088 Exchange Invest Weekly Podcast April 3rd, 2021

This Week in the parish of bourses and market structure:

A new era with a nascent futures benchmark ICE Futures Abu Dhabi brings Murban futures to the Middle East's newest derivatives exchange.

My name is Patrick L Young.

Welcome to the bourse business weekly digest,

It's the Exchange Invest Weekly Podcast Episode 088.

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 week’s many events and happenings can be found in Exchange Invest’s daily subscriber newsletter, the unique guide to the bourse business sent daily to your inbox.

More details at ExchangeInvest.com

Seemingly without breaking a sweat and against the complexities of COVID-19. ICE launched ICE Futures Abu Dhabi (IFAD) this week with no fewer than 19 contracts going live simultaneously.

The biggest contract news was the launch of Murban futures- which looks to create inevitable momentum towards a Middle Eastern benchmark from the Emirates sitting between Brent crude and West Texas Intermediate as the iPhone itself.

Before the weekend, ICE announced a rather stellar list of members with an elite group of 18 General Clearing Members amongst 24top quality members overall.

Over in the City of London, practitioners are finally grasping the notion the EU will be closed for financial services, as a leading lawmaker, Lord Hill notes:

“The politicians, the regulators, and the market are now broadly aligned about the need to get on with constructing a more nimble, competitive, dynamic regulatory future for this city.”

Lord Hill noted that this week as the Reuters headline ran that the City of London was grasping that the EU will be closed for financial services from London - until presumably, the EU runs out of money. That is true, it's a fairly empty forum for chopped but something has been established through an MOU, it will meet twice a year which ultimately won't actually manage to do much for the Eurostar premium status of the frequent travelers on that train line.

The abject lack of substance in the agreement is demonstrative of Brussels’ desire to bring London to heel and the UK’s desire to break away towards markets where it is not impeded by endless nitpicking or absurdly skewed ‘equivalence’ which the European Union can rescind in the regulatory timeframe of a “New York minute”.

Results news this week:

It was a busy week for Results in the parish all the deals were in Exchange Invest daily - the newsletter no person can afford to be without in capital markets and market structure, for the sake of this podcast let's look at some edited highlights.

Final results for the year ended 31st of December 2020. We're very encouraging from Aquis Exchange, membership grew at the subscription-only exchange platform to 33 during 2020 (a 10% increase) and there was a 50% increase in the average monthly usage in terms of chargeable orders.

PLY: More importantly, revenue increased 67% to 11.5 million pounds (2019 £6.9m) making the first heavily profitable year in the existence of the Aquis organization.

Also still in profit, The International Stock Exchange (TISE) in the Channel Islands of the United Kingdom, announced increased record revenues of 8.4 million pounds and a 4.2% increase in post-tax profit to 3.6 million pounds.

Over in Nairobi, however, they saw their full-year results double during the course of 2020 - congratulations to them.

In Deals similarly once again, a very busy week for deals in the parish, all the deals were in Exchange Invest daily - can you afford to live without it, ladies and gentlemen? If you're not already a subscriber for the sake of this podcast let's look at some edited highlights.

The London Stock Exchange (LSE) has sold $4.5 billion worth of bonds, to help keep refinancing the refinitiv deal, that came of course in the week where the London Stock Exchange's share price was now down, I do believe a third since it's all-time high integration is proving difficult already with the refinitive BMF ‘#toldyouso’.

Of course, if you're reading Exchange Invest as a subscriber you’d have read this, well the day after the deal was announced.

Two years on the London Stock Exchange is therefore borrowing like well, one might say an apocryphal footballers wife, they built a huge instant yield curve across three separate currencies, and it'll be interesting because NASDAQ, ICE, and London Stock Exchange Group have all now issued at the 20 year part of the yield curve since August.

PLY: “How interesting that will be on the macro to compare how the market perceives the 20 year issues of ICE, London Stock Exchange Group and NASDAQ going forward.”

Euroclear made a modest acquisition, they're buying a Nordic funds platform MFEX, giving them a little bit more of a global distribution haft.

