099 Exchange Invest Weekly Podcast June 19th, 2021

Transcript:

This week in the parish of bourses and market structure:

Betfair turns 21, Hong Kong Exchanges turn 21 too and pushes for greater diversity.

My name is Patrick L. Young,

Welcome to the bourse business weekly digest.

It's the Exchange Invest Weekly Podcast, Episode 099.

Good day ladies and gentlemen, this is a very brief reduction of highlights amongst the key headlines from the events in market structure. All of the analysis from 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.

This was the week when Coinbase celebrated T+60 and the end result is they are half the company they used to be! Coinbase burst forth top of Young's Pyramid and now 60 days on it finds itself $12 billion adrift at the bottom of the top tier, thanks to the London Stock Exchange's stock bouncing from its post first Refinitiv shock lows.

A bit below $47 billion, that's the Coinbase valuation on a non-diluted basis or at least it was on its 60 day birthday. The stock peaked at 429.54 and bottomed (so far) at $208 closing out after two months at $223.92. That surely must be delivering some sleep issues for more than a few of the buyers who are clustered in the $300 bracket and even above, which looks a long, long way over the horizon. Unless I suppose Uncle Elon better manipulates a new Bitcoin bubble.

Amongst the clear legacies arising from the whole situation is one: Kraken appears to be delaying their IPO as a multiplicity of other cryptocurrency exchanges suddenly concern themselves about the viability of being loved on the legacy stock market.

Indeed, I would remind parishioners of the OpEd I wrote for CapX published on the day Coinbase completed its Direct Public Offering (DPO):

Is Coinbase The Future – Or A Digital South Sea Bubble?

The predictions they're in are not looking too shabby as predictions go. But I have to say the words of Mad Magazine Editor Philander Chase Johnson, spring to mind, “Cheer up, the worst is yet to come”.

Back to Coinbase, here’s the pyramid in tier 1.

Here we are today…

Over in the UK Parliament, lawmakers have been urging in a report:

Go Boldly To Cut Red Tape After Brexit, UK Lawmakers' Report Urges

On a BigWorld level, the continued closure of the United Kingdom at the whim of a persistently inaccurate blob of statisticians is a worry. However, there are signs that despite a de facto socialist approach from the Prime Minister and Finance Minister, the free marketeers are fighting their corner when it comes to two key areas. The first is trade, where the UK has an outline agreement on trade with Australia, which it signed this week (that's significant because it's the first all-new agreement and opens to similar deals with New Zealand and potentially the United States of America, plus the golden possibility membership of the Pan Pacific trade area CPTPP.

Secondly, it ought to start having an impact on financial services in due course, especially if the UK gets that vaunted TPP membership. Third, this agreement shows the weak notion of the European Union's model of demanding the ceding of national governance rights in exchange for trading. Matching sovereignty with the trade may be good for despots, but when it comes to economic growth, it's like asking goldfish to choose their preferred bicycle.

Closer still to the parish of exchanges. The remaining free marketeers in the BoJo government are pushing against the “Waitrose protectionists” as they've been called (those it has to be said who are often authoritarian in their COVID control freakery). Thus we have a report this week excoriating the useless ‘precautionary principle’ which lies at the heart of the European Union's ongoing policy of deliberately reducing its own citizens’ prosperity.

The sooner and the more, the greater of the ditching of this ghastly precept, the better it will be for any financial market - and all citizens within that nation, the UK moving first and pushing against the ghastly drivel of MIFID II with renewed vigour - is vital to secure a better financial future for us all.

PLY: And a hearty happy birthday, 21 years old to the Hong Kong Exchanges Group. They were celebrating this week and they were also trailblazing Hong Kong Exchanges wants to end all male boardrooms, in a gender diversity in ESG shake up. On the verge of celebrating their 21 years as a for profit entity, Hong Kong exchanges had raked in 19.19 billion Hong Kong dollars (that's about 2.4 7 billion US dollars last year). That's up significantly, some sevenfold growth in two decades from the 2.31 billion Hong Kong dollars that it had achieved in 2000 A.D.

Of course, when it comes to the ESG issue, Hong Kong after all has the model tiger chairman, who shows the excellence of women in the boardroom. Good news for coherent diversity promoted by Laura Cha.

Then again, I'm not minded to agree with mandatory policies, but Hong Kong is so far behind the curve in terms of its diversity strategy, that mandating a single woman director is anyway just the barest of starts and thus it's good to see Hong Kong exchanges pushing this.

