091 Exchange Invest Weekly Podcast April 24th, 2021

TRANSCRIPT

This Week in the parish of bourses and market structure, London Stock Exchange group double down. Is ISS independent? The UK curtails MIFID II, and results are mixed as Interactive Brokers on NASDAQ display classy performances.

My name is Patrick L Young.

Welcome to the bourse business weekly digest,

It's the Exchange Invest Weekly Podcast Episode 091.

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

More details at ExchangeInvest.com

In the week when Interactive Brokers and NASDAQ led with roaring results - well done - let's concentrate on that brilliant thing: something which Exchange Invest itself was launched as a newsletter to applaud.

It feels like dog years in the current lockdown state of near Stasi restrictions on our everyday lives - by the by I was alone in reading an article the other day on the (truly brutal) crackdown on anti regime protesters in Belarus, which left me musing that it seems even in Minsk, where displaying red and white garments can get you a savage beating in prison, that nonetheless, you can wander around breathing Gods air unaided without a face mask.

Anyway, I digress...

I mentioned the other week the success of IFAD (ICE futures Abu Dhabi) and the momentum shows no sign of slowing - albeit RSI (I don't mean relative strength index, of course) I mean, Repetitive Strain Injury may yet before the ICE PR team. Anyway, we know at a record of 18,848 Murban Crude Oil futures that took place on April the 20th, just before this podcast was recorded, which I think you will find amounts to significantly more than for instance, the first month of entire trading on the international petroleum exchange's Brent crude futures. And of course, what do we know about crude oil these days? Well, nowadays it's a billion barrels a day of Brent crude futures.

Meanwhile, if we peel back the numbers, we can see that substantively, there have been, well just 17 clear trading days before ICE got so achingly close to the 20,000 contract marker because of course, Easter closed many markets (where also It seems the bubble in beach huts really got going in parts of Europe). Plus, of course, Ramadan began last week, which often saps a bit of energy from Middle Eastern markets.

Of course, this all happens #DespiteCOVID but I think we can resolutely say the best markets of the parish are Ops-oblivious to the pox.

It's been another week of mixed analysis for Coinbase. The stock has been trading with a lot of volatility during the course of the week. Some are saying the stock is headed to good grief, at least $600 which is roughly doubling from where it is as I speak.

PLY: Meanwhile, in other news, Wall Street's branch of “Delusionists Anonymous” is targeting a reopening of its Manhattan branch as the COVID threat abates.

See also Incidentally, on this theme of coin base, my article in CapX is coin base, the future or a digital South Sea Bubble, you can find that at CapX.co

Don't forget, of course, that I Patrick L. Young - FinTech pioneer, cultivate the watercooler of markets in the COVID era at Exchange Invest, exchangeinvest.com - the bourse business daily newsletter, equally if you're looking for some longer reading from my pen and pixel, don't forget my latest book Victory or Death: - Blockchain, Cryptocurrency and the FinTech World”, published by DV books and distributed by Ingram World Wide.

Over at the London Stock Exchange, their largest stockholder Lindsell Train which is managed by a man called Nick Train, they own a 4.2% stake in LSE Group. And they've said the London Stock Exchange must put more cash into its Refinitiv acquisition.

The exchange should invest “more and sooner if necessary” said Train to fix the long-standing problems with Refinitiv.

PLY: Good grief Ladies and gentlemen, welcome to #BottomlessPitonomics101

I minded wondering just how much concentration Risk Mr. Train has by the way, as London Stock Exchange group is his largest single fund investment and not merely a couple of billion punts on the overall future of the LSE Group and its ability to integrate or not the Refinitiv organization with or without more money.

At the same time, I suppose the London Stock Exchange group should be delighted that Mr. Train thinks the LSEG has the management resources to fix the problems of Refinitiv, which have stumped generations of hands-on managers, whereas the London Stock Exchange Group has the same (well, not so hands-on managers) running Refinitiv, who even last week after locked down eased and the UK seethed with thirsty souls could have been challenged organizing a suitable drinking session.

Incredible news from Charles Schwab, they added 3.2 Million brokerage accounts in the first quarter - that was more than the entirety of 2020 and indeed 3.2 million was about the number of investors in the entire Russian stock market before the whole COVID come red thing really kicked off during 2020.

