085 Exchange Invest Weekly Podcast March 13th, 2021

TRANSCRIPT

This Week in the parish of bourses and market structure:

LSEG stock rout as the Refinitiv Reality bites while the long arm of the American law haunts that Turkish Exchange balls all the way to regulation.

Over in China regulators are proposing STAR reform.

Meanwhile, the unthinkable thoughts are being given credence: could the Chicago Mercantile Exchange (CME) lose its Eurodollar luster as the benchmark switches away from LIBOR?

My name is Patrick L. Young.

Welcome to the bourse business weekly digest it's The Exchange Invest Weekly Podcast Episode 85.

London Stock Exchange's shares were spooked by the costs from Refinitiv this week. Thus, we saw the first chink in the armor of the London Stock Exchange group's reckless deal to buy refinitiv, not only has Borsa Italiana been carved out of the core markets business, but now #zeroshock! Integration may not be going as smoothly as once predicted.

Given the deal only closed weeks ago the rapid realization is at least welcome. The fact that nobody could foresee this within the LSEG C suite is damning. Then again, we know LSEG has little real confidence to sell the deal as their groundbreaking insights have today been mostly softball interviews with the likes of the Daily Mail. The meals traditional approach to the London Stock Exchange is usually so craven that it makes a certain Oprah Winfrey interview look positively hardcore. Anyway, for those who missed the last few years of history, nope, take that out.

Meanwhile, encouraging news from the Bucharest Stock Exchange, they estimate they're going to get 20 more bond and share issues this year. That's good news for the generally historically beleaguered Romanian Stock Exchange, they've already attracted three new shares and two bonds, so far.

At the same time, the world leader, the Hong Kong exchange, recommended that the number of IPOs could surpass last year's total. And indeed the former Hong Kong Exchanges CEO Charles Li has been making some interesting remarks. He's also a member of the Chinese People's Political Consultative Conference and he suggested the creation of a Drip Irrigation Connect which could be used to link sources of global capital and solve the financing problems of 10s of 1000s of Chinese SMEs.

Over in Southeastern Europe once again, the Zagreb Bourse have signed a cooperation agreement with their Scopje Counterpart, the Macedonian Exchange, great news as the Scopje boss announced their turnover had more than doubled month on month in February. The primary aim of the agreement with Zagreb is to improve the expertise and professional development of participants in the local capital market through seminars delivered by the Zagreb Stock Exchange Academy.

Interesting shareholder news this week, a Dubai-based Indian Siddharth Balachandran, who is the Executive Chairman and CEO of Buimerc Corporation Limited has boosted his stake to 2.58% of the total capital of the Bombay Stock Exchange (BSE) limited.

London Metal Exchange (LME) traders fear for the silencing of the ring. There's a pushback emerging amongst those who claim the London Metal Exchange risks shifting away from its core role as the price setter of the physical metals market.

Nigeria news, fabulous confirmation coming this week the Nigerian Securities and Exchange Commission and the Nigerian Corporate Affairs Commission have approved the demutualization of the Nigerian Stock Exchange, they've moved a crucial step closer to their IPO.

NASDAQ brought a little Joy to the world of entrepreneurship this week, the NASDAQ Foundation's Grant Program is engaging more communities in markets and entrepreneurship across the United States of America.

PLY: “I love it! There's always a charitable impulse amongst great businesses to give back. But I always wonder if saving the lesser spotted green eared wombat is the best use of funds where we can deploy something which helps our universe to use our own skills. NASDAQ powering entrepreneurship is a great signal of faith in markets and the market economy and their power to advance anybody anywhere on earth to greater prosperity is a great sign of a wonderful harbinger of a better world to come thanks to NASDAQ.”

Over in the Philippines split privileges in Manila. The Philippine Stock Exchange is planning to allow companies to debut on their bourse by offering preferred shares.

The Chinese they're weighing tighter rules for the STAR Boards IPOs curbing FinTech. China is considering adjusting the investment threshold for the Shanghai Tech-focused STAR market to boost liquidity. The new proposal may indeed add further difficulties for ANT to revive their listing plans.

The Chinese Securities Regulatory Commission may introduce revised rules as soon as next month, placing greater emphasis on hardcore technology and innovation. There's also going to be increased scrutiny on financial health to boost the quality of companies and protect investors.

And Brexit news this week, well one city Minister John Glenn, he was saying that Britain will do the right thing for the City of London.

PLY: “And if you want a dose of the right stuff ladies and gentlemen, then check out IPO-Vid, you can find all the recordings on YouTube that's YouTube.com search for IPO-Vid. Our most recent episode was a Brexit classic Daniel Hudson, the chairman of the City United Project outlining a wonderful, exciting and intriguing future for not just the City of London, but also all those other financial centers and financial players in the orbit of the world's largest most historic global financial center.”

Results this week, one set of results Broker TP ICAP the company's adjusted pre-tax profit fell 3%.

PLY: “The dividend has been halved, temporarily they say although I feel it's science rather like Britain's imposition of a temporary 70 mile an hour speed limit for motorways for three months in 1965."

"Things we can rely on and a volatile 2021 the verb “disappoints” is symbiotic with - if not quite yet a synonym for the brand of “TP ICAP”. Remarkably, the stock has been stubbornly just under 250 pence last time I looked, which is vastly in excess of fair value given the incapable management and its complicit board members who instead of trying to make the core function have doubled down on the Liquidnet suicide bid.”

“Their only consistency remains “disappointment”, which is now a staple of the financial statements. However, at 250 pounds, TP ICAP is surely way too pricey for a PE bidder to acquire knock sense into this ongoing anomaly of management ability.”

" The only regularity about the TP ICAP management are the consistent disappointments. Here are the results of disappointments on top of the predictive outlook which was disappointing. For those who reckon the average TP ICAP broker’s vocabulary never reached the end of the alphabet and Sesame Street episodes. It appears the management can't move beyond the letter “D”.

Deals this week as I mentioned before, cleared for takeoff to IPO with the Nigerian Stock Exchange have won approval for its public listing.

Elsewhere in the private markets, ION Capital, Andrea Pignataro’s Dublin-based vendor, has teamed up with the GIC, the sovereign wealth fund of Singapore to try to bid $2.2 billion for at least COVID.

Elsewhere the Indian Energy Exchange (IEX) shares jumped up after they sold a couple of stakes in their budding Indian Gas Exchange 26% in total was sold to NSE (National Stock Exchange) 5% to the ONGC this week.

PLY: “Don't forget ladies and gentlemen, if you're looking for something to read, depending on where you are in lockdown at the moment, then check out “Victory or Death”, my book on the future of Blockchain, FinTech and Finance as a whole. Available from Amazon and all good retailers “Victory or Death” is published by DV Books and distributed by Ingram Worldwide.”

And crypto news this week, one other exciting IPO, Coinbase is said to be valued at $90 billion after recent private transactions on the NASDAQ private market.

Elsewhere, Goldman Digital Asset Lead reckons there are going to be mergers ahead for crypto infrastructure providers. Now, the crypto exchange coin bases shares have been privately trading at $350 each. Thus we see a $90 billion overall market capitalization being imputed, direct listing is coming this month and set to be a big first for NASDAQ.

PLY: “Frankly, the valuation is one which I doubt can be sustained. The idea that Coinbase is worth more than either the Hong Kong Exchange or pretty much it's worth almost the value of the Deutsche Bursa plus the Chicago Mercantile Exchange is, in my view entirely unsustainable.”

“Unsustainable is a polite way of perhaps spelling long term ludicrous when it comes to valuation. Jared Dillian and a Bloomberg column explain the issues elegantly this week in the headline Coinbase is $100 billion crypto cult. Now, we have Goldman Sachs prophesying around of highly valued acquisitions of companies, which likely won't survive the next stage, which is to reduce crypto commissions from their eye wateringly unacceptable in the digital age levels to a point where the legacy providers already are with their old line legacy trading settlement approaches.”

“ I'm old enough to remember when the USP of the new “new thing” and finance was, how cheaper it was than the old way of doing things. This is manifestly untrue of cryptocurrency trading, and sooner or later will impact the values of all cryptocurrency markets. Very, very much detrimentally.”

Product news this week, as Matt Levine money stuff, Libor is going away for real.

