069 Exchange Invest Weekly Podcast 31st October 2020

TRANSCRIPT

This week in the parish of bourses and market structure. From the great nation that brought us rousseau and Sartre: “ is it a buy or is it a sale?” A philosophical dispute, afflicts Euronext middleware. After the joy of NASDAQ, a week of gloom, until ICE raised the profitable mood. Meanwhile, the world's largest Ant is heading for a slew of records in the public markets.

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 weekend market structure. All the analysis of the weeks, many events and happenings can be found in the Exchange Invest Daily subscriber newsletter: The unique guide to the bourse business, sent daily to your inbox. More details at ExchangeInvest.com ...and finally a word. On behalf of the echo. Thank you very much for the fact that I've got some temporary premises this week in the midst of a very, very frantic week of engagement. We're coming to you live from a wonderful ballroom in the center of Valletta.

Over in Bigworld, the 0816 intercity express trend from Lockdown Central to Temporary Desk is now arriving at platform two (Just beside the printer)... In other words, in BigWorld this week, model railway brand Hornby have returned to profit on a lockdown boom.

When it comes to Euronext, “Is it a buy, is it a sale? Oh man, this is way too complex”. That was the headline. We appended to a Uranus story of the week. The Financial Times’ Phil Stafford rightly tweeted that it was one of the strangest exchange communications he'd ever seen, which I think was putting it very, very diplomatically. Indeed.

Essentially the Euronext exchange had a bit of a data handling error. They couldn't tell “buy” from “sell.” It strikes me that could be regarded as the most fundamentally blatant failing of an exchange to do its core function.

That might be getting a bit closer to the descriptive mark compared to Phil Stafford's diplomatic comments, as in define an exchange? Well, I would define it as “we match buyers and sellers as a neutral venue.” Therefore, we could define Euronext on the past week's evidence as “we're a user neutral, lucky dip, where we will execute trades based around your orders, but we reserve the right to randomly deliver buys as sales and vice versa all with the gallic trademark shrug...because middleware.”

Indeed given the fact that previously in the week I was discussing, “was it middle earth or middleware?” that was the problem of the shutdown at Euronext that triumphant acquisition of Borsa Italiana seems well. So very last year with this latest confirmation that discerning buy or sell is inherently tricky for one of Europe's leading stock exchange groups.

Anybody who ever dawned a yellow jacket on the old floor of say LIFFE, or MATIF in Paris - wherever they were in past decades, they can readily confirm the operational complexity, even during open outcry. I mean, it used to be two separate boxes, whole inches apart on a sheet of paper with one to be ticked, #stressfulbinary or what?

Luckily Euronext, not in Japan. Otherwise they would now be facing endless ritual humiliation for weeks on end. As a cheaper alternative to accelerate understanding of these somewhat conflicting, but interrelated terms of trade. I can recommend some former floor trading bosses who could come over to Paris and offer “hairdryer” management until Euronext can discern “buy” from “sell”.

True. These figures, these consultants, as it were, might not even speak recognizable English to the sophisticated Enarque aesthetes of La Defense but I could believe they will manage to make their points clear enough, even though an Essex centric language barrier may have to be circumvented with a few descriptive hand signals.

...that brings us to results. All the results were in Exchange Invest this week, but let's pick a few - perhaps I was going to say highlights - but actually we really need to kick off with a slew of low lights. The Chicago Mercantile Exchange. Oh, dear.

what an earnings miss: quite spectacular.

Everywhere you look, there's volatility, things like grains, which traditionally the Chicago Board of Trade traded very, very well...tThey're actually pretty much at record highs and yet CME volumes are flat lining. It's really funny. How, what looks simple on the white. Board has an issue when it comes to meet real life.

Thus, of course, TP ICAP...They had a message of, “all we have to do is reduce personnel overheads and EBITDA will explode!” That lies in a heaving mass of silted ineptitude. Meanwhile, over at CME, the message there has long been: “We just have to keep the ship on autopilot and milk the monopoly.” Now that appears not to be sufficiently long-term to be, well, a full career strategy as I imagine its architects hoped.

In essence, the CME strategy has now been proven to be penny wise and billions foolish. Equally over at Deutsche Boese, quarterly net profit down 9% missing forecasts as per CME. DB1 exudes a lax strategy and it shows, template and outbreak of management would be very, very welcome.

No better news in India, MCX there, they reported net profit drop of over 18%. While the London stock exchange's profitability was generally flat lining. At least the LSEG told us something that we absolutely knew was going to be the case. Anyway, the takeover of Refinitiv: that dire deal will be delayed until at the earliest, the first quarter of next year.

Elsewhere in deals, the Nigerian stock exchange: They're looking for approval to list their shares next this month...and following their recent, acquisition of TD Ameritrade, Charles Schwab are planning to lay off 1000 employees as they make that shuffle from the West coast, somewhat inland - that we've been talking about recently - towards taxes.

Elsewhere in China, there's a merger mooted. The Shenzhen Boure says it is going to merge its main Bourse with the upstart that supplanted it: effectively taking the SME board and implanting that into the overall larger stock exchange new markets with a bumper week of new market announcements. I'm going to cherry pick two that we had.

Of course, all the details were in the exchange. Invest newsletter this week.