Then again, given the alpha generated by HKEX Group Chairman Laura Cha, it's a shock, other companies in the usual investor-solving Hong Kong aren't already rushing to follow suit?

It's amazing at the same time to think that the actual unified Hong Kong Exchanges is a week younger than the gambling prediction market Betfair - but of course, the Hong Kong Exchanges have a much more storied past, albeit with a slight story in reverse. They became a stock exchange monopoly in Hong Kong, where before various bourses had flourished. Congratulations to Hong Kong Exchanges on their 21st birthday, a remarkable history of achievement that already exists in the group's timeline.

Speaking of 21 years of remarkable achievement that brings us of course to wishing out a very happy birthday to Betfair, that pioneering exchange that changed the face of gambling and introduced coherent risk transfer into a lot of sports trading. They launched on June the 9th 2000 AD.

PLY: One has to say in a tiny footnote, PLY mentioned the rise of sports prediction exchanges in an earlier worldwide web publication to Exchange Invest several years previously. I applaud the excellent work of all of the founders of Betfair in achieving such a remarkably successful franchise.

Meanwhile, the good news, the London Metal Exchange ring will return but nobody's quite sure how long it might last. The London Metal Exchange CEO Matthew Chamberlain is hoping that ring dealers will adapt to a hybrid pricing system. Therefore the possibility that ultimately the ring could close is still very, very much an accident threat.

And I quote, writers saying this week:

“The exchange proposes a new rule that would allow it unilaterally to move the official price discovery session from ring to screen. In the event that the number of ring dealing members falls below six or their share of volumes falls below 75%.”

In New Markets this week:

A new market for SMEs has launched in New Zealand Catalyst opens to the public, it will officially launch for trade on June the 21st. Aiming to fill a huge gap for smaller companies that want to raise up to $20 million a year from the public.

In Deals this week:

No sooner had it been mentioned that it might be happening than broker Marex Spectron (they're a leading exchange-traded derivatives broker amongst other products) canceled the idea of their London listing, having at one stage thought about seeking a main market position on the London Stock Exchange with a valuation in the range of 650 to 800 million US dollars.

Elsewhere in Daily News:

Accenture will oversee the merger integration between S&P and IHS Markit.

If you're looking for some reading, of course, ladies and gentlemen, whether you're still locked down, whether you're in the zone, the green zone, the red zone, maybe you can even actually manage to travel and read a book while you go.

Don't forget to pick up a copy of my latest tome “Victory or Death” - Blockchain, Cryptocurrency, and the FinTech World. An easy read, explaining the differing and diverging roles of bank exchanges, explaining the winning models of the new world order, placing in perspective just what Bitcoin, Blockchain, and Cryptocurrency mean for markets. Victory or Death is published by DV books and is distributed by Ingram worldwide.

Also, we've had a fantastic fortnight on the IPO Vid Livestream. Last week we had David Weild IV, he was following Kenny Polcari.

Kenny Polcari talking about stories from the New York Stock Exchange floor, David Weild IV was the man who is really the godfather of crowdfunding in the United States of America. He was talking all about the crowd and future ways to fund the democratic success of the Western nations and beyond.

Coming this Tuesday at 7 pm European Time, 6 pm London, 1 O'clock in New York time, we have none other than the fantastic crypto dad himself, the former chairman of the CFTC, the honorable Christopher Giancarlo.

Catch all the back issues of IPO Vid online at YouTube IPO-Vid, which you can search for. And of course, this will be live every Tuesday as it always is, with Christopher Giancarlo on Tuesday on Facebook, LinkedIn, and YouTube.

In crypto land this week:

Very interesting exposé by the Financial Times, Tether (which is, of course, one of those many currencies that have tied themselves to fiat money in this case the US dollar). Tethers commercial paper disclosure places it amongst the global giants according to the Brussels Beagle none other than the Financial Times. Disclosures from cryptocurrency provider Tether suggested it has become one of the world's largest investors in the US commercial paper market, rubbing shoulders with the likes of fund managers Vanguard and BlackRock and dwarfing the investments of tech giants like Google and Apple, according to estimates from JPMorgan.

PLY: Very interesting, possibly revealing read. Will we hear more about this in the future? I wonder?

Product news this week:

CBOE is going to expand the global trading hours for their VIX and SPX options to nearly 24 hours a day beginning from the 21st of November this year 2021.

Elsewhere, give SPACs a chance, cry the experts as they urge more listing reforms in the Hong Kong exchanges marketplace.

Elsewhere, sadly, there has been an open outcry all about the CME Group, but not actually in the CME Group. This is civil society protesting the creation of NASDAQ Veles California Water Price Index Futures last December on the CME.

