076 Exchange Invest Weekly Podcast December 19 2020

Transcript

My name is Patrick L. Young. Welcome to the bourse business weekly digest for the last time in 2020. 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.

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

Affirm has postponed their initial public offering. The whole notion that companies might cancel IPO's because market pricing seems to be landing closer to Mars than Elon Musk has yet managed, amounts - like this sentence - to a somewhat tangled metaphor: whatever lies behind these cancellations, we do need to consider the reality of the IPO pricing fiasco. Last week, the SEC, frankly, blundered around the market data issue.

I mean, it was only at the weekend. I began to appreciate that a cast member of a Kardashian reality show was not moonlighting as an SEC commissioner, but that still leaves a mystery of quite what some parties had in mind when they last week delivered somewhat emotive statements without much, indeed, any evidence that electronic markets, even in the SEC muddled NMS world. amount to some form of judge Dredd style dystopia.

In this curious - one might add contradictory to reality - vision of modern markets. The SIP resembles the forgotten Rustbelt desert gas station accompanied by wisps of spray blowing, almost in cadence with the moody background electric guitar riff.

Of course we could argue the forgotten Rustbelt element of our markets played out in Cushing, Oklahoma earlier this year, but that whole Farago appears to be simultaneously overseen and overlooked by another agency entirely of late.

Anyway, if you missed what some SEC commissioners may say about the SIP, it seems to fly in the face of the perfectly accurate data that hit my IBKR screen Friday without perceptible delay and all for frankly, a decent enough cost.

Oddly enough, the SEC seems to have bulk imbibed the buy sell side Kool-Aid and believes everything ought to be ostensibly free in market data without stopping to wonder quite how the magic of digital market information gets from the data centers of New Jersey to the rest of the world. That the SIPs became a problem one may argue stems from the analogue creation of Reg NMS itself...But that's a box nobody wants to think outside of because the SEC made it themselves.

As a derivatives person, I actually remain quite in awe of cash equity trading. A stupendously simple binary that has ultimately been rendered horribly complex by various vested interests. Anyway, amidst all of the frankly juvenile Hullabaloo from Washington DC. last week, I am minded to wonder. If these high handed Commissioners might be inclined to dismount their high horses and actually ponder the landscape of trading to address genuine gaping holes, as opposed to the imagined outrageous pricing in a parish where it's nickels and dimes for the exchanges, and nano cents for the analysts in Exchange Invest and always basis points, if not outright percentage points, for the banks, brokers, fund managers et al, to return to the top of this tale, the implication that IPOs are being withheld due to the - at best - utterly inept method of pricing stock offerings.

That is surely seismic. I mean, shrewd regulators elsewhere have made their careers pursuing much less flagrant dislocations. Airbnb is the latest conspicuous example of oligopoly issuer failure. And the issue is not an exchange nor in any way tied to a genuine market activity. The failure lies precisely with the issuing brokers clinging to a 19th century approach to selling stock issues. Nobody can anticipate perfect pricing. Anyway, stocks will always move according to that day's economic trends. But where brokers cannot price their stock to within 100% of the market value is an outrage, a scandal, and a big case of money being lost while confidence drains from the process.

The simple truth is when it comes to pricing stocks for public issuance, issuing companies and investors “are relegated to a cheaper ride on a public highway with cracked pavement and potholes” as one Commissioner last week, ludicrously asserted about something completely different.

If the regulators won't take action, then exchanges must consider how they can ensure companies come to market in an orderly fashion that may also involve finding other means to stop the ludicrous cost of listing, which emanates far from the modest fees of the exchanges themselves. The exchanges may be able to eke more from the process and above all else issuers and investors will thank the exchanges for bypassing what amounts to a massive recurring pricing failure.

My next podcast in 2021, we will have a deal or not. And thus, the Brexit transition will be clear or perhaps a little less opaque. That said, even without any clarity of resolution, it has become blatantly obvious that the old Project Fear campaign of the last five years has once again been proven woefully inaccurate.

indeed after four years of inaccuracy, of daft “Project Fear” projections - arguably even five of them - Yes. I was feeling somewhat vindicated when even the Brussels Bugle, the Financial Times, finally got around to admitting that its own excessively pessimistic reporting driven by dogma, not objectivity, was inaccurate.

