103 Exchange Invest Weekly Podcast July 17th, 2021

TRANSCRIPT:

This week in the parish of bourses and market structure:

The Gensler era SEC seem to have found a fascinating line for their SPAC attack using a conflict of interest approach.

Are the cuts to Binance - only a flesh wound?

And Matt Chamberlain notes “Je ne Ring-grette Rein”

In a week when the LSEG sets a technology and FinTech listing record.

My name is Patrick L. Young,

Welcome to the bourse business weekly digest. It's the Exchange Invest Weekly Podcast Episode 103.

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 ExchangedInvest.com.

Didi Chuxing is probably not something that was well known in the West until a couple of weeks ago. Of course, the man in the street knows little or nothing about the Chinese ride hailing app. But in financial markets circles, it's become quite a fascinating thing. Why did they choose the US over Hong Kong for their IPO? Why did they ignore the Chinese officials asking them to pull their IPO when it appeared they had significant issues over privacy issues, at least in terms of the way the Chinese government was viewing what was happening?

The lawsuits of course came teeming in soon after Didi’s share prices dipped below their offer price but not before the ride hailing app granted $3 billion in pre IPO options to executives. With what amounted to a double whammy that was a US move: the major stock indices will remove more Chinese companies following an order by Joe Biden suggesting that there's a certain sort of what is it anti-détente, I suppose could be the word for it where China lists its Chinese things and Hong Kong presumably reaps the rewards of the Americans pushing Chinese listings away. At the same time as indeed the Chinese government's officers seem to have had various people who were eager to try to remove the listings of the Chinese companies in the USA in the first place.

Over the Philippines, the bourse CEO there is hopeful that short selling will start this year, optimism that corporate and tax regulators will reserve issues on borrowing and lending of securities to enable a short selling regime.

Good news from Interactive Brokers, they've eliminated the monthly account inactivity fees for those who've got smaller, more modest balances with IBKR. The US brokerage was arguing that its decision is aligned with industry standards.

“I don't regret the outcry from trying to ditch the ring”, said the exchange boss of the London Metals market, Matt Chamberlain, the Chief Executive of the 144 year old LME which is home of course to the ring, the last pit of its kind in the City of London.

JPX Group has said that their trading activities in Tokyo will continue as usual. Despite the Tokyo lockdown which is stopping spectators from attending the Olympics it's not going to affect JPX trading, nor I presume is JPX trading going to be cancelled. Although it seems some are remembering that the Olympics themselves may be in danger.

A Fabulous heartwarming story this week, from the Indian Stock Exchange BSE (formerly known as the more extended Bombay Stock Exchange) It acted as a catalyst for investments and helped in the creation of US $3 trillion of wealth since it was set up in 1875. That was a comment made by the CEO during the course of its anniversary celebrations last July the 9th.

Meanwhile, in the US, Reuters ran a fascinating exclusive: The SEC is focusing on bank fee conflicts as it steps-up its SPAC inquiries.

Suddenly special purpose acquisition corporations could look a little bit wobbly. A spokesman for the SEC was not responding to requests for comments, but SPAC sponsors Reuters note, typically pay banks a 5.5% fee for underwriting the IPO.

The Gary Gensler SEC appears to be demonstrating an uncanny knack by applying acute finger pressure just to the point where maximum pain ensues.

No pain whatsoever in the Channel Islands, The International Stock Exchange, what used to be known as the Channel Island Stock Exchange has set a spectacular new record with 500 + new listings in the first half of 2020.

Remember last year, they listed 831 stocks during the course of the year that looks to be beaten quite significantly during the course of this year. What a stunning performance bringing the total number of listed securities on The International Stock Exchanges official list to 3,431 by the close of business on the 30th of June 2021.

Over in Brexit news:

The Bank of England supremo Andrew Bailey he sees deadlock with the European Union on City of London access to the Eurozone markets expect a lot more talk of global Britain in the future.

In new markets this week:

Great news, the Zimbabwe Stock Exchange has been granted a licence to operate a Central Securities Depository.

Meanwhile, good news in the crowdfunding world, in the Bahamas with the official launch announcement of ArawakX, a new upstart which is taking on the Bahamas International Stock Exchange (BISX) who are hoping to get into crowdfunding at some stage during the course of 2021, ArawakX are already there.

