120 Exchange Invest Weekly Podcast November 13th, 2021

Transcript:

This week in the parish of bourses and market structure:

There’s an eerie sense of 140 pence being a last stand of sorts, as this is the level at which TP ICAP launched their rights issue to overpay for Liquidnet. Just a pity TP didn’t listen to Exchange Invest. In the week that CME created a Google Cloud deal, Euronext dumped LCH, and European Commission saw sense on CCP clearing for Euro derivatives.

My name is Patrick L. Young.

Welcome to the bourse business weekly digest.

It’s the Exchange Invest Weekly Podcast Episode 120.

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.

And indeed this week we reached a historic, well, what we called our Star Trek milestone issue. Exchange Invest surpassed 2,200 issues, reaching our 23rd century where epic sci-fi such as Star Trek was originally set. We’ll continue to boldly go where no analysts of markets have been before.

The Chinese mainland capital markets are going to triple in size in the course of the next 10 years. That’s according to the Hong Kong Exchange’s new boss Nicolas Aguzin reckoning that the 30 trillion US dollar Chinese capital market will reach $100 trillion in the course of the next decade. And perhaps you’re not surprised by the next revelation, Hong Kong has a major role to play, according to the chief executive of the city’s bourse operator.

Saudi bourse Tadawul has ended the IPO wait, it’s planning to list a 30% stake that can all go to a retail investor has finally announced its plans for a listing which is due to take place in the course of the next month.

The Bank of England was being very sotto voce this week. It said it wouldn’t ‘politicise’ dealings with foreign clearing houses perhaps that was just a diplomatic sign of things to come a couple of days later from Brussels, of which more in a moment.

Elsewhere Euronext announces its new strategic plan growth for impact 2024. The revelation there they’re going to ditch the London Stock Exchange for the clearing of their derivatives by 2024.

It was a landmark day as the inevitable poulet came home to roost, with Borsa Italiana gifted Euronext saying ‘’no’’ to continuing to use Clearnet from 2024. Thus, ‘Growth for Impact 2024’ sets out Euronext’s ambition to build the leading market infrastructure in Europe, the group aims to make an impact on its industry and its ecosystem to shape capital markets for future generations.

Frankly, the CCP maneuvering was #ObviousMove: having been gifted a viable CCP on the cheap buy Out of his Depth Dave’s mad moves, Euronext will dump London Clearing House leaving behind the old ‘no vertical’ stance of the late great Jean-Francois Theodore and moving beyond 2017 offered to buy Clearnet for €510 million when the London Stock Exchange was last looking to merge with Deutsche Börse.

Over in Hong Kong once again, they’re planning to offer derivatives trading in some products on public holidays. In other words, HKEX is looking to trade their non-HKD contracