113 Exchange Invest Weekly Podcast September 25th, 2021

Transcript:

This week in the parish of bourses and market structure:

The Binance Noose is tightening more as Coinbase Blinks versus the SEC and the London Stock Exchange closes Curve Global.

Aquis Exchange makes great results, and congratulations to Verena Ross who’s returning to ESMA as Chairman, having been Executive Director under Stephen Maijoor.

My name is Patrick L. Young.

Welcome to the bourse business weekly digest.

It’s the Exchange Invest Weekly Podcast number 113.

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.

Over in Brussels the stubborn determination of the European Union to defer a decision on European clearing permissions is an impediment to taking Brussels seriously. That’s after the Financial Industry across the EU 27 and indeed the UK and beyond was urging the European Union to extend the Euro swaps clearing rules to permit the use of the London clearing house and avoid financial Armageddon.

Meanwhile, sad news from the London Stock Exchange Group on the path to trying to organize Refinitiv they’ve decided to drop the London Stock Exchange group’s loss-making derivatives platform Curve Global as the Financial Times put it, curve global markets has failed to win enough business and will cease trading in January.

It is sad news as the latest attempt to break the Exchange Traded Derivatives interest rate oligopoly dies with the demise of Curve Global as the London Stock Exchange group clearly looks in every area to reduce costs which have burgeoned with the addition of the Refinitiv bloat.

So farewell then curve which will close during the Libor transition and thus LSEG abandons what amended to the most tangible possibility to revamp the interest rate oligopoly to date. It’s understandable that faced with the tsunami of reorganization in Refinitiv LSEG would make this sort of cut (a ‘desperation-o-meter’ reading towards the top of the 1-10 scale is apparent from the Paternoster Square C suite). But it’s still a real shame that there was not enough impetus from the top of the group to give Curve a better chance to innovate further.

At the group level, it’s another sad day for LSEG’s long story of failed derivatives ambition. Clearly, a small LCH CCP pot will die too but that won’t have much impact compared to the Noun-clear behemoths of Swap clear, repo clear et all.

Andy Ross and the Curve team have made a spirited attempt at delivering a serious competitor without controversy and are to be applauded for their efforts.

In results this week, increase in GPW’s group net profits albeit well somewhat anaemic, -3% year on year on revenue for the Warsaw Stock Exchange, operating expenses up 15.5% year on year, leading to an operating profit which was -9.2%, but by the time they’ve done a bit of tax wizardry, that gives us a net profit squeaking up at 4.1% for the second quarter of the year, which leads the net profit for the first half of the year up 15% which looks rather more encouraging. The government will be happy, they’re going to be the major recipient of a $26.8 million dividend to be paid.

Happier News and results came from Aquis Exchange, just as we were rushing into the studio. The unaudited results for the six months ended 30th of June 2021 are stunning. Revenue up 37% and EBITDA growing to 1.6 million pounds ($2.2 million) or over triple the half a million pounds that they made in the equivalent period last year. Excellent stuff, congratulations to Alasdair Haynes and the team at Aquis.

In new markets this week, China’s new stock exchange (Beijing’s latest SME-focused market) is moving ahead, a great par, it set the investment threshold. Individual investors qualified to trade on the Beijing Stock Exchange must have at least 500,000 yuan ($77.5) worth of assets in their stock accounts that set the threshold on a par with Shanghai’s tech-focused STAR market.

Meanwhile, in deals this week, Euroclear completed their acquisition of the MFEX Group, and ‘Dark Pool’ trading platforms Level ATS and Luminex look set to merge. The news that Luminex is still going may come as a surprise to many onlookers for starters.

“By combining we create an ecosystem where both the buy-side and the sell-side have the ability to interact when and how they choose broadening the liquidity that both customers can participate in”, said Level ATS Chief Executive Officer Whit Conary.

In other words, they’re creating what some others might call an exchange. Not that I’m overly convinced the notion of Luminex embracing the sell-side is anything other than an admission of defeat; they were just too late into the buy-side block business without a sufficiently compelling new model. The news that it will be one broker-dealer with two ATSs strikes me as cumbersome, if not entirely pointless in a holistic sense. Then again, as Luminex amounted to little more than the “We loathe Seth club” which has now been randomly redundant by his exit from Liquidnet. What was the purpose of Luminex other than to be merged into another ATS?

