077 Exchange Invest Weekly Podcast January 16th 2021

TRANSCRIPT

This week in the parish of bourses and market structure, a catch up edition as we get 2021 underway.

And we have our first new word of the exchange invest year Genslerfreude that smug feeling you get when ‘woke-ist’ idiot bankers get saddled with their worst nightmare as a leading regulator!

My name is Patrick L. Young. It's our first edition of the new year episode, zero 77. 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. All the analysis of the week’s 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.

Amongst our top stories this week, the London Stock Exchange has got the EU nod for the $27 billion takeover of Refinitiv, or some might see it as the LSEG being subject to an inverse takeover to be swallowed whole by the lethargy of Refinitiv. In the end, the EU didn't add any more tweaks, but in due course, gifting Euronext, the Borsa Italiana at below open market value, will I imagine, be viewed with regret by many who right now are cheerleading this deal, which is being made by a group broadly lacking an integration ability and acquiring a tired franchise, which is flaccid, political and has repelled all previous attempts to bring it kicking and screaming out of the 1970s.

Meanwhile, Euronext: of course they still can't believe their luck. The contemplated acquisition of the Borsa Italiana group at below open market price is still subject to regulatory approvals in several jurisdictions. Nevertheless Euronext expects to complete the transaction in the first half of 2021.

One deal that's not so messy - It ‘simply’ requires a new market to be set up in all its complexity - Intercontinental Exchange have provided an update on the Murban futures ahead of the launch of ICE Futures Abu Dhabi - IFAD - on March 29th, 2021. It's looking good for an end March launch - #despiteCOVID - in Abu Dhabi with the bank of England and MAs in Singapore among regulators recognizing the new venue.

Elsewhere Political Action Committee donation fatigue has hit the finance community. Those are of course the “PACS” not to be confused with this “SPACS”, those sexy little listing vehicles that we've seen so much over in recent months. No rather

You're back to the grubby business of giving donations to politicians. Therefore in the PAC world, a number of people have stopped donating for the time being: Charles Schwab, CME, and NASDAQ, amongst them from in and around the parish.

Looking back over the festive season, some of the stuff you might've missed:

Well, first of all, you probably didn't miss this, but Brexit has happened...At the same time. We did tell you that it was going to happen as opposed to a vast swathe of the media. It ultimately ended up with the EU doing more compromising than the UK. And thus the trade deal is not as bad as it might have possibly been. In fact, overall, it's a pretty decent trade deal, leaving aside various issues from the May government’s, cack handed handling of the situation such as the fact that Northern Ireland is now even worse positioned in terms of Imperial status with Belgium than even the Belgian Congo who managed to escape that grip many years ago.

Nevertheless, of course there have been a few foibles but there has not been Brexit chaos. If you fancy a trip to a parallel universe on Brexit, the New York Times leads the field with what can be politely, termed ‘opinion fiction.’ The key points to recall are that London remains open for business.

Stock trading in European Union names has indeed moved, the Eurozone having taken back its stock trading.

Nevertheless, that leaves behind everything else, including, but not limited to forex and derivatives: much more difficult to move at any point in time. At the same time, where are those stocks going to seek new funding? Well, methinks that when you wake up in the morning, the place, the name you think of is always London to which end the European union's ESMA even issued a warning this week concerned about what they called reverse solicitation, which some might regard as actually being a case of when people wake up in the morning and think “I need finance.”

They think London, the UK chancellor, Rishi Sunak laid out the possibility the city could be set for a post Brexit, Big Bang, 2.0. Let's just say that I'm not too optimistic. Given the fact that to date the sole innovation of this Chancellor has been a restaurant packing program that caused a COVID spike.

Elsewhere in news over the Christmas period, TP, ICAP are adamant in their Deathwish. They're now at the point where they announced their rights dilution in the quest to buy Liquidnet - an entirely fallacious notion - are going to offer a swinging dilution of two for five at a vast discount to the prevailing share price.

Elsewhere pantomime season was ongoing at the New York stock exchange with an “Oh yes, they do!” ”Oh, no, they don't!” maneuver being held to, well, the unique question in pantomime history: “are we listing Chinese stocks.” As even China Daily. Put it “Flip Flop, Flip Move, Hurts, New York Stock Exchange Reputation.”

Elsewhere new markets could be aplenty in India, even SEBI the quasi- socialist regulator of the Indian financial marketplace: they're setting the stage for new bourses and depositories, encouraging people to start with a hundred percent ownership and then indulge in the usual Sebi process of swinging dilution over the course of what is now going to be a 10 year period.