First up Memx: the Members Exchange that's finally gone fully live, offering another alternative for those who wish to trade US equities over in the Middle East, the Dubai crown Prince Hamdan bin Mohammed launched the NASDAQ growth market for SMEs. Of course, if you're looking for some reading during lockdown...you may well be of course, a victim of a new second wave lockdown.

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In crypto land, this weak spot, a cynicism coming in, Finance Magnates ran a story. “Are Bitcoin holders, losing trust in crypto exchanges?” Actually, what they said of course, was using the deep down with the kids' language, “Are BTC hodlers losing trust in crypto exchanges?” The point they make is that the total number of Bitcoins pledged at exchanges has been steadily declining since March the 12th / 13th of this year.

Now let's just rewind a few headline items while that might be one of the world's leading exchanges. Binance? Nobody actually knows where they're based. BitMex. are doing their bit for the Vietnamese orange jumpsuit textile exporters to the United States of America amongst other jurisdictions. And OKex currently have, at least as far as I'm aware at the time of recording this podcast, at least one founder currently incarcerated. And have also suspended, actually giving people their Bitcoins back.

Even in a hyper bull market, which no longer really applies to crypto. One might be inclined to feel the above issues impinge on the outlook for the product set just a little bit.

Product news this week. Well, it's a frenzy, whether you're on the Chinese mainland or in Hong Kong, the Special Administrative Region, lots of investors looking forward to what is going to be apparently a $34 or $35 billion raise from the Ant group IPO smashing records in the process. Indeed, the South China Morning Post noted.

Banks and brokers are offering a record amount of $39 billion in margin loans for the Ant IPO elsewhere.

Great to see that water futures are finally on track. The CME group has announced December 7th for the launch of the NASDAQ Fellas, California water index.

Technology news this week. Sad news once again, from the Australian Stock Exchange, Their blockchain based chess replacement has now been pushed back to installation date expected April, 2023. Yes. That's April, 2023. And we're currently in October, 2020. That in other words means it's an update to replace the antiquated ASX chess T plus two system, which is now going to be T plus 24 that's T plus 24 MONTHS overdue.

And self-evidently the whole system is taking little short of T plus forever to install with an option on the, well, what can only be #neverendingstory. The lack of action by the regulators. on what is now a profound national embarrassment for this creaking ASX monopoly is to put it mildly, noteworthy, Australia needs competition in settlement.

Elsewhere, the ritual humiliation of the Tokyo Stock Exchange continues with regulators beginning onsite inspections at the Tokyo Borse after that highly embarrassing outage of a couple of weeks ago, thing is I fear the Japanese authorities may be shooting themselves in the foot here for if they're not careful, they risk appearing overzealous in a way which may dissuade their charm offensive to attract other parties to the financial center of Japan itself with this show of strength on JPX elsewhere. One embarrassing fall over this week was the Colombian stock exchange, which had a data center outage, which closed on business operations last Friday.

One happy piece of technology news to finish this week's update: the Colombo Stock Exchange in Sri Lanka, they have been able to run their exchange remotely during the COVID-19 curfew, affecting the Sri Lankan state.

In People news or Joji Okada has been appointed a governor of JPX regulation.

Meanwhile, “the top cop” as the Wall Street Journal, put it, the man who runs the New York Stock Exchange’s in-house regulatory, unit Anthony Albanese. Is heading to the Silicon Valley venture capital firm, Andreasson Horowitz who've got a big interest in the future of the crypto economy.

Elsewhere, in Malta, the boss of the Malta Financial Supervision Authority Joseph. Cuschieri is under pressure to resign, following a sad tale where the discredited former Maltese government has ended up seeing an effect of bureaucrats being rendered untenable given his accepting all manner of exciting trips to Las Vegas, No less, with a man currently awaiting trial for the murder of one of Malta’s leading journalists. That sadly looks like being a position as boss of a regulatory agency - an ESMA national regulatory agency, no less - which is going to result in being rendered untenable. Indeed. Also he sits as a Maltese representative on the supervisory board of the European Central Bank. I don't think that's a viable look for the long term, despite his management abilities.

In case you missed it. The 1MDB debacle, which delivered amongst other things, the movie, “The Wolf Of Wall Street,” and many concomitant murky financial dealings, which could have been seen in “The Wolf Of Wall Street.”

So Goldman Sachs being fined pretty much record amounts in a dazzling array of jurisdictions.

Last week elsewhere we’re heating up.

This is the last Exchange Invest Weekly Podcast before the American elections. But could it make any prophecies or predictions, but one thing that is interesting on the prediction markets and in the gambling markets, finally, there is more money on Biden, but actually a lot more bets on Trump.

Who knows where that's going to end up, come next Tuesday evening, November 3rd, and on that mysterious and magnificent note, ladies and gentlemen, thank you for listening to this the Exchange Invest Weekly podcast number 69 with me, Patrick L. Young. Have a great week in markets and catch up with you in the newsletter Exchange Invest during the week.

LINKS

Model railway brand Hornby returns to profit on lockdown boom.

City AM

Euronext - Is It A Buy, A Sell? Oh, Man This Is Way Too Complex

Euronext

Euronext Resolves Mix Up Of Buy And Sell Orders On Trades Struck On Tuesday

Metro US

CME Profit Slumps On Low Rates; Election In Focus

Reuters

CME Group , Inc. Q3 Adjusted Earnings Miss Estimates

Nasdaq

Deutsche Boerse Quarterly Net Profit Down 9%, Misses Forecasts