themselves as being remembered for being a boy, a girl, a ‘prefer not to say’ or indeed anything in between, then we'll have made some significant progress from their predecessor.

Gosh, I don't believe there's ever been a gender reveal party for an exchange communications boss. Perhaps LSE could start now posterior booting and all that modern lingo.

In deals this week. Yes. It's the discount deal of the year. The London stock exchange group have agreed to sell Borsa Italiana thanks to various shotguns pointed at David Schwimmer's head... to Euronext four or $5 billion. It's a cheap deal. No matter what others in the media might have said, even if it does leverage Euronext. at a Euro 4.325 billion price tag. Given that London stock exchange group have clearly panicked over the EU antitrust stance and walked right into Brussels trap, gifting Euronext excellent infrastructure to give them clear Southern heft.

Indeed, now the largest money earning revenue aspect of the Euronext empire. However that comes at a cost because it is therefore a genuinely Southern pivot. Paris is now a relative group revenue bit part player. Will Italy be able to out Machiavelli the powers and influence, which have ensured a steady French handle on the teller, ever since that brief spat around George Moller and rotating C-suites way back at the original invention of the, then all lowlands empire of Amsterdam, Brussels, and Paris, which created the original Euronext.

For London, this amounts to a shame. LSEG are selling core parish assets for no good reason whatsoever. The justification to do a deal, which helps define the pay package of the CEO and his cronies is no way to run a business, but it is the way the quasi hedge fund of market structure LSEG has structured incentives, AKA perversely.

Reuters noted in their story on the whole deal. “The deal is contingent on the European commission formally stating it will only approve the Refinitiv deal if all or part of Borsa Italiana is sold.”

At that point in time, the out of his depth Schwimmer contradicted by noting, “we believe the sale of the Borsa Italiana group will contribute significantly to addressing the competition concerns.”

AKA. ‘We're so desperate to have Refinitiv, Mrs. Vestager...The EU’s antitrust chief has free reign to continue her 50 shades of gray approach to antitrust with the LSEG a willing masochist welcome indeed to the London stock exchange group, the parish home of the mixed message.

Indeed the media delivered mixed messages too, but that's why they get paid by the word and not by the deal as clearly they know the values of a metaphor and the pricing of not much when it comes to assets, the story's binded run this week saying you're annexed paid a high price to halt an auction.

Well, actually Euronext got LSE’s Italian jewels, cheaply. Let's never forget that, as it killed it an open auction and ended up paying barely around 8 percent more than the previous high bid at the first stage of SiX, at 4 billion euros in the open market.

Euronext would have likely had to have paid much, much more as we have seen from other dynamic auction processes in the past. All the best Euronext: if they can manage to get assets below market value sold by alleged capitalists from London who are to say that they should not take the opportunity with both hands and grasp the nettle?

[00:06:56] However London stock exchange’s Group management are surely open to lawsuits in future for what amounts to a willful reduction in shareholder value by contingently overpaying for an asset that they're selling core businesses to secure through antitrust mechanisms. We're not quite in the Duncan, the value destroyer ‘DVD’ era yet but there could be a hint of a reprise.

The LSEG CEO Schwimmer clearly merits the accusation of being O-D-D, ODD, or “out of his depth, Dave,.” Hopefully he'll be able to survive the tides.

Speaking of masochism, TP ICAP jumped in this week and determined stubbornly to buy Liquidnet. So we can presume the bord are complicit in this idiocy. Indeed. We have since seen that the chairman and CEO have both been ramping up their share purchases in what amounts to the ultimate poker, double down of a career strategy.

It will be interesting to see if the TP ICAP shareholders agree to tipping another $425 million of good money after the bad stuff TP ICAP has willfully value destroyed in establishing what is a great boutique for staff and a rubbish investment for third parties. Adding a whole new layer of confused strategy in a separate non-contiguous arena tips, the masochism equation towards willful suicide and the investors in these rights issues can only look forward to substantial losses and indeed the contempt of the parish as they lick their wounds. After the inevitable write-off. It strikes me the upside for beleaguered investors here is once again, going to be the law courts, suing TP ICAP for making a deal on antiquated data.

After all Liquidnet was providing assets under management from 2018 and let's face it. If that howler is so obvious in the public domain already, there are likely other grounds too. Certainly the TP ICAP board and the executive have now made their bed. And I don't think they will enjoy heavenly dreams in the Starwood style.

But then again, look at Starwood. They've just had a debt default as well.

One new market this week, China is planning to launch a futures exchange in Guangzhou.

Whether you're pondering theGuangzhou futures exchange, or just looking at the future of your career, perhaps you're one of those people who could somehow, find themselves unemployed as a result of say, managing TP ICAP: we all know COVID is a killer, but it's ultimately FinTech that can kill your career with even greater gusto

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It's a binary world. Your career will sustain or collapse in the next stage of the digital financial movement. 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.

While you're waiting for your copy of Victory Or Death to arrive check out our livestream. Tuesdays 1800 PM London, 1:00 PM New York time. It's the IPO video live show and it is available on Facebook, LinkedIn, and YouTube in posterity.

This week, we had a marvelous discussion with a lot of Supercycle tops from the Elliot Wave expert. Murray Gunn, a leading technical analyst in the field who came on to tell us all about well, where the Elliot Wave is going to be leading us to in the future.

...And the answer is a very, very fascinating future. And one where your bottom line may be affected, if you don't go and listen forthwith to the recording, which has much to say. You can find on, for instance, YouTube at IPO-Vid, as well as Facebook and LinkedIn.

In crypto land one week we'll concentrate on just a single headline: China's central bank is calling for a faster digital Yuan rollout. That of course comes on the back of the rest of the world's central banks sketching, digital currency, as China was “forging ahead.” It's a sound example of blob think. The Chinese central bank is now being accused of trailblazing by implementing something we've been discussing for well over 20 years, it even made it into a book.

