068 Exchange Invest Weekly Podcast October 24 2020

Transcript

This week in the parish of Bourses and market structure, NASDAQ obliterates Q3 earnings, estimates. Ant financial IPO is a go. CBOE buys BIDS. and the London Metals Exchange ring is closed for another half year due to COVID. Euronext falls over and Mahwah. New Jersey's biggest industry hangs by a thread, thanks to government intervention.

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

Over in New Jersey, surrounded by the labor unions. A state representative. Mr. Gottheime was raising the alarm on the proposed New Jersey tax on financial transactions.

Too late methinks: NYSE and NASDAQ have threatened to leave New Jersey. If the transaction tax goes ahead, noted Data Center Dynamics. And indeed I do suspect it's just too late for New Jersey. Withdrawing the tax now is merely a timing issue. Given how desperate the Tristate area is for taxation revenue, as it approaches the death spiral of insolvency.

The “Soak the rich” approach is deeply embedded in the region's politics. Wall street’s, only defense is to deliver a polite bloody nose, where anyway, the limitations of the New York data center ecosystem are coming close to capacity on various metrics, such as for example, stable power supply.

A fresh data center.start on a clean sheet of paper out West will be best for the U S parish and its future execution of orders.

In a decade, Mahwah, New Jersey will for the financial industry amount to little more than a trivia question for exchange nerds with a footnote in electronic trading history.

Indeed, there may be 50 ways to leave your lover and barely half a dozen means to exit a commercial airliner but ultimately there's only one way. Jurisdictions can get rid of businesses: Raise taxes in a competitive digital era.

The West beckons for the American trading infrastructure.

Elsewhere in terms of moves, the finance minister of Zimbabwe has by the time you listen, to this, opened the Victoria Falls stock exchange. Interesting to see how that one moves forward.

In results this week, spectacular numbers from NASDAQ plus 13% revenue growth broadly based across the entire group company.

The Adena Friedman revolution is marching ahead, 49 cents per share dividend and indeed excellent results obliterating the estimates... while meanwhile, the NASDAQ CEO noted the cloud is the future of the industry. Adena Friedman is precisely correct. Nowadays, a genuinely digital business leader has their head in the clouds for ALL of the right reasons, other results.

This week in brief, Charles Schwab beat their earnings estimate by about 4 cents, Interactive Brokers disappointed. They were 3% down on their earnings. And indeed also not such good news:The Indian energy exchange, hitherto, a darling of the sector: 9% declining Q2 profits deals this week.

Well, it was a busy week for M and A, and the parish, all the details were of course in Exchange Invest Daily in considerable detail.

This newsletter offers you all the insights you can possibly want for $250 per person per annum, no one can afford to be without it in capital markets and market structure. For the sake of this podcast, let's look at some edited highlights: CBOE global markets. They agreed to acquire BIDS trading, an absolutely intelligent, sensible, coherent move.

And indeed how ironic: the Plato partnership set up to shake up equities trading and their greatest legacy achievement in this regard was to create BATS, CBOE LiS lists, Large In Scale...Thanks to a chance meeting in the waiting room before presenting their respective wares to the player, to a partnership by Mark Hemsley and Tim Mahoney, respectively.

This deal is totally sensible for CBOE And indeed once they had worked their way through the Liquidnet data room, it probably completed the CBOE conviction of this deal’s soundness. Equally time to get the SEC onside because of the rather curious loophole, which is now being closed in one way or another, whereby U S SEC exchanges could not also own ATS platforms (unlike the case in Europe, for example). That seems odd, given that in the USA, of course, an exchange operator can own a multiplicity of exchanges, which are all absolutely identical apart from what amounts to little more than a micro shuffle of execution difference. For CBOE this is a simple logical bolt on undertaking..

...One might argue a defensive move in Europe where they already have huge and very, very rapidly growing volume from their Large In Scale joint venture with BIDS. Thus the deal has many ramifications. And indeed I was delighted to briefly cherry pick a few in Exchange Invest Weekly, If you'd like to subscribe, send me an email ([email protected]) or drop by ExchangeInvest.com and send us a note.

