092 Exchange Invest Weekly Podcast May 1st, 2021

TRANSCRIPT:

This Week in the parish of bourses and market structure, a mixed week for parish results is just one element to a busy seven days in the world of exchanges and market structure, stay tuned for some key highlights...

My name is Patrick L Young.

Welcome to the bourse business weekly digest,

It's the Exchange Invest Weekly Podcast Episode 092

The London Stock Exchange shareholder revolt is one big story, but the CME’s managing to be reported as ‘beating expectations’ while profits are actually in freefall. Perhaps scarier still.

Yes, even the London Stock Exchange group managed to eke a 4% profit increase - pushing the Paternoster Square ‘smugometer’ into unjustified Tesla-like orbit. From NASDAQ to NYSE, profits are soaring, before we get to Hong Kong Exchange (HKEX) stellar performance this past week yet, Chicago Mercantile Exchange Group's profits are collapsing at the pace we anticipate for Coinbase’s net commissions. Strange times, but some might think management is an issue.

Good day ladies and gentlemen, this is very brief - in fact, this week, it's an incredibly brief reduction of highlights. It's been a big data week amongst the key headlines from the weakened 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 ExchangedInvest.com. Join us and find out what you're missing at the watercooler of markets.

David Schwimmer could lose a lot of city friends if the mega-merger with Refinitiv encounters any more serious problems.

We didn't say that last week, actually, it was the Sunday Telegraph, that provoked a lot of well #LOL responses amongst the Exchange Invest readership who've been expecting a denouement on the written Refinitive situation for some time.

There's been a singular incapacity by the London Stock Exchange Group to sell the merits of the Refinitive deal beyond those who are de facto Craven to their every word. Group CEO, the man we nicknamed “out of his Depth Dave” is embattled now and the party has barely even begun. The average Refinitiv staffer is starting their Stockholm Syndrome campaign on the latest owner as I speak.

I pity all the poor souls actually making better markets at London Stock Exchange Group, the relentless greed, and myopia mixed with institutional incoherence of the G in the LSEG isn't even in the early “coming home to roost stage” for those pigeons.

Frankly, what we've seen so far wouldn't even qualify for the preliminaries of a “red herring” prospectus of things to come.

At the same time, the Telegraph having made their pun on “Terminal” was an escalation - “embattled” seemed frankly fairer to ODD. The key question though, remains how many weeks did David Craig et al have in the Refinitive C-suite? It was hard to justify their presence in the first place during the merger, as indeed now. Under pressure, the Paternoster Square C-suite looks to justify or at least jettison bodies in a ‘Sauve qui peut’ management panic/shakeup. Who will be leaving first?

Meanwhile, the problems for DB1 were writ large over their recent acquisition of ISS, a walking conflict of interest as we noted an Exchange Invest before the ink was dry on the day last November. Here we are barely five months later, and that conflict can be seen in absolutely plain sight.

ISS fairly in our opinion, rebuked the London Stock Exchange Group for their 25% pay rise to the group CEO David Schwimmer, however, that left the door open to what would be signed advice from an independent entity. Looking curiously tainted given the ISS parent is none other than the Deutsche Boerse, who are engaged in a titanic struggle across several fronts to gain post-Brexit business at the expense of the London Stock Exchange group.

Eventually, this week we had an analyst call and subsequently the AGM of LSEG. It seems the C-suite shambled into your conference room and stuck with their core message for at least an hour. Well, if that continues compared to the previous call. A perception of a management outbreak at a group level could yet be upon us. However, that requires the apparently happy story right now of Refinitiv remaining on track. Thus the news was “About 40 million pounds ($55.5 million) of savings in combined operating costs from the Refinitive takeover had been realized and there were new products” and blah, blah, blah, blah.

PLY: Now, call me an old cynic here, but frankly $55 million on a $27 billion acquisition for a company that we already know is flustered and outmoded in many angles. Sounds like they might have lost a few “Customer Enablement Executive” positions but in terms of restructuring the black hole of Refinitiv, which sucks with the sort of force that James Dyson can only dream of.

Let's put it this way, a firm whose restructuring involves the creation of titles like “Customer Enablement Executive” doesn't strike me as one which is seriously trying to craft a new lean mean profit machine. “ODD must go!” is a growing theme in my inbox. While ODD clings on, as I said before, doubtless the Refinitiv C-suite will go first, but frankly, from this distance, it's tough to see how anybody is justified in situ. The markets run themselves and run themselves well, but the C-suite as well, chocolate teapot utility (albeit said chocolate teapot at least has a value in its component parts).