(If only I could remember the name).

In product news this week, the Intercontinental Exchange, they announced what was undoubtedly inevitable, a slight delay to the launch of outbox Murban oil futures through the new ICE futures, Abu Dhabi venture. That's going to be taking place nonetheless early in 2021. It's an interesting reflection on time value in the organization of ICE, a global pandemic drives the biggest Discombobulation of everything since the world war stopped all motor sport and more for several years, governments closed airports for weeks on end this year, while there are still all manner of tricky quarantines, precluding, travel, et cetera, et cetera, causing huge issues for the creation of any new venture at every point on the chain of organization through regulation.

And the result is going to be, a few months late with Murban trading and indeed, many, many more fascinating products. If you look at the press release, launching the new IFAD. The relatively brief delay, a bare blinking of the eye in the macro sense, represents an impressive demonstration of just how well organized both ICE and ADG M are given the unprecedented circumstances, throttling commerce, the world over one piece of commerce that wasn't well this week Allegro, the Polish dominant Provider of E-BAY equivalent option style sales services, and e-commerce.

The stock surged 63% on its market debut to leave the whole market capitalization short of NASDAQ. (I think I'm still a buyer of NASDAQ over and above Allegro at that full and wonderful valuation). It was a great day for the GPW - The Warsaw stock exchange functioned perfectly as it took on what began the day as a $12 billion stock and ended the day closer to 20 billion.

Technology news this week, one dominant story. The Mexico Stock Exchange followed on from Tokyo the other week with a ‘whoops nasty’ in the technology deployment department, ultimately suspending their operations for the day on the previous Friday to this podcast with a huge Outage, a technical glitch, to which we have no further idea.

...Although we were told it was not a DDoS attack.

In regulation, back to that wonderful world of stablecoins. The global watchdogs are agreeing rules for stable coins, like Facebook's Libra. It's an interesting reflection on, what is the time required to become seen as a firmament of civilization? Given modern central banking is barely 150 years old in most nations and a little over a century old in the world's economic powerhouse, the USA...It's interesting to note how the central bankers now are making rules, which on one level look sensible at the headline, but on another, smack of old line protectionism that any monopoly would appreciate as the central bankers seek to keep a hold of their monopoly money.

QV note in these releases, the classic line about more rules may be required for “systemic stability.”

AKA, the central banks are de facto saying, We'll fight to the death to keep our raison d’etre. Tricky part is I fear they won't quite manage to kill the whole internet. Seepage from the monetary system: is on and what can be defined as a currency is essentially a redundant term, when you can have real time settled digital assets, at which point, permit me a brief trumpet blow here.

That book of mine - again! - from 1999: “Capital Market Revolution!” - two decades before any central bank “trailblazed” on digital currency - was laying out precisely these terms. Perhaps you ought to think about buying yourself a copy of “Victory Or Death” to keep up there. The very notion that anybody can endanger your financial stability to even a scintilla of the damage wrought by the QE madness of the past decade or two is certainly a clear sign that “chutzpah” is alive and well in the world of central bankers.

People News this week, delighted to see Dierdre Somers, the former boss of the Irish stock exchange has been appointed to the board of Aquis exchange, marking her definitive return to the parish. The former FESE president I fully expect could well be soon the chairman of the Aquis exchange group, given that chairman, Nikki Beattie has been sat in situ for just shy of eight years.

And of course, as we all know, the UK FCA are a bit, well, ‘shirty’ about non executive directors staying longer than it should eight years in the wake of the Cadbury report on boards decades ago.

Finally: Vale, Rest In Peace. Joseph Sullivan, III, the founding president of the Chicago Board Options Exchange who died this week at 82.

I'm doing this week, once again, an entry for what might be termed GUBU corner.

This week's adventure in the grotesque. Unbelievable, Bizarre, And Unprecedented surrounds Italy where the government has just issued zero coupon three year bonds. By the way, I don't mean a discounted bond where the coupon is in the price accretion.

Nooooo!, I mean, a pure play zero coupon bond. You pay 100 and in three years time, according to the theory, - at least - you get 100 back. Now in reality. Well, let's just scratch the surface of the due diligence process. At-issue the ECB owns 25% of all Italian government debt. By the end of next year, even the very benign OECD who are always somewhat optimistic on their predictions about the EU they're predicting

Italian government debt will be no less than 192% of GDP. And now you can give this self-same Italian government, your money for nothing. If we GUBU our way across the English channel, we have that ominous message from the Bank of England with an added portent of doom. I mean, this after all worked so well in Japan for these past 20 years of stagflation, and they're asking banks, are they ready?

Just in case interest rates might go negative soon.

Back to those Italian bonds, where you get nothing for giving money to the government for several years at a time. Some might call it taxation. Others might reflect that once upon a time highwaymen like Dick Turpin, amongst other brigands were hung for similar financial practices.

And on that mysterious and magnificent note, ladies and gentlemen, my name is Patrick L. Young. Thank you for listening to this. The 67th Exchange Invest Weekly Podcast. Don't forget. You can get all the news on exchanges delivered daily into your inbox via exchange, invest.com and the exchange invest daily newsletter.

LINKS

Nobel Prize for Economics 2020

EU Watchdog Works On "Plan B" To Move Euro Clearing From London

Reuters

London Stock Exchange Group (Lseg) Empowers Female Founders With Hatch's Kickass Series 4

adaderana.lk

LSE Agrees To Sell Borsa Italiana To Euronext For $5 bln

Reuters

Euronext Paid A High Price To Halt An Auction

Yahoo Finance

Italy's Interventionist State Nails $10 Billion In New Deals

BloombergQuint