The trading mania is really pushing the Charles Schwab results and also, as we'll hear in a moment, helped interactive brokers too.

Over at ISS (Institutional Shareholding Services) people who anonymously offer you all sorts of content and input on where you should vote at AGM, some generally give school report cards on the management of all sorts of publicly listed companies.

Well, they've been driven to releasing a statement. The statement regarding ISS’ Policy of Non-interference and potential conflicts of interest related to Deutsche Bursa.

PLY: I really wish I could believe this. Remember, Deutsche Boerse is the same hectoring, arrogant corporate structure which sued the European Commission over one of their previous attempts where Deutsche Bursa was flagrantly attempting to breach European antitrust laws.

Deutsche Bursa nowadays, of course, is the owner of ISS in what I remarked at the time looked like a horribly dubious deal given a lack of due diligence simply because there's such a huge conflict of interest.

Taken at face value, this announcement suggests ISS will independently hold Deutsche Bursa to account. Frankly, I don't really believe that, but the BIGGEST issue is not that now we must struggle to trust ISS with Deutsche Bursa. But we must struggle to trust ISS anywhere in the parish. It strikes me that the statements offered by ISS to date would not actually pass muster if a third party said it, and therefore it was in plain sight of ISS as independent analysis.

Credible numbers about capitalism this week, the United States controls 56% of the world's total stock market value, bravo USA rest of the world, time for a catch up.

Meanwhile, NYSE market value is surpassing the entire GDP of the United States of America.

PLY: The US dominance of stock market capitalisation shows the opportunities in many nations and indeed the colossal failure of the European Union to coalesce their customs union towards investment prosperity.

Swingy note of apology this week, the National Stock Exchange of Australia that's the minnow competitor to the ASX, it mostly concentrates on SME stock.

The Australian Financial Review offered a swindling apology to the managing director and the lead shareholder of NSX John Karantzis.

PLY: The esteemed Australian Financial Review (which is of course the equivalent of the likes of The Wall Street Journal in the Antipodes) has walked back many previous accusations including money laundering, and also rather pithy headlines such as: “More alternative facts from iSignthis boss John Karantzis." Seems to me that the AFR probably paid a pretty penny for their apology to boot.

It was a super busy week for results in the parish. The same thing goes for next week, of course. All the deals were an Exchange Invest daily, the watercooler of markets, the newsletter no person can afford to be without in the capital markets and market structure. For the sake of this podcast, let's just look at a few edited highlights.

I touched upon Schwab's spectacular numbers earlier in this podcast.

Meanwhile, Interactive Brokers have added several 100,000 new clients, not 3.2 million of Schwab but nonetheless, their results were utterly spectacular. Quarterly earnings of $0.98 per share, beating the Zacks Consensus estimate of $0.90.9per share, 72% pre-tax profit margins up from what was already year on year in the first quarter and eye popping 58% last year.

Flow Traders had good numbers too.

But the highlight of the exchange world in pure exchange play was of course NASDAQ with their very, very strong profits helped of course by the huge boom in stock market listing in the USA, as we mentioned earlier 56% of the world's stock markets.

The 21% increase in revenue compared to the previous year amounts to an excellent testimony to the management skills of Adena Friedman and her team.

Disappointingly Deutsche Bursa didn't keep up with this, more disappointingly still, they tried to justify the fact that they previously said they wouldn't manage to meet up to the standards of the rest of the parish.

In Young's Pyramid, NASDAQ has momentum and as I speak DB1 is in its sights. The market cap of NASDAQ is not above $26 billion and moving well, while DB1 is below $33.5 billion and looks at best became.

One interesting deal snippet this week, NASD (that is by the way nothing to do with the United States of America now store NASDAQ) it's the Nigerian Automated Securities Dealing system, an independent platform for SME and other equities. They've admitted Nigerian exchange PLC shares to trading.

Elsewhere Euronext got the nod from Italy's Consob for their takeover of Borsa Italiana.

