112 Exchange Invest Weekly Podcast September 18th, 2021

Transcript:

This week in the parish of bourses and market structure:

Banks win Libor case, SIX ADX has been approved, IBKR goes towards crypto with Paxos, and the New York Stock Exchange half greenlit a new green segment.

My name is Patrick L. Young,

Welcome to the bourse business weekly digest.

It’s the Exchange Invest Weekly Podcast number 112.

Good day ladies and gentlemen, this is a very brief reduction of highlights amongst the key headlines from the week in 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.

Interactive Brokers were in the wars this week they issued a statement about their patent trial a verdict. They have to pay trading technologies $6.6 million dollars in a fine for what was originally a 12 patent suit reduced to two patents (10 proved invalid) in the case where trading technologies had sued in 2010. And now anyway, the patents have expired. So therefore Interactive Brokers have very little additional cost involved.

B3 (Brasil, Bolsa, Balcão) – Fitch has assigned them a first-time BB rating (rating the senior unsecured ‘BB(EXP)’. B3 is revenues as we know related to trading, post-trading, and clearing activities on the listed segment for equities and derivatives comprise some 69.3% of the total revenues during the first half of 2021.

Meanwhile, there’s a bit of a worry, a multi zillion dollar Cruzado/Cruzeiro lawsuit (that takes us back doesn’t it) all relating to 22 years old legal action with the central bank and the original BM&FBovespa. Interesting to see how that lines up in terms of what B3 might have to pay.

Wasteful spending, that’s what ASX is being accused of. No, we don’t mean digital assets. We simply mean millions of worthless letters every year being sent resulting in a ‘staggering waste’ as different communications are duplicated, replicated, could replicate it to the shareholders on the ASX.

Over in Hong Kong, they’re planning to limit the retail investor access to their SPAC products. While there’s been a lot of chatter on the wires about the new Beijing bourse for SMEs. It’s seen according to China Daily as an Elixir for capital market reform. At the same time, other parties noting that they think that the new Beijing bourse faces a tough road ahead despite President Xi’s blessing.

Linking the Chinese mainland with the Hong Kong SAR, Tradeweb Markets, and China Foreign Exchange Trading System we’re delighted this week to expand their trading channel. Essentially the Southbound leg of bond connect has been increased. At the same time in Guangdong, they’ve unveiled a blueprint to double the number of listed companies by 2025, as China’s richest province eyes a capital market to retain the edge. As part of the drive, they’re aiming to increase by 1/3. The number of companies trading on the technology-heavy Star Market and ChiNext boards.

Back to Brazil’s B3, they’re planning a diversity Social Link Bond in the near future as they underpin their ongoing corporate sustainability policies and did their corporate sustainability index known as B3 ISE.

Brexit seems to have maintained its position in the headlines in the United Kingdom newspapers to some degree, even though it happened many months ago. But of course, the ramifications are still playing out. Brexit won’t turn the UK financial sector into a “Wild West” says the Minister for financial services.

Britain will be making judicious changes to financial rules following Brexit to compete better with New York and Singapore but will not become a ‘Wild West’ that harms its global reputation, according to Reuters.

No results this week, but it was a busy week for new markets in the parish all the details were in Exchange Invest’s 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.

The Swiss Exchange SIX, they have finally received regulatory clearance for their digital asset bourse SDX (SIX Digital Exchange).

Given the tens of millions spent via a multiplicity of management teams, I suspect the feeling inside SIX is one of wholehearted relief after what has been a troubled birth of their digital asset exchange. Will the launch now blow away the previous problems? Or is the difficulty going to prove architectural and not merely operational?

The New York Stock Exchange and Intrinsic Exchange Group, they’re partnering to launch a new asset class to power a sustainable future. The Natural Asset Company (NAC) is going to be a new investment vehicle intended to tap into ESG fever.