The headline for that “Finance jobs stayed in London after Brexit,” as opposed, of course, to the Armageddon where everybody would have been making markets, continentally speaking. Let me also add, at this point in time, Exchange Invest is a much cheaper read than the FT daily, as well as being more accurate on these points!

Oh, and indeed note Bloomberg has reminded us recently of those stunningly inaccurate numbers presented by Xavier Rolet whose role in the Project Fear debacle tainted his legacy as London Stock Exchange CEO in parallel with his quixotic pursuit of the doomed Deutsche Boerse deal. The net result as predicted by Reuters’ Huw Jones last month and noted in the Wall Street Journal this past week: US derivatives traders are the unlikely Brexit winners.” That's a farcical situation. The simply disgraceful behavior of the EU in dealing with Brexit demonstrates perfectly that the UK was right to leave. However, my absolute favorite Brexit “Project Fear” story of the week, according to various media in the event, Britain ends up on the same trading terms with the European Union as Australia: the United Kingdom may suffer an avocado shortage. That would of course be the avocado, which the UK predominantly imports from Peru, South Africa, Chile and Israel. None of them come anywhere close to being members of the European Union.

Deals this week. One thing coming soon, Tadawul, to go public after 2021, is the latest exciting information to come out of Riyadh.

Don't forget. Of course. You've still got time. If you want to order it for the new year, a little bit of reading, What's happening in markets, life and technology. Remember my book, “Victory Or Death, blockchain cryptocurrency, and the FinTech world.” It's a binary world. Your career will sustain or collapse in the next stage of that digital advancement. Hence the title of 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 world wide.

Don't forget also to check out the live stream. All of the recorded issues are on YouTube: youtube.com. Search for IPO-Vid. We're going to be back on January the 12th, 2021 with Mark Makepeace talking about the history of FTSE, the index company, which he actually funded before it became an element of the London stock exchange group.

Over in crypto land this week: This was the week when the price of Bitcoin launched itself through $20,000 and many leading platforms, promptly collapsed, perhaps - who knows - one or two of the market leaders forgot where they left bits of their technology stack, given the opacity of their operations base.

Thus the juvenile and often sub regulated end of the spectrum has problems in the parish of exchanges, which may be cured with a little maturity or at least some more mature new entrants to that field. During the course of 2021 elsewhere, orange jumpsuits in South Korea: various execs of Coinbit have been charged over washtrading on their digital asset exchange.

And meanwhile, the Korean exchange is scrutinizing crypto related stocks. Suspecting file play.

In Estonia they're cracking down. The Estonian regulators have withdrawn licenses from over 1000 crypto companies during 2020 and elsewhere, the new Maltese Finance Minister has declared the Maltese “blockchain Island,” DOA. “RIP blockchain Island, new minister injects dose of realism into Malta's crypto dream” went the headlines.

Technology news this week: Exciting to see the Multi Commodity Exchange of India has received three bids for its new trading tech platform: TCS Tata Consulting Services, one of the local bidders, alongside 63 Moons, who are, of course the incumbent technology provider to MCX and also London Stock Exchange Group’s, Millennium Exchange.

Therefore this amounts to perhaps the first bid we've seen in a long time where NASDAQ technology has not been conspicuously bidding. Nonetheless, NASDAQ issued this week, their annual global compliance survey. They noted that accelerating surveillance technology demand from firms has been happening across the world.

Across the financial markets space during the COVID-19 epidemic, I'll add following that NASDAQ surveillance update came the sad news about a technology demise in the parish. Bay Street Systems are closing down and now looking to sell their IP technology. Contact Exchange Invest if you've got any interest in buying that asset.

Regulation news this week relief for the Irish stock market. The European Union's regulator has cleared the way to keep our shares trading post Brexit, because of course they still clear into Euroclear's UK and Ireland, CSD, which will sit very much outside the European Union come the end of the transition period on December the 31st, 2020.