And the big exchange deal of the week was CBOE global markets - have actually become well CBOE global markets, what was previously a US and European focused entity has launched into Asia. They're buying Chi-X Asia Pacific, expanding their global footprint into trading platforms in Australia and Japan, as well as some tech development staff who are in Hong Kong and Manila in the Philippines.

The deal, of course, brings with it the jewel of Chi-X Australia, and that therefore puts further pressure on the embattled Australian Stock Exchange. With the deal numbers all private it's hard to tell what JC Flowers made here and owning Chi-X APAC over the course of a number of years, but it seems that at least doubled their total investment. Maybe they eked out about 3x over the course of that ownership period, but clearly not a great deal more which I suppose will leave the private equity owners somewhat disappointed.

At the same time, it's a fabulous structural move, and finally, we do actually have a CBOE global market - which is a genuinely global business.

In Crypto land this week:

Some mention of new contracts coming all run, CME delivering micro Bitcoin futures.

And the CBOE expected to build out further crypto offerings as demand rises.

Binance meanwhile, as we know, may well be under investigation in the United States of America. They've added some former FATF (Financial Action Task Force). Some of the officers of that organization have been acquired, recruited, I suppose one might say by the Binance organization to presumably avoid or reduce orange-jumpsuit risk.

Product News this week:

The Bank of England (BOE) while we are not at the point where you can no longer officially borrow in Libor in the UK, the UK Central Bank was noting that artificial sterling Libor could continue for a decade through legacy contracts.

The US is planning to avoid synthetic Libor pushing legislation in New York to smooth the transition, however in the UK, it's still gonna be possible.

PLY: So say we get a few years out and synthetic Libor, is still quite the same outside say the upper echelons of banking, might it be reborn as Libor for a flourishing new career - something like the interest rate benchmark equivalent of say Robert J Downey post rehab, or will ultimately their synthetic Libor just end up being a nation trust for those hardy souls still playing LP records.

Technology News this week:

Broadridge extended their capital markets franchise with the acquisition of ...

PLY: Now here we come to a confusing thing, I mean I would have always called Itiviti, other people say it's ‘Itivitae’ which rhymes with “Nativity”, other people say that it could also be ‘activity’ or something along.

Anyway, look Broadridge bought some company or other it's actually a 2 billion Euro vendor, $2.5 billion more or less, you’d think they would have managed to get their branding, right but then but of course it came from Sweden, which is well, somewhat the black hole of weird branding when it comes to many different names in the parish of exchanges.

Anyway, Itiviti Holding AB has been bought an all-cash transaction by Broadridge - who is funding the acquisition through a new $2.55 billion term credit arrangement.

Hopefully that at least we'll see the use of the Broadridge brand rather than the awful scandal trash name, that nobody could understand beyond, well, the Greater Stockholm Metropolitan Area.

Elsewhere BAKKT - launched their mobile app for Bitcoin holding and spending.

PLY: “But hold it right there, you can definitely get it in the USA untold but alas, there's no sign of it in the App store in many other countries throughout the world. So the rest of us have to wait or just be subject to the digital divide of not being part of Bakkt.”

In Crowdfunding:

The equity crowdfunding platforms Crowdcube and Seedrs, officially terminated their merger agreement this week, which was of course driven by a UK antitrust decision.

PLY: “The right decision I might add, a 90% concentration risk was surely beyond incredible that an antitrust organization would ever agree to it and given the impetus was to seek profit from these merged entities, while somehow rather charging 700 basis points in certain instances for their key services. The realpolitik, the reality, the truth behind the balance sheets, is that both Seedrs and Crowdcube need to approach their businesses with a new mode of thinking towards profit.”

PLY: “After all, legacy exchanges can thrive with fees at not just less than 1%, often one thousandth of the gross crowdfunding levels and what do they get for these profits that they produce? Oh, accused of being profiteering, the UK crowdfunding industry needs reform.”

Regulation this week:

The CFTC they're not moving towards any given Sunday of reform as it were because they don't like the idea of event-based futures.