Ultimately the biggest losers in the CBOE BIDS structure must of course be both Liquidnet and indeed their bidder TP ICAP. Indeed. As I noted this week, our TP ICAP taking for fools, or are they just cheapskates? I must admit to some shock and contempt when I read in the Financial Times what had been spun the previous week as major investments by the management supporting what is, of course, a deeply flawed deal to acquire Liquidnet by the already stressed TP ICAP entity, where the brokers rule the roost and shareholders are a significant part in the capital mix.

...Albeit the shareholders amount to little more than a vital spare. If they're to be placed under significant dilution in a mooted forthcoming rights issue. As the Financial Times noted about this management share purchase, “Amid waning confidence, chairman Richard Berliand and, and chief executive Nicolas Breteau this week stepped into the fray and bought shares worth 57,000 pounds and 23,000 pounds respectively.”

Wow. So ultimately last week's headlines about the TP ICAP chairman and CEO investing to support the deal are more a case of having raided their petty cash boxes. They bought a few shares: To trumpet your support on what is collected barely a hundred thousand dollars in investment is an insult to the shareholders’ intelligence, particularly after, as the FT notes, the TP ICAP management have engineered another drop in the already sickly share price of a third in recent weeks.

And that was indeed before this week where the stock, once again has been in decline as the Financial Times company concludes of Mr. Breteau, - whose career I believe hangs by a thread - “With so much at stake, he might have put more skin in the game.” That sounds like a management epitaph to me.

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You can catch this and indeed all of the back issues are on YouTube via IPO-Vid. The live stream can also be found on Facebook and LinkedIn.

In crypto land this week, the bad news from crypto land was another delay in the rehabilitation plan for Mt. Gox. And meanwhile, we had stories that the finder of, OK EX had been arrested - OK Exchange, which seemingly has a joint venture with the Malta stock exchange in the legacy world was itself stopping withdrawals from the platform. Worrying times as well, or possibly confusion, not letting people have their money back on demand amount in my book, to, three impossible things before breakfast. When it comes to generating the sort of consumer confidence that exchanges are supposed to exude, I think crypto is falling far short.

Meanwhile, we also had, well, another day, another Binance shuffle as Binance Jersey shut its operations less than two years after launch. Nobody knows where this exchange is actually based. and now it loses another office in a credible regulated financial center.

In better crypto news, The Bahamas have launched the world's first CBDC central bank, digital currency: the Sand dollar plots to The Bahamas for a full rollout while the Chinese are still rolling out their very, very interesting digital dollar or Yuan, Digital one. And also we're hearing plans from amongst others, the Moscow central bank at a point in time when the ruble itself is under pressure. Once again, on the international markets, finally, a statement of wild optimism. A digital Euro is very likely within a decade, said Finland's chief central banker.

Well, that is indeed significant optimism, ladies and gentlemen, if the boss of the Finnish central bank thinks the Euro will still be in existence in a decade's time.

In product news this week, some crushing news for the CME as JP Morgan, worried about their volume outlook, whether it's the barges or the Cushing crisis, the exchange traded derivatives energy balance has, it seems shifted decisively, JP Morgan reckoned that oil product futures have shifted from 52% to 43% in favor of CME to precisely the opposite.

43% to CME. I'm 52% to the ice following the CME’s mismanagement of WTI contracts became apparent some months ago. That shift strikes me as all the more dramatic given CME has that huge warpage of quasi passive business from oil, ETNs, Exchange traded Funds, exchange, traded notes, and such like as well as retail hedges in spread bets through CFDs and much, much more.

In essence. if the headline number is now 52 43 in favor of ICE I'm minded to think the commercials are now indeed departing CME in droves and let's face it, which board would willingly put up with the sort of basis risks, which emerged during the Cushing crisis?

Elsewhere big news of the week, apart from the fact that Europe's biggest ever e-commerce flotation of last week, Allegro has now already spawned the birth of Allegro stock futures on the Warsaw stock exchange.