People news this week, the CFTC’s Chairman Heath Tarbert took office in mid 2019. He's not going to hang around for the new regime under Joe Biden. So he's announced he's standing down. Good luck. Chairman Tarbert has been a sensible and coherent CFTC chairman since he took office.

In New Zealand, Mark Peterson's term as New Zealand Exchange CEO has been extended to 2024 and in a tantalizing hint of things to come, Hong Kong stock Exchange’s boss, Charles Li hints that he could set up his own financial business when he finally leaves office at HKEX in the coming months. A fascinating possibility. Whatever he chooses to do, I wish Charles well, and I'm sure he will succeed.

Finally sad news this week on the death of an industry stalwart George Gero. He was genuinely an institution in the gold trading business and deemed to have been an elemental player in the development of gold futures.

Let's - ladies and gentlemen for this final podcast of 2020 - let's end the year with two good news stories. After all the negativity of Brexit and following a dismal year for governments, the world over, one minister in one nation has impressed. So blindly. The mega upbeat news is the standard 2020 British government minister Liz Truss, she's in charge of trade and therefore negotiating trade deals.

She has defied all the daft doomsayers and already, even as we record this podcast two weeks before, whatever transition period or non transition period may be ending on December the 31st. La Truss has signed no fewer than 57 post Brexit trade deals around the world amounting to 93% of UK non EU trade.

And that of course comes despite COVID despite Brexit, despite all sorts of other issues.

Frankly, I believe Brexit will be a success if only the UK government can keep away from caving into the EU’s self-destructive vengeful myopia. However, finally, ladies and gentlemen, let's share a word to the workers in the parish of exchanges, Exchange Invest exists to applaud the parish while - without fear or favor - noting where exchanges fail. The parish has enjoyed incredible uptime during 2020, despite a distributed network of kitchen tables across the world often being the hub of market operations.

This has been a stupendous result given scintillating volumes across more market symbols than I think almost anybody envisaged at the Dawn of this century two decades ago.

Salutations to all involved, almost none of you have been named in person during the course of the year in Exchange Invest or elsewhere, but you contributed to a magnificent demonstration of excellence in the parish during a year when the blob - from the World Health Organization, government at all levels, almost everywhere, has proven itself a shambles, regardless of the alleged political colors of the political incumbents. Markets enabled funding that kept the economy alive. As fast as the blob struggled to balance enterprise with its creeping authoritarianism, which has delivered lockdowns often without much tangible benefit.

So the exchange parish exits 2020 with excellence and in rude health, across the board. And indeed some wonderful deals just in the past few months, alone, ICE- Ellie Mae NASDAQ - Verafin, CBOE -BIDS for example.

It has been a real pleasure to work through this remarkable year, precisely because of the excellence of markets, such as all of the above and the many smaller exchanges which have stayed open despite considerable challenges posed by COVID 19. Plaudits too to Hong Kong Exchanges who I believe will take the spoils for most IPOs, despite being unable to complete the record breaking - as it would have been - Ant Financial listing, due to a last minute regulatory intervention.

Therefore, ladies and gentlemen, I want to finish this podcast. Number 76 of the Exchange, Invest Weekly Series with a simple word of thanks, applause and gratitude towards the amazing achievements of IT folks, Ops teams, listing staffs, and the many other workers across the parish, who've made 2020 a fabulous advertisement for the benefits of free open markets.

And on that mysterious and magnificent note, ladies and gentlemen, I wish you all the compliments of the season and a very, very happy 2021. We'll be back in the second week of January. My name is Patrick L. Young, have a great week in markets and have a wonderful festive season.

LINKS

Affirm Postpones Initial Public Offering

WSJ

Finance Jobs Stayed In London After Brexit

Project Fear Dismantled: Finance Jobs Have STAYED In London Despite Brexit, Study Finds

Daily Express

Brexit Hit To London's Financial Service Jobs Overstated: FT

Bloomberg

London Retains Finance Jobs As Brexit Fails To Deliver Blow To The City

City AM

Reuters’ Huw Jones

U.S. Derivatives Traders Are Unlikely Brexit Winners