Meanwhile, out there in the big world, don’t forget, you can still get a copy of “Victory or Death” – Blockchain, Cryptocurrency, and the FinTech world. Some reading whether you’re in lockdown and quarantine, or even possibly allowed out to be on public transport. What else can you do but find a good book to read while you’re on your daily commute. Neither there’s no longer the opportunity to pad in your slippers from the bedroom to the spare room.

Anyway, “Victory or Death” – Blockchain, Cryptocurrency, and the FinTech World was also discussed this week in the final part of my “AMA” as part of my IPO Livestream. However, Episode 40 of the IPO-Vid Livestream was a lot more than just the AMA. We had an absolutely marvelous guest this week, Steve Hamilton. We came live from the ICE house in London. And we were discussing all sorts of issues about interest rate derivatives with the head honcho of interest rate futures, options, and derivatives at the Intercontinental exchange worldwide. You can get that at YouTube.com, just search for IPO-Vid.

In crypto land this week, well, Coinbase spat with the SEC continues to reverberate around. For one thing, Coinbase has removed their land product, it will not be launched, so no 4% bounty for anybody who’s holding their crypto in the near term, while the SEC and Coinbase endeavor to resolve their differences. Equally, as the week was coming to a close Coinbase were actually trying to make ministrations to suggest a framework of regulation for the crypto economy in the USA.

I wonder how that will go down with Gary Gensler, who seems to be well, one might say very, very eager to be seen to be the man in charge at all times.

Speaking of blinks, first, it was Coinbase blinking on their land product, then it was Binance. Binance is now restructuring to quell regulator’s concerns, they’re going to become a single centralized business. Death of the DeFi model for Binance there, as finally, the risk of orange jumpsuits become conspicuously obvious.

That said, Binance becoming a centralized entity to ease its compliance across jurisdictions sounds like a wonderful thing. However, given how many years they’ve actually been actively dodging such a structure. Until over the past year, regulators actively disrupted Binance’s operations by banning its services. The realpolitik is, this feels awfully out Binance performing the equivalent of an Alice in Wonderland ‘six impossible things before wearing these somewhat inevitable orange jumpsuit’ kind of transition I fear.

In product news this week, the American Financial Exchange, the people who bring you AMERIBOR as a benchmark in the post-Libor world, announced their commitment to being carbon-neutral with the support of Climate Vault setting a new standard for the financial market industry. That of course, Professor Dr. Richard L. Sandor would be the man behind producing an absolutely carbon-neutral. The interest rate index is perhaps not surprising given that he is, as well as the father of financial futures, the father of the climate futures business, and indeed the Climate Exchange itself.

In India, the National Stock Exchange of India is mulling discontinuing stop-loss market orders for options, which could cause a bit of a kerfuffle but it’s obviously an issue relating to relative liquidity and some of the strikes particularly the out of the money.

Hong Kong they’re proposing SPAC listings, but only for professional investors while Borsa Istanbul has launched Platinum and Palladium Futures.

Moscow Exchange they’re going to accept international stocks as collateral and ICE’s benchmark administration has launched ICE Risk-Free Rate indexes (RFR) for US dollar, euro, and Japanese yen.

Meanwhile, back in India, there’s a little bit of a kerfuffle over the settlement plan. SEBI the regulator wants to reduce settlement to T+1 day.

The irony of this is of course, that those rich folks out West always want emerging markets to tone down their settlement cycles as they simply can’t cope with it due to the edge of nature of their legacy systems (QV how T+ 0 on Moscow Exchange and the Kazakhstan Stock Exchange both morphed into T+2 and now the proposed T+1 in India is being greeted with some degree of horror out West).

Technology news this week, OSE (Osaka Stock Exchange) and TOCOM (Tokyo Commodities Exchange) they’re both under the Japanese exchanges umbrella, of course, they have launched their new derivatives trading system. Euronext linked with the transaction reporting service Qomply and Turquoise Plato has connected to OpenFin.