Deal news this week, it wasn’t too busy week but nonetheless Coinbase, announced they had a proposed private offering of $1.5 billion of senior notes for general corporate purposes, including product development and potential mergers and acquisitions. They subsequently find there was so much interest in the debt that they’ve upsized and priced the 2 billion note offering subsequently for the same purposes.

Elsewhere, SIX (Swiss Exchange) successfully completed the placement of their first Swiss Franc Bond at a coupon of .2%.

MSCI completed the acquisition of real capital analytics, and the pre IPO marketplace forge global is going public in a rather staggering $2 billion SPAC deal. That’s going to be backed by Motive Capital, which is sponsored by Motive Partners, a private equity firm specializing in financial technology, the CEO of the SPAC is none other than former Digital Assets CEO, Blythe Masters.

If you’re pondering your future, don’t forget to buy yourself a copy of “Victory or Death” – Blockchain, Cryptocurrency, and the FinTech world, some reading whether you’re locked down, not locked down, or just waiting for one of your terminal number of COVID tests that you need in order to manage to get anywhere in the world these days.

Well, we all know COVID-19 is a killer, but can it kill your career? Rather that’s the impact of FinTech potentially destroying your business. It’s a “Victory or Death”, the world of risk and opportunity. Speaking of the risks and opportunities of “Victory or Death”, the IPO Vid Livestream return this week. You can catch it on YouTube.com just search for IPO-Vid, and it was an “Ask Me Anything” with myself, Patrick L. Young discussing precisely this book “Victory or Death”.

That will continue on Tuesday when we also have an excellent guest in the figure of a Steve Hamilton, interest rate guru at the ICE in London, where we’ll actually be going to record the show with Intercontinental Exchange.

In crypto land this week, the Coinbase dummy spit was a major piece of entertainment as it railed against the SEC’ss prescription about the Coinbase lending product. The SEC has told us it wants to sue us over lend, we don’t know why, was a blog post by Paul Grewal, the Chief Legal Officer of Coinbase.

A fundamental misunderstanding seems to have emerged of the Gensler genius. Just because you don’t follow doesn’t mean you aren’t being sued, and the court of public opinion matters zero-iota to Gary Gensler.

As the Coinbase rant exposed the exchange’s crucial need to expand revenue. We heard that Coinbase is also applying to trade crypto futures in a derivatives push, pushing it, of course in the United States of America into the arms of a whole different regulator, the Commodity Futures Trading Commission CFTC.

On the macro, Ray Dalio says if Bitcoin is really successful, regulators will kill it.

Over in Hong Kong, they don’t seem to be killing it right now. And in fact, Hong Kong landlords are open to leasing to crypto exchanges on a much broader basis following regulatory clarity by the Securities and Futures Commission of Hong Kong to regulate digital asset exchanges in the Special Administrative Region.

Albeit, of course, some of the most expensive office space ever leased in Hong Kong was taken by Bitmex at record levels three years back (US$600,000 monthly office rent at Cheung Kong Center is a Breeze for Bitmex).

Binance according to the South China Morning Post, they’re battling regulatory headwinds as the world’s largest cryptocurrency exchange seeks financial legitimacy., which brings us to this week’s ‘believe it or not question’ how do you feel about the statement “Binance is rebuilding the exchange into a licensed financial institution with centralized headquarters as it attempts to improve ties with regulators?” Answers on a postcard or via email are welcome.

Product news this week, still in China, China’s Shanghai Energy Exchange is looking to launch a Freight Index Futures this year.

Excellent timing may think given the vast rises in container costs ex-China during the COVID era. For example, box ship charter rates hit an unprecedented $200,000 a day last week according to Splash news 247.

A Libor judge has rejected the halting of the use of benchmarks in a win for banks. Blob 0, Banks 1. Benchmarking status: #ItsComplicated.

The move towards T+1 clearing that has left the market divided in India. SEBI facing a mixture of responses from different market operators.

And back to Bitcoin once again. What else? Eurex the Deutsche Boerse’s own derivatives platform has debuts Bitcoin Futures Trading in Europe.