To which end the shareholders were revolting this week at the LSEG AGM, there were of course the usual North Korean style endorsements. However, notably Jacques Aigrain and Cressida Hogg’s had contra-blips in the directorial endorsement vote (6.96 and 5.48% respectively). Chairman Don Roberts got a Refinitiv definitive “trouble at the mill” looming 7.13% thumbs down.

Most spectacularly 23.52% of the shareholders voted against the ODD’s one's egregious CEO pay rise.

Most spectacularly, 23.52pc of the shareholders voted against ODD’s egregious CEO pay rise.

The LSEG offered the usual hollow worded nonpology with shareholders to be talked at and management taking the lessons onboard blah, blah, blah x10 to the power of infinity…aka a message that given LSEG's ongoing comms crisis amounts to: ‘the C -suite will continue trousering everything we can until the game really is up.

As to the compelling rationale behind the original Refinitiv entity, the corporate messaging of LSEG still collapses post of blithe then “you know, big data, the future, electronic things, exciting wavy, binary numbers mean cash or income. Can I get some help from one of those Customer Enablement Executives? My Nokia isn't talking to my Blackberry.

EI awaits the next quarter of the LSEG Saga with the feeling it might be possible to do the duct tape tango for some months to come but the truth is out there, beyond the great market components (apart from the ones already foolishly sold off) management are now well on their way to going native in a Refinitiv fashion. That amounts to a less cinematic version of control takeover by other parts akin to John Hurt’s spectacular dinner party demise in the movie Alien.

Meanwhile, for the annals of history, CFO Manz noted: “We are exactly where we expected to be at the end of the first quarter”.

The trouble is, nobody else knows where LSE is.

It was a Mega tactically busy week for results in the parish above and beyond the London Stock Exchange groups that we were just discussing. All of these deals were in Exchange Invest daily and in detail - the newsletter no person can afford to be without in capital markets and market structure. For the sake of this podcast, we're gonna look at some very, very brief edited highlights.

Hong Kong Exchange (HKEX) sent a sessional look at that bottom line, profit attributable to shareholders reached record quarterly highs of 3,840 million Hong Kong dollars, whatever currency you take that in that serious money, and it was 70% higher than Q1 2020 31% higher than Q4 2020. That put everybody into the shed by the time we recorded this podcast, admittedly ahead of the announcement of ICE and trade web results which are going to be happening very very soon after we leave the studio. Nonetheless, it set an incredible benchmark compared to everybody else who was blown into the shed.

Most disappointingly, the Chicago Mercantile Exchange Group, Inc., their return revenue of 1.3 Billion. They have an operating income of $725 million for Q1. The trouble is profits for the three months ended March 31st stood at $574.4 Million, now that's a great number as a stand-alone, but the trend is your friend, ladies, and gentlemen, those were down from $766.2 million a year earlier.

Deals this week, news from Saudi Tadawul, the group has hired advisors for its upcoming IPO, those include NCB Capital, Citigroup, and JP Morgan, presumably, JP Morgan was pitching for the business while they were on a call to Saudi Arabia trying to sell a football league a few weeks back.

Elsewhere, investors have begun trading in the shares of the Nigerian Exchange Group, not on the NGX itself, I must note but rather on its smaller, unrelated cousin if that's not too great of an Oxymoron - the independent NASD (not anything to do with NASDAQ) but NASD (Nigerian Automated Securities Dealing) system following demutualization NGX have distributed 1,964,115,918 ordinary shares of 50 Kobo each to over 200 dealing members on additional ordinary members who have now become shareholders.

Elsewhere, Euronext has this week completed the acquisition of the Borsa Italiana Group. Total consideration 4.444 Billion Euros. And they note they followed the satisfaction of all condition precedents.

PLY: Does that mean the Italian push for greater hegemony against the Franco-centric (in management at least) Euronext Empire has failed to breakthrough?

Also this week, news of a couple of good new markets the World Bank is backing the Zimbabwe Agricultural Commodities Exchange.

And in Ethiopia, an Investment Bank Law may yet herald the creation of a stock exchange.

Of course ladies and gentlemen if you're looking for other insights during the course of the week. While you're listening to this podcast, don't forget, you can also drop over to YouTube and catch up on the back issues of our IPO-Vid. Go to YouYube.com “IPO-Vid” and you can catch all of the shows that you will also be able to watch as a Livestream, Tuesdays 13:00 Eastern Time New York or 6 pm London the IPO Vid Livestream with myself and a cornucopia of special guests coming to you every Tuesday on Facebook, LinkedIn, and YouTube.