Prediction markets took another slamming at least in the sports arena as the CFTC decided to skewer the idea of NFL - National Football League (which is you know, Tom Brady, those people whatever, I don't know what NFL is some sort of football game anyway, It's like rugby but more violent or rugby with more protective gear or, oh who cares). Anyway, you can't have CFTC approved futures on the business despite the fact that Eris X was sensibly trying to apply for such permission, Commissioner Brian D. Quintenz, instantly skewered the whole concept.

PLY: “And quite right to the CFTC have proven their analogue instincts which belie their talk of being a modern digital regulator. This stuff, this trade has been in the public domain as a discussion for a quarter of a century. I know I was writing about it online, then certainly in 1996. And certainly the CFTC are woefully behind the ball - whoops, sorry, sports pump, which I suppose is a comment they would seek to sanction as they refuse to acknowledge the presence of the ball in the first place. Highly decrease the CFTC need to up their game sports features should be a thing, otherwise, we risk pushing it underground. And we all know what happens when we get underground markets, ladies and gentlemen, bad for all, bad for markets, bad for employment and a lot of fraud.”

Career News this week:

As part of the acquisition by CBOE in order to vote themselves forward to records becoming actually CBOE Global Markets, buying Chi-X Asia Pacific, that means that David Howson, who's currently President of CBOE’s European operations, will also lead the company's business expansion into the APAC region and has been promoted to President, Europe, and Asia Pacific.

PLY: “David Howson appointment is, I think, terrific and also it's great news to hear that Brian Harkins has been appointed to run BIDS at the same time that was slightly surprising given the fact that BID CEO Tim Mahony was apparently making a long planned retirement move this week. Yet, just a few months ago CBOE global markets' own CEO was saying that Tim Mahony was going to be staying with BIDS for the long term, clearly long term and Chicago just means about three to four months.”

Over in Borsa Istanbul, someone who may or may not manage to survive three or four months in his job tenure given how volatile things are in Turkey at the moment. Borsa Istanbul has appointed a new General Manager Korkmaz Enes Ergun was named Borsa Istanbul Stock Exchange's (BIST) - the new General Manager replacing the formerly interned in the USA Mehmet Hakan Atilla, previously of course of the much sanctioned Halkbank.

PLY: “Does that market safe pair of eternal hands and will we therefore see a safe pair of internal hands moving forward with the organization for the long term, watch this space.”

And so ladies, gentlemen, we reach the troubled relationship between Australia and China. More than 11,000 liters of Australian wine were detained in Shenzhen by customs this week, as tensions run high and Chinese customs officials are slapping outrageous 100 to 250% tariffs on Australian wine.

At the same time while those Chinese Australian relations were worsening, Beijing is eager to buy wheat from down under, China's purchases of wheat from Australia over the first two months of 2021 worth 479.3% above the amount acquired over the same period last year.

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

My name is Patrick L. Young, wishing you a great week in life in the markets.

Thanks for listening to this Episode 88 of the Exchange Invest weekly podcast.

We'll be back next week with Episode 089 logically enough, but in the meantime, if you'd like to keep up with all the business of bourses every day, don't forget, subscribe to Exchange Invest - the daily newsletter of the business bourses ExchangeInvest.com.

As I said before, have a great week in life in markets, and most importantly of all, if you're celebrating, have a very 'Happy Easter'.

My name is Patrick L. Young.

Thanks for listening!

LINKS:

Abu Dhabi Landmarks Light Up To Celebrate Murban Crude Futures Launch
The National News

Murban Is Lighting Up Abu Dhabi
ADNOC Group’s Twitter

ICE Marks First Day Of Trading On ICE's New Exchange In Abu Dhabi With 8854 Cleared Lots Traded
Business Wire

Murban Crude Futures Start Trading At New ICE, Abu Dhabi Exchange
Reuters

Start Of Trading In Abu Dhabi's Murban Futures A 'New Era' For Global Oil Markets
The National

ADNOC's Listing Of 'Murban' Crude Futures Scales Up Transparency For Middle East Oil Markets
Gulf News

Abu Dhabi Wants To Revolutionize How the Middle East Sells Oil
Bloomberg

City Of London Grasping That EU Will Be Closed For Financial Services, Says Lawmaker
Reuters

Britain And EU Strike Cooperation Pact For Financial Services
Reuters