Technology news this week, ION markets, the Dublin-based financial vendor have acquired Clarus Financial Technology, an SaaS Analytics, data provider for derivatives. No terms were disclosed.

Yieldbroker, their partnering with IHS Markit to bring investors access to the product to Australia.

And finally this week in technology, Sporttrade, they’re leveraging NASDAQ’s surveillance technology to bolster the market integrity of their sports betting platform. An expansion for NASDAQ in the gambling technology market where they’ve had several clients over the course of recent years, including most conspicuously that leviathan of the special administrative region of China, the Hong Kong Jockey Club.

Just one snippet of regulatory news, the UK financial watchdog, the FCA are seeking stronger powers to cancel licences, essentially UK licence permission. Use it or lose it.

Career news this week, Barbara Roth is joining Deutsche Bursa as Head of Group Audit, which is quite worryingly, the most exciting news release we’ve seen from Deutsche Bursa for months – that tells us all we need to know about how the company has been conservatively positioned compared to its rather more dynamic previous PR approaches.

Commissioner Dan M. Berkovitz has announced his intent to depart the CFTC. That leaves the CFTC at a briefly with only one Republican and one Democrat in place of the usual five-person panel.

The White House of at the same time decided to nominate Rostin Behnam as the incoming CFTC Chairman, having also looked at a series of different Democrats to be added to the roster of CFTC Commissioners.

Speaking of CFTC commissioners, the former CFTC member Brian Quintenz has joined Andreessen Horowitz, the private equity venture capital firm as a crypto advisor. While Binance US announced Brian Shroder, a former Ant Group and Uber Executive as their new president. This is ahead of what some say is an IPO push, and what others say is simply an attempt to try and clean out the augean stables of Binance somewhat confusing, and indeed, broadly regulatory free status. Despite being apparently the world’s largest crypto exchange.

And that leaves us in the realm of the big world, an a heartening piece of news this week.

The news that “Britney Spears’s Father is Petitioning the Court to End the Popstars Conservativeship” came via a Wall Street Journal news alert this week. And it reminded me of the joy of seeing at least a chink of political consensus from the United States of America, where both sides of the aisle in the Senate, Chuck Schumer, and Ted Cruz have joined to promote the liberation of Ms. Spear. On that tiny scintilla of hope that we can manage to see some element of political bipartisanship and progress from the United States of America.

Well, that seems to me ladies and gentlemen like a perfect, mysterious, and magnificent note on which to offer you the exhortation as always. Have a great week in blockchain, life, and markets.

Thanks for joining me, Patrick L. Young for this, the 112th episode of the Exchange Invest Weekly Podcast. Catch up daily in the Exchange Invest newsletter, and on Tuesday evenings at 6 pm UK time for the IPO Vid Livestream.

LINKS:

Interactive Brokers Issues Statement On Patent Trial Verdict
Business Wire

Interactive Brokers To Pay Trading Technologies $6.6M Amid Patent Trial Verdict
Seeking Alpha

Fitch Assigns B3 First-Time ‘BB’ IDRs; Rates Senior Unsecured ‘BB(EXP)’
Fitch Ratings

Big Money Lawsuits Stir Doubt In Brazilian Stock Market
The Brazilian Report

ASX Sends Shareholders Millions Of Worthless Letters A Year Resulting In ‘Staggering Waste’
ABC News

Hong Kong Plans To Limit Retail Investor Access To SPACs
Yahoo Finance

Beijing Bourse Seen As Elixir For Capital Market Reform
Chinadaily USA

New Beijing Bourse Faces Tough Road Ahead Despite Xi’s Blessing
California News Times

Tradeweb Markets: China Foreign Exchange Trade System Roll Out New Trading Channel
MarketScreener

China Gives The Nod For Investors To Buy Offshore Debt Via Hong Kong, Opening The Southbound Leg Of Bond Connect
Yahoo Finance

China Widens Bond Connect’s Southbound Leg Via Hong Kong
South China Morning Post