If that's not enough for you, don't forget to pick up a copy of my latest book “Victory or Death” all about the forthcoming world of FinTech and how that's changing in the world around us. Victory or Death, blockchain cryptocurrency in the FinTech world is published by DV Books and available via Ingram worldwide.

Crypto this week, it's been an exciting week for Coinbase. At one stage it was done 32% from its highs in that hype, which was less than a fortnight ago.

PLY: Stage one blamestorming had begun before the stock recovered, it was only there for dying 20% something by the time we last looked.

And of course, Kraken, Blockchain, Gemini, and various others are all looking at the possibility of their crypto IPOs.

As I noted in Exchange Invest this week from one undiluted success…to the well, hold on just one second.

Talking about something that's certainly not been an undiluted success, that's Turkey and Crypto. The ban is coming from using cryptocurrencies as a payment method as an investment method a lot of investors are.

This week nursing considerable pain in Turkey after the demise of two exchanges no less Thodex could not be a multi-billion dollar scam. It certainly doesn't look very encouraging as multiple people have been arrested and the CEO appears to have disappeared. Equally doesn't seem to be a very happy ending to Vebitcoin.

Ultimately, therefore we have the newsletter in the week that Turkey is looking to establish a custodian bank for Bitcoin exchanges.

Technology news this week, one huge headline SIFMA, ICI, and the DTCC are leading the effort to shorten the US security settlement cycle to T+1. They're looking to collaborate with the industry on the next steps. How long will that take T+7 years I would guesstimate is the rough margin.

Elsewhere, Trading Screen - a vendor which has been for sale for a long time after some troubles around its management, to put it mildly. The execution management system provider has been bought by private equity firm Francisco Partners for an undisclosed sum.

In regulation, the CFTC we're celebrating collecting more than $1 Billion in sanctions via Tipsters, which is quite sensational as they issued their latest $3 million whistleblower award.

In China, the draft of a first law related to Futures Trading has been sent for primary assessment. That is of course coming 31 years after the first Chinese Futures Exchanges were set up in 1990.

Elsewhere in China, the Ant IPO-approval process is under further investigation by Beijing.

People news this week, a couple of interesting developments we got a new CEO to head of the Trinidad and Tobago Stock Exchange, Eva Mitchell, she'll also be leading the central depository.

Elsewhere in India Arun Raste has been named with CB permission for a five-year contract as MD and CEO of NCDEX (National Commodities Derivatives Exchange)

One fascinating footnote in the world of people, just last week, Alex Oh became the first woman of color appointed to lead the U.S. SEC's enforcement division that lasted barely a week as she resigned from the role on Wednesday citing public: “personal reasons”.

PLY: We reported on those being appointed on the 23rd of April in Exchange Invest 2032 that brought out diversity celebrations. Unfortunately, her personal reasons for leaving the post so rapidly “turned out to be” a federal judge has reprimanded her and others who were the council defending oil giant ExxonMobil in a class action suit brought by Indonesian Villagers which accused ExxonMobil which amongst other things accused ExxonMobil of being a party to torture and murder.

Kinder, gentler politics indeed. Some Wags will clearly wonder if Chairman Gary Gensler appointed the unfortunate Ms. Oh to the role as he felt somebody with a degree of experience in corporate torture might be an ideal enforcement chief. Naturally this podcast cannot possibly comment.

And on that mysterious and magnificent note ladies and gentlemen.

My name is Patrick L. Young.

Thank you for joining this 92nd Exchange Invest weekly podcast, which will be seen by or listened to rather by most of the world on the International Workers day of May the first 2021.

Have a great week in life in the markets.

My name is Patrick L Young, catch up on Exchange Invest daily - the watercooler of the bourse business on Monday with all the subscribers, and don't forget to tune into our Livestream Tuesdays at 6 pm London time.

LINKS:

$27BN Refinitiv Deal May Prove Terminal For London Stock Exchange Chief
Monday Telegraph

London Stock Exchange CEO Pay Hike Faces Shareholder Vote
Reuters

London Stock Exchange Reports 3.9% Rise In First Quarter Income
Nasdaq

London Stock Exchange Investors Revolt Over Chief Executive's Pay
Telegraph

LSE Rebuked By Investors Over Chief's Pay Package
Financial Times

London Stock Exchange Says Expenditure Targets Unchanged
Reuters

London Stock Exchange Income Rises, Refinitiv Savings On Track
Reuters

HKEX First Quarter Results
HKEX

Hong Kong Stock Exchange Reports Best Quarter On Record, Helped By Bull Run
South China Morning Post

CME Group Inc. Reports First-Quarter 2021 Financial Results
CME

CME Group Profit Drops 25% In First Quarter
Reuters