However, Borsa Italiana, itself is subject to quite a lot of political wrangling at the moment, it seems, as I mentioned last week, that more and more of the nation's elite want to see the Euronext, concomitantly giving an equivalence of directorship and indeed management to the Italians as they will become the largest stock market in the Euronext Empire, if the deal is consummated.

New markets this week, Guangzhou Exchange kicked off, it's going to be offering a hedge for carbon emissions trading amongst many other commodity products. And of course, it's interesting because, on that market, Hong Kong Exchanges (HKEX) in clearing holds a 7% stake.

Product news this week, Deutsche Boerse threatening as we record this podcast to de-list Coinbase stock from Xetra and Frankfurt Trading.

PLY: It seems that in the LEI-zy issue at DB1 (that's “LEI” for the identifier for stocks) somebody filed the wrong paperwork. It'll be interesting to discover just who made this admin error.

In better news for Coinbase,

Options on Coinbase global started trading on April the 28th, a massive day of volatile and exciting trading events you entered and it seems that Coinbase is going to remain an investor favourite for quite some time to come.

PLY: After all, who needs the Tote pool at Finger Lakes, when you can speculate on Coinbase and get way more time value for your money than a mere nag bet on the horses? #Srsly, I'm glad to see Coinbase options listed as it will allow some judicious positioning of investment approaches around the parish.

Now options trading per se the big news of the week was the remarkable fee cut by OCC (Options Clearing Corporation) -they're the people who clear all of the major single stock markets in the United States of America as a monopoly amongst other products. They also clear the likes of CBOE futures exchange too.

PLY: Anyway, OCC announced a clearing fee reduction down to 2 cents. That means over the course of the last few years during the Craig Donahue era of CEO and Chairman the OCC have brought clearing fees down by over 60%. Moreover, they brought them down from 5.5 cents per contract to 2 cents. That is simply astounding. Those sorts of price cuts at the same time, while exciting for Coinbase options traders must surely strike fear into the heart of the management of Coinbase itself.

If only we could manage to see a Bitcoin trade that could clear for even 20 cents, let alone the 2 cents that the options clearing corporation is managing on what amounts to currently something like $30,000 worth of premium in the likes of Coinbase options.

Technology news this week,

SEBI fines two trading members in the (National Stock Exchange) NSE-Colocation cases that continue to be a presumably lucrative money spinner for the Indian regulator who found a series of exchange executives in recent months.

Robin Hood had a trading outage on their crypto trading side.

Meanwhile, China's Central Bank is looking to build its own FinTech Cloud, at the same time as it increasingly looks at oversight of big tech, in the wake of those huge fines on the wings of ant financial and Alibaba just recently.

Digital Asset - the people behind DAML (Digital Asset Markup Language) raise $120 million in a Series D growth round to expand the whole data network for DAML itself. Their attempt to try and create an all-encompassing universe for the settlement of issues. That means to date that DAML has raised over six funding rounds, some $307.2 million.

Most interesting perhaps of all to parishioners is the fact that exchange investors include ASX (Australian Stock Exchange) CME, ICAP, and of course, Deutsche Bursa. They've all been investors, but it seems they didn't put in money in the latest round.

What does that tell us about the future of digital assets? A lot of speculation me thinks on the topic.

Regulation this week,

Complaints and worries that the Securities Exchange Commission of the USA is becoming woke that was an opinion piece in The Jerusalem Post.

While elsewhere, as the New York Times put it quite pithy in a headline, Crypto is minting lobbyists.

PLY: Yes, I'm just minded to wonder how much Due Diligence is being entertained by these particular lobbyists, all seemingly senior political and regulatory figures when they're looking at just who they're going to be lobbying for in their risk to accept crypto based lucre.

Meanwhile, ladies and gentlemen, two interesting statistics to bear in mind.

Well, one of them is just a headline from the CNN (Communist News Network) CNN noted in a headline this week: “Trump said electing Biden would crash the markets. It didn't”

PLY: I have to say I think that that might just be a premature action at this point in time looking at the incredible froth of the US market. And indeed, the fact that well Biden spent a trillion dollars here and a trillion dollars there. I mean, sooner or later, we're going to be talking about, well, real money.

Equally, in China short-selling of stocks has reached a near-record high.