Elsewhere, we had stories about the Chicago Mercantile Exchange looking to life after Eurodollars. As Matt Levine notes live or is cancelled, I guess they were serious.

PLY: “CME was and has been a dominant force in US dollar listed derivatives for many years. Yet, it's soon going to see the end of its whole conquering Eurodollar futures contract. And it has to be said CME have done an almost majestic mellifluous job in encouraging competitors to think the unthinkable and seek to strike as Eurodollars give way to a Sofer back to new era contract”

“CME management inaction on contract modernisation across the board coupled with an inability to capitalize on many of their previously deemed untouchable franchises, which have been just not gaining shares and commodity trading. And of course, then there was the ignominy of the Cushing crisis. That's all in fairing that the C-suite is absent from the management process, it might still amount to windmill tilting, given the dominance of Eurodollars as a futures contract, but it's no done deal. “

“And that lady who might yet provoked some ‘weightist’ complaint is not warming up yet. The CME’s Eurodollar franchise is at risk as Libor enters its final chapter.”

Technology news this week. One exchange had a really, really bad technological week, but it wasn't directly an exchange of the parish. Rather, Microsoft Exchange was ripped asunder by a lot of hacking, which was explained by the IT security media. Thus, “Four zero-day vulnerabilities in Microsoft Exchange Server are being actively exploited by a state-sponsored threat group from China”. And that not only impeded the European banking authority but also sent shockwaves through the parish of organized markets themselves.

One spot of crowdfunding news this week, Seeders, one of the UK's leading platforms, they've opened their secondary market.

Elsewhere in regulation news, GARP, the Gobal Association of Risk Professionals noted this week that regulation itself is rising on the risk radar while focused on the pandemic and other immediate matters of risk managers are anticipating permanent and longer-term regulatory trends, they noticed.

PLY: “Yes, indeed, ladies and gentlemen, less you missed it, big government is back and operated by a new even more smug generation than before. That's a huge regulatory risk potential.”

Career paths this week in people news the legacy of Berat Albayrak (Iraq President eldest son in law) as Finance Minister of Turkey has unraveled a little bit in the HR department, as the head of the Sovereign Wealth Fund resigned. And indeed then the Chief Executive of the stock exchange had already resigned in short order, a presidential edict has seen are the armored named CEO of the Turkey Wealth Fund, replacing Zafer Sonmez.

BIST, the Borsa Istanbul was bolstered last year when the Kuwait Investment Authority purchased a 10% stake.

However, the controversial choice of former US inmate Hakan Atila, who served 32 months for Iranian sanctions-busting in the USA always looked a tad Quixotic when he was appointed as Borsa Istanbul CEO.

Hakan Atilla's position appears to be rendered untenable when Halkbank finds itself back again in the US prosecutorial spotlight recently. Turkey's state-controlled exchange monopoly still hopes to IPO next year.

Over at NASDAQ great news, the new Senior Vice President and Chief Marketing Officer is Brian Barclay.

PLY: “All the very best to Brian an excellent choice for this NASDAQ role.”

And finally, ladies and gentlemen, only eight years later, and we have some element of relief. The first payments have been ordered by the Bombay High Court to some 6445 investors amongst those caught up in the 2013 National Sports exchange fiasco.

And on that magnificent and mysterious note, ladies and gentlemen.

My name is Patrick L. Young.

Thanks for listening. Catch us daily in the Exchange Invest Newsletter.

Have a great week in the markets.

I'll say that again. Have a great week in the markets.

LINKS:

London Stock Exchange Shares 'Spooked' By Costs From Refinitiv
Reuters

Bucharest Stock Exchange Estimates 20 More Bond And Share Issues This Year
Romania-Insider.com

LSE Slumps As Refinitiv Costs Overshadow Confident Outlook
Yahoo Finance

Hong Kong IPOs Could Surpass Last Year, HKEX's Bonnie Chan Says
Bloomberg

Hong Kong Exchanges Says IPO Pipeline Is Looking 'Solid'
Bloomberg

Use Hong Kong As Channel For Funding Chinese SMEs, Ex-CEO Of Stock Exchange Says
South China Morning Post