I suppose if all else fails, you can always ask TP ICAP’s management. They seem to be good at diluting things to a vast degree.

In People News - the stuff that happened over the Christmas period. The highlight was the departure of Charles Li. He's left the Hong Kong exchanges building, departing the world's largest exchange by market capitalization after Hong Kong exchanges managed to surpass the somewhat lackluster Chicago Mercantile Exchange during 2020.

Robinhood. They didn't have a very happy Christmas. They got fined $65 million to settle charges from the SEC therefore the SEC disintermediated the letter to Santa approach by getting a bonus from Robin hood, I suppose. Well, perhaps arguably incoming chairman of the SEC, Gary Gensler was probably salivating at the idea he could have got at least twice that amount of money had he been in office.

Would that be a trend in 2021, it remains to be seen at the same time, Robin hood amounts to essentially a cunningly package brokerage which is ostensibly a form of SPAC for legal fees.

Over in Vietnam, the new Vietnam Stock Exchange has been finally announced: Ho Chi Minh and Hanoi coming together to create the Vietnam Stock Exchange with separate specialties in the two cities under a unitary bourse.

Speaking of new markets, the Guangzhou Futures Exchange is going to be the first new futures exchange to open in 14 years in China. And it's also going to be the first to be run as a company with at least some private shareholders making it somewhat more like multiple major exchanges around the world.

Data, data data, the Wall Street Journal, having launched a rather brutal attack on NASDAQ over its diversity policy... Just before Christmas carried on with an opinion piece of “fighting a stock exchange shakedown.” It was frankly, a dubious piece of market socialism from the usually pro-free market Wall Street Journal, who seem to think that exchanges can conjure higher data feed speeds out of thin air, or at least they can do that for free. Drinking banker Kool-Aid is common in the media generally, but one expects much more of “the Journal,” which presumably wants to avoid the brand damage of the Financial Times’ gradual morph towards obsolescence in financial market terms.

Nonetheless that brought a stunning response from NASDAQ's General Counsel: “the new SEC data rule will harm main street investors.” Quote: “The SEC proposed market structure changes dubbed ‘NMS II’ is a regulatory expansion that will add fragility and complexity to the financial market system, potentially harming main street investors and serving a narrow agenda of influential financial players.”

And so the letter goes on in the same vein.

Deals during the course of the past week, the CME & IHS Markit, well they seem to have solved what's going to be the future of Markitserv. Now that IHS Markit has been sold to S&P Global - presumably this was being negotiated in tandem - CME Group and IHS Markit are going to form a leading post-trade services joint venture for OTC markets, incorporating CME Group’ s Triana, TrIOptima and Reset along with the MarkItserv business of IHS markIt, as I mentioned a moment ago.

Elsewhere Intercontinental Exchange they're making use of one of those SPACs. Bakkt, their cryptocurrency arm is going to become a publicly traded company where else, but on the New York Stock Exchange, of course, with a merger via VPC Impact Acquisition holdings. The deal makes sense. NYSE endorses SPACS, and a substantial roster of backed shareholders and investors get a cleaner public subsidiary interest to manage as opposed to being a private arm of ICE. At the same time the valuations look encouraging presently, why not take advantage of such propitious climes for crypto related plays?

Elsewhere in new markets, we have another, “IEX” the Iranian energy exchange. That's going to be launching January the 16th. Gives us a bit of an acronym. Failure alert. We now have, of course “IEX” “the Investors Exchange” - the flash boys first mover in the acronym space.

Then we had the Indian Energy Exchanges and now a third “IEX” in the ship of the Iran energy exchange.

In crypto land, even there, we're looking at IPOs in addition to the Bakkt deal that I mentioned moving into a SPAC, Coinbase, they're going for the traditional route. The crypto exchange is looking at an initial public offering.

It's going to be quite a challenge methinks in the future for Coinbase given the fact that their transaction fees - as we discussed in an article in Exchange Invest last month - are considerably higher than those of the legacy transactional exchange marketplaces. At the same time, when asked, when would there be a Binance IPO, CZ, - He of Binance fame - explained how his firm's path forward is different from that of rival Coinbase.

Well, of course, IPO investors are fickle types. They generally like to see companies with transparent headquarters addresses, let alone confirmed regulatory status #justsaying.

Product news. There was a Welter of stuff over the Christmas period, which was all in the exchange Invest newsletter. Don't forget to sign up. If you'd like to read that day in day out to understand what's happening in the business of bourses, but one or two key pointers around about the use of benchmarks. And of course we're talking about IBOR or the death of LIBOR and its replacement. ICE Benchmark administration, they launched ICE term Sonia reference rates as a benchmark for use in financial instruments.

I also know with excitement, ICE have continued to break open interest records with the ICE futures. Europe listed Sonia achieving, just shy of 150,000 lots as of early January.

In technology. Euronext unfortunately get the prix citron. They had the first tech meltdown of the new trading calendar year. Unfortunately, that came on Monday. The 11th, well, one dropout is an error, of course. The trouble is that Euronext looks to be somewhat more systematically problem strewn when judged over the past six months, at least that's a worry, especially as Borsa Italiana will next come under the Euronext tech umbrella in the near future.

That said, plaudits to the Euronext team. They managed to launch Optiq on the MSM. What was previously the Muscat Securities Market, which has been renamed by edict in early January as the Muscat Stock Exchange. They've got a full new electronic trading system, courtesy of Euronext.

In Regulation News. Yes. Genslerfreude could be real according to various stories in political Bloomberg Reuters and elsewhere. Gary Gensler once the bane of the bankers life as the chairman of the CFTC. Most recently, an MIT lecturer. He is poised to be chosen apparently by president Biden - incoming president that is of course as I speak - Joe Biden as the leader of not just the CFTC on this occasion, but actually going one step larger. The SEC, the U S Securities And Exchange Commission. I fear that could prove hideously counterproductive to free markets, but it will at least be an amusing rebuttal to all the useful idiot bankers who funded the Biden campaign.

Meanwhile, of course, big brother is already stalking your home office even before going Gary Gensler can manage to run the SEC. In the UK, the watchdogs there, they've been telling bankers: “record all your work calls at your home office.” In other People News this week, it's been all about indexing. First of all, over the Christmas period, we had a delightful piece of news:

The CBOE expanded their board and the most notable new entrant is one Alex Matturi who was a guest on the IPO-Vid live stream just before Christmas, Alex Matturi the former boss of S and P global indexing business. Don Jones indexes is going to be an excellent choice and candidate to add to the CBOE Global Markets board methinks in the future...speaking of which another excellent man of indexing history Mark Makepeace was the latest guest on the IPO vid livestream series.

You can catch it on YouTube IPO-Vid, and indeed it's live streaming every week on Tuesdays, 1900 European time or 1300 New York time on Facebook. YouTube. And indeed also LinkedIn. So Wilshire, you may remember them as one of the famous early pioneers of the American analytics and indexing business with their 5,000 index. They've been bought by private equity….The private equity has put a huge amount of money into the idea of expanding and creating a great data franchise and they've added a Kick ass - No other word can describe it. Leadership team in the form of CEO, Mark Makepeace, who was the latest guest, as I mentioned, on the IPO-Vid livestream this week, Mark is of course the founding CEO of FTSE building it into the FTSE Russell Titan, and also heading all information services at the London stock exchange subsequently.

It looks like a very exciting time in the index year with the whole idea of a new invigorated Wilshire business going to take over, or at least try to take over some fascinating assets in a new run on the data analytics and indexing parish. And so two remarkable stories about China to end the week with news from Bigworld. First of all, China, they're looking at upgrading their farmland. Indeed. They're looking to upgrade sufficient land to make it arable for high quality farming as the area of the entire Republic of Ireland.

Personally as I come from Belfast, I'm a little upset. Why didn't they go the whole hog and offer to increase farmland the size of the other six counties of Northern Ireland as well, and make it a, all 32 county sized, all Ireland expansion of their arable land.?

Meanwhile, there's a certain irony methinks to the notion that two of the World Health Organization delegation, preparing to launch an investigation into the origins of COVID-19, who were headed to Wuhan this week... failed antibody tests in Singapore and hence have had to be quarantined awaiting later onward travel to China when given the all clear.

And on that mysterious and magnificent note, ladies and gentlemen, thank you for listening to this Exchange Invest Weekly Podcast 77 with me Patrick L. Young. Catch up with you during the week at ExchangeInvest.com. Meanwhile, have a great week in markets.

Links

London Stock Exchange Gets EU Nod For $27 Billion Takeover Of Refinitiv

Reuters

Euronext Updates On The Contemplated Acquisition Of The Borsa Italiana Group

Euronext

ICE Provides Update on ICE Murban Futures Ahead of Launch of ICE Futures Abu Dhabi on March 29, 2021

The ICE

ICE On Track For March 29 Launch Of Murban Futures Contract: Executive

S&P Global

Nasdaq Issues Statement On Political Action Committee Donations

Globe Newswire

Charles Schwab To Stop Political Donations