And indeed ArawakX is expecting to expand its crowdfunding platform into its SME exchange platform for which it's been licenced during the course of the next nine months.

Deals news this week:

Summertime of course, Bastille Day in France, Day 12 of July in Northern Ireland much else besides in the wake of Independence Day in the US last week, SIX (Swiss Exchange) they've acquired ULTUMUS from ETFS Capital. They're looking to strengthen their ETF and managed data service offering.

That's an interesting acquisition of SIX. Clearly sent the opportunity in the gradually rationalising European Union ETF space or is it time to emulate ICE with their moves in the US ETF market? Or indeed does SIX (Swiss Exchange) have something alternative in mind?

Don't forget ladies and gentlemen, wherever you are in the world today, if you're perhaps studying for the hot topic of this year, a PhD in understanding just what on earth you have to do in order to cross borders. You've always got the opportunity to brush up on your reading “Victory or Death - Blockchain, Cryptocurrency and the FinTech World”, in my opinion, of course, I wrote it, an excellent read during lockdown, post lockdown or whatever we're going to call this current complete nutter unseemly massive near zero travel without hassle.

Twenty years on from the excitement of the original FinTech bestseller “Capital Market Revolution”, it's time to look at some of those loose strands hanging around which needs a spot of perspective, whether you're an exchange parishioner, a FinTech professional, or anybody just trying to stay abreast of where technology is now driving investments in finance. “Victory or Death” is published by DV Books and is distributed by Ingram worldwide.

Meanwhile, we had a spectacular end of season IPO-Vid Livestream this week with Dr. Robert Barnes, who coincidentally is the first ever paying subscriber to the Exchange Invest newsletter. Robert was discussing all sorts of issues from his fascinating position as the Chief Executive of Turquoise of the London Stock Exchange's group's fascinating MTF platform which operates across the European sphere.

No bad idea to go back and check out to listen to that, and while you're waiting for IPO-Vid Livestream to return on September the 14th. Don't forget to go to Youtube.com IPO-Vid and you can look up our 37 fascinating back issues of the IPO-Vid Livestream covering all manner of exciting topics.

Over in crypto land:

Well perhaps the headline of the week's law was Binance. We got a few things wrong but we're working on it which was recorded in City AM. Beleaguered Binance boss Changpeng Zhao, better known as “CZ” has confessed the organisation hasn't got everything right over the last four years as he was responding to a raft of criticism and clampdowns from regulators.

An exchange which is of no fixed abode is, in my humble opinion, a much more fundamental problem than what appears to be here an attempt to brush off a swathe of regulators clamping down or banning Binance on their territories.

In the sense, the Binance boom, was being talked about by some as crypto trading unfolded beyond the nation states reach.

The same time I have to add to the Exchange Invest newsletter this week, the phrase “invitation to wear an orange jumpsuit” was springing to mind when I read that headline. All extraterritorial trading somehow interacts with “regulated onshore” sooner or later and even with the ineffectual Biden White House, my money is on the Feds intervening where they perceive their interests threatened.

And indeed, Elizabeth Warren has been warning that crypto ‘Scams will Continue to Surge’ on exchanges and is desperately eager to see SEC regulation.

Meanwhile, Binance as part of their attempt to fight back from the recent clampdowns have announced that they're going to double their compliance staff.

At the same point Santander blocked payments by UK banking customers to Binance and indeed China blocked access to Binance.com in order to curb Bitcoin trading.

It wasn't unilateral though they lock cover servers in Beijing, Shenzhen, and provinces like Heilongjiang. Exchanges such as Huobi, Bitfenix, Kucoin, Bithumb and Bitstamp were also being blocked alongside Binance.

Of course that led to headlines in the crypto kitty press such as Binance still can't catch a break despite compliance ‘efforts’ theatrics.

Now some readers might remark that it was quite easy to foresee that Binance would reach a particular denouement. Others might comment that the settlement of this detritus-fan repo is far from settled. At the same time it's quite interesting to hear even the crypto media starting to make some rather cynical comments about what's going on in the crypto world.

Our last comment for the week on crypto and in particular Binance. Well, there was an epic headline from Bloomberg: Crypto Exchanges have a Plan to Beat Binance: Play by the Rules.

In other words, a great example of Young's first rule of exchange innovation: “At all costs, eliminate orange jumpsuit risk”.