PLY: The most disappointing issue here, well, let's put it this way. At least CME is consistent in failing to actually defend free markets once again. This is a big and growing issue, we need to be out there preaching the message of why water will be better quality, better priced, and ultimately cheaper for all. Thanks to liquidity, accessibility and transparency. It's a tragedy, the CME is not doing this when it's its own product.

Elsewhere for those who are wondering what they might be smoking in the near future, we are not encouraging drug use anywhere in the world but the small exchanges have continued to innovate and they've got Cannabis Equity Index Futures now available.

In technology:

The Ho Chi Minh Stock Exchange is testing the South Korean IT system, which will finally in a COVID delayed move be replacing their pre-existing exchange technology which of course as we know has been suffering huge technical outages in recent times.

Over in Brazil, B3 we're working their way through a glitch that affected last Thursday's trades and transactions, something in the integration between the trading and clearing platforms.

Over in regulation:

Britain has urged the EU to ‘expedite’ financial services talks.

PLY: Given the unmitigated hostile negativity of the European Union towards the UK in this Brexit world, I think this requests our minds to, well, a spot of diplomatic trolling towards protectionist Brussels. Good thing too: the European Union needs to be kept under pressure lest it sees common sense and abandons its usage of the Belgian Empire playbook, as it seeks to not only punish the UK for Brexit, but even forcibly break up the European Union itself.

In a more cheering piece of news from Brussels, we move to career paths:

Euroclear has appointed Citi veteran Francesco Vanni d’Archirafi as chairman of the Euroclear boards, which's subject to shareholder approval at the company's general meeting of shareholders on July the 1st.

Meanwhile, the European Central Bank is urging Deutsche Bank to find a successor to their outgoing chairman.

PLY: The interesting thing is that it seems that one DB might be poaching from another DB. Deutsche Bank may still be looking at employing the DB1 (that's Deutsche Bursa) in the center of our parish CEO, Theodor Weimer. Then again, given his track record at Deutsche Bursa, I can honestly say I have no idea why Theodor Weimer is so eagerly sought by anyone to be their Chairman. Unless the key C.V. criteria for Deutsche Bank comes “from Frankfort and is breathing”.

Somebody who's certainly breathing through those capacious lungs of his, there's none other than Spyros Capralos, he's been elected the European Olympic Committee's president.

PLY: Congratulations to Spyros, a long standing Olympian turned high quality International Olympic Committee (IOC) official who was an excellent Federation of European Securities Exchanges (FESE) Chairman from 2008 to 2010. While he was, of course, a successful CEO of the Athens Exchange from 2004 to 2010.

Finally, this week, a little bit of a flux in the world of cryptocurrency, Wei Zhou, the Chief Financial Officer at Binance has left the company somewhat abruptly, it seems.

And thus we come to the Bitcoin story of the week:

El Salvador has recognized Bitcoin as legal tender. Most of El Salvador's legislators voted to accept Bitcoin as legal tender.

Meanwhile, the Bank for International Settlements, the banker's bank was swift to pour scorn on the concept of Bitcoin as the legal tender of anywhere, even a South American nation with an ongoing fiat currency problem.

And on that mysterious and magnificent note, ladies and gentlemen, this has been Episode 099 of the Exchange Invest weekly podcast with myself Patrick L. Young.

Catch up with us during the course of the week at the Exchange Invest newsletter, and it only remains for me to say I hope you have a great week in life and markets.

Links:

The Coinbase IPO kicked Off A New Era In Crypto—Or Did It?
Quartz

Coinbase To Create Its First NYC Office
New York Post

Kraken IPO In Doubt After Poor Direct Listing Performance By Coinbase
The Coin Republic

Go Boldly To Cut Red Tape After Brexit, UK Lawmakers' Report Urges
Reuters

HKEX Wants To End All-Male Boardrooms In Gender Diversity, ESG Shakeup
South China Morning Post

Women On Boards: Hong Kong Exchange Wants To End All-Male Boardrooms, Quicken Progress On Gender Diversity In ESG Shakeup
South China Morning Post

HKEX's Revenue Up Sevenfold In 2 Decades
China.org.cn

HKEX CEO Blog: And To The Next 21 Years!
HKEX

HKEX Celebrates 21st Anniversary
HKEX

HKEX's Bridging Role More Needed Than Ever Amid Fractious Macro Backdrop: CEO
Global Times

Happy Birthday Betfair! Company That Changed Betting Turns 21
Betfair