Of course, that's a mere nothing. I mean by good. Well, despite the Warsaw stock exchange has great success compared to Jack MA's Ant group, they've received them Hong Kong, and Shanghai's exchange, regulatory approval for the upcoming IPO. Let the records roll. It looks like it's going to be a world record in terms of the amount of money offered, beating, even Saudi Aramco just a year or so bBack on the site of the Tadawul exchange

Technology news this week, amounted to a bit of a tsk tsk Oh dear. Oh dear. Oh, dear segment: the Tokyo stock exchange continues to bow, apologize, scrape and do all sorts of things saying that it's going to do everything within its power to avoid the recent and profoundly embarrassing fall over. Meanwhile, Euronext, they had a monster problem which affected pretty much the entirety of the Euronext empire during the course of two glitches on Monday, becoming the latest exchange to suffer a near day’s outage. They reckoned. the blame was well middleware, which was somewhat vague to put it mildly.

We termed it, in Exchange Invest, “a tale of two glitches. Euronext does Dickens for the digital age.” Hopefully that wasn't against the background of another French revolution. I do have some sympathy given the complexity of systems within Euronext and indeed during the open outcry era, we rarely managed a week on any major floor without some sort of data feed failing.

That said exchanges in certain cases have a remarkable ability to preach hypocritically. Thus, the “all public companies must be transparent in disclosures” message to listing can all too easily turn into codified gibberish when there's a problem in the Bourse itself. Tartly stating “middleware” is about as useful as that pithy, but bland exhortation to a young Dustin Hoffman encouraging his future career, pertaining to “plastics” in The Graduate,

Perhaps Mrs. Robinson will emerge from a Euronext data center and enlighten us much more specifically in the near future.

Regulation news this week. Well, the Bank of England was offering huge speeches on environmental finance. Andrew Hauser, the executive director of markets spoke to the investment association and talked about “from hot air to cold, hard facts. How financial markets are finally getting a grip on how to price, climate risk and return.”

There you go. Ladies gentlemen, hot air. has a price - Just ask the central bankers.

Ultra big news of the week in Clearing: the U S CFTC and the bank of England have signed a new MOU - memorandum of understanding - for the supervision of cross border clearing organizations. This matters on several levels; for one, two grownup organizations who understand central counterparty clearing or talking to each other much closer than ever. That's excellent news. Meanwhile, the other level relates to politics: ignore the endless stream of pyramid Piffle , which is the European union's protectionist, jilted spouse in the throes of divorce drivel, like everything else in fairyland. I mean the Brussels bubble that ignores any vestige of currency, comm economic reality in the world of clearing derivatives.

If you don't understand that Google my. CapX article from some years ago, which neatly outlined what was going to happen in the world of central counterparty clearing. And indeed proved entirely prescient as to where we are. Now a US trade pact may be difficult with the likelihood of the blinkered tax hiking.Anti-trade Joe Biden, coming to power. Especially given the fact he's a moderate, but probably a moderate puppet compared to his own party's crazy base which is as economically illiterate as the European Union. But this is a very strong sign, this clearing agreement that the U S recognizes the UK CCPs and sees them as the backbone of the only top tier European financial center.

Moreover CFTC - Bank of England are taking action in a way that is systemically vital, but too detailed methinks for whoever is in the White House come next year.

People News, just one story. NASDAQ has announced the retirement of their chief financial officer, Michael Ptaznik all the very, very best to him.

Presumably if he returns to his native Canada, I suppose we might see him on the NASDAQ Canada board in the near future. Meanwhile, congratulations to Ann Dennison the controller and chief accounting officer of NASDAQ who’s been appointed as CFO.

I'll leave you with one interesting aside in the world of financial centers, Japan is planning a regulatory hub for foreign brokers who can file their paperwork in English.

Now that is a somewhat seismic shift in the previously opaque and rather foreign bank averse, Tokyo - Osaka financial center. And on that mysterious and magnificent note, ladies and gentlemen, thank you very much for tuning into this episode 068 of the Exchange Invest Weekly Podcast with myself, Patrick L. Young, have a great week in markets, and don't forget if you want all the details every day on what's happening in the business of bourses subscribe to Exchange Invest more details@ exchangevest.com.

LINKS

Surrounded By Labor, Gottheimer Raises Alarm On Proposed NJ Tax On Financial Transactions

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