More to come from the Binance story, no doubt as cryptocurrency traders around the world have been struggling to sue the Binance organisation. Due process is of course tricky when, as I have experienced a friendly conversation opener at a cocktail reception “so where are you based?” was hastily rebuffed by a senior Binance staffer in 2019 with a rather blunt statement “we're not allowed to reveal our office location”.

Product news this week:

Fabulous listing in London, the London Stock Exchange Group celebrated as Wise (formerly Transferwise), they're a Titan of quality service, quality processing in the payment service provider business, listed through a direct public offering. They're already covering something like 85% of the world's bank accounts altogether. Therefore, perhaps unsurprising that they came in with more than 8 billion pound market capitalization, which makes for $11 billion, not $8 billion, as I might have mentioned erroneous a last week on this podcast.

Meanwhile, there's been a ‘Big Shock’: Aggrieved investors were in court in India last week, after India's MCX (Multi Commodity Exchange) had pegged their oil contracts in the negative. “The MCX has cheated us!” where the strong words as tempers flared, concerning the Indian branch of the Cushing crisis impact stemming from CME’s problems with their West Texas Intermediate markets, which were also licenced in Indian rupees on to the MCX.

Meanwhile, the CME launched Micro West Texas Intermediate futures on July the 12th. And we're eager as we were recording this podcast to beat their chests and note they'd already traded 50,000 contracts within a couple of days. The CME clearly has a firm eye on the micro, my concern remains, CME doesn't seem to be focusing on...well, the macro.

Over in India once again, GIFT City, that's the International Financial Centre that's been built in Gujarat. It's regarded as potentially the hub for internationalisation of the Indian rupee according to the Chairman of the IFSC.

Rather more worrying though in product news:

Fractured Libor transition halts US structured rates Switch, and that came from the esteemed folks of Risk.

Technology news this week:

Avenir, they’ve suddenly jumped from the back office into the front. They're looking to develop the trading platform for the International Stock Exchange, those folks are the 500 listings in six months. That's going to help the specialist venue drive transaction volumes.

Registry / commodity warehouse vendor Avenir is moving to the trading area is exciting news. Perhaps it's unsurprising that their marquee customer is going to be the International Stock Exchange given that Avenir Co-founder Stuart Turner has been on the board of the channel on the stock exchange on The International Securities Exchange for many years, even though he's in the process of retiring from Avenir day to day.

Regulation news this week:

The DTCC of America, their derivatives repository was fined a rather swindling $500,000, well to be precise, $408,000 euros for data breaches for EMIR.

And elsewhere, the Bank of England, say they're going to crack down on the ‘secretive’ cloud computing services. Noting that they're not happy with some of the processes that are going on around Amazon, Google and Microsoft to name but three.

This was the week where news from Inc.com pointed out that female startup CEOs cut their salaries 30% during the pandemic, while men gave themselves a rise.

And at the same time, ladies and gentlemen, ENO was launched, not the English National Opera that's been around for many years, but rather ENO, a dedicated digital token for the wine industry. Frankly, I think I'll drink to that.

And on that mysterious and magnificent note, ladies and gentlemen. My name is Patrick L. Young.

Join me Monday through Saturday for the water cooler of the business of bourses Exchange Invest, the only unique daily newsletter about the Stock Exchange, Commodity Exchange, Crypto Exchange, and indeed every kind of exchange business.

Once again, my name is Patrick L. Young.

Ladies and gentlemen, have a great week in life and markets.

I'll be back next week with the Exchange Invest Weekly Podcast Episode 104.

LINKS:

Hong Kong To Benefit From Beijing's Didi Crackdown, IPO Rules Overhaul, Analysts Say
South China Morning Post

Chinese Ride-Hailing Giant Sued By US Shareholders Over Stock Plunge
South China Morning Post

Didi's Regulatory Troubles Might Just Be Getting Started
The New York Times

Uber Under Pressure As Chinese Rival Didi Enters UK
City AM*

Why Did Didi Choose The US Over Hong Kong For Its IPO?
South China Morning Post

Four Suits Filed On Behalf Of Investors After NYSE IPO Of China's Didi
Voice of America

Didi's Shares Dip Below Offer Price, But Not Before Ride-Hailing App Granted US$3 Billion In Pre-IPO Options To Executives
South China Morning Post

Major Stock Indices To Remove More Chinese Companies Following Order By Joe Biden
South China Morning Post