In regulation, while I mentioned earlier how Coinbase is trying to make some ministrations and proposals to the US regulatory bodies in order to manage to move crypto forward. But nonetheless, the headline in MarketWatch summed it all up this week: Critics fear the SEC’s Gensler is seeking ‘Unlimited Powers’ in Crypto Regulation.

Elsewhere Gary Gensler was also noting the fact that he thinks that well cryptocurrency as in private money is only going to be a short-lived thing. Viva is presumably the central bank’s digital currencies in Gensler’s opinion.

Career path this week, a series of interesting moves. First of all, over at ESMA (European Securities Markets Association), Verena Ross is going to become the new Chairman taking over from Stephen Maijoor, who was previously herbals when she served the full-time limited-term as Executive Director. The top of the shortlist originally for Chairman was actually the Italian veteran Carmine Di Noia, who will be obviously very disappointed, but at the same time, it looks as if Verena was helped along not merely by her excellent bonafide ease for the job. But also of course, in a diverse world the fact that the European Union needs a lot more women in situ in senior posts. Congratulations to Verena and indeed, all the best to Carmine Di Noia who was a close runner-up.

ICE Clear Europe’s former Chief Finbarr Hutcheson joined Coinbase as a Strategic Advisor. Not such good news for Dmitry Vasiliev, he was the former Chief of Russia’s Wex Crypto Exchange, he got arrested in Warsaw, Poland, after his exchange was alleged to have laundered funds for numerous high profile crypto hacks, including even the notorious Mt. Gox incident which takes us a long, long way back indeed.

Elsewhere, the CISI in the UK Heralds six new honorary fellowships amongst them to parishioners in the world of exchanges, Alan Burr for a long time the marketing man in London for the MEFF Spanish Futures Exchange, and the ultimate eminence Grise in the parish Martin Watkins. Congratulations to both.

In big world this week, farewell then Sir Clive Sinclair, who launched a personal computer revolution in the United Kingdom with his ZX80, and subsequently ZX81 on spectrum computers. His electric C5 was ridiculed as a vehicle in its time but would have been also hipster now. He was a genius ahead of his time in so many ways. Rest in peace, sir Clive, and thank you for my introduction to computing via the Sinclair ZX81.

Those born outside the British Commonwealth may find the rules of cricket confusing, but none of those rules are perhaps more perplexing than the MCC regulatory bodies latest decision to make cricket more inclusive, thus the batsman will be renamed “batter”.

“Batter” being of course the term that an everyday usage refers to the preferred means for covering fried fish. How the Great British takeaway became part of the inclusive agenda, frankly escapes me.

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

Thanks for listening to this Episode 113 of the Exchange Invest Weekly Podcast. I look forward to meeting up with many of you via the pixels of the Exchange Invest newsletter, Monday through Saturday.More details at Exchangeinvest.com.

Meanwhile, it only remains for me to wish you a great week in blockchain, life, and markets.

LINKS:
Financial Industry Urges EU To Extend Euro Swaps Clearing In London
Yahoo Finance

Financial Industry Urges Brussels To Extend Access To UK Clearing Houses
FT

Brexit: EU Finserv Groups Call For Extension To City Clearing House Access
City A.M.

Increase Of GPW Group’s Net Profit In Q2 And H1 2021
GPW

Aquis Exchange PLC (AQX.L), The Exchange Services Group, Is Pleased To Announce Its Unaudited Results For The Six Months Ended 30 June 2021
Aquis

China’s New Stock Exchange Sets Investment Threshold
Reuters

New Beijing Bourse Opens For Investor Registration
Caixin Global

Can The Beijing Stock Exchange Spur Innovation And Inclusive Growth?
CGTN

China’s New Stock Exchange Eyes Small, Medium-Sized Companies
Voice of America

Euroclear Completes Acquisition Of MFEX Group
PR Newswire UK

‘Dark Pool’ Trading Platforms LeveL ATS And Luminex Set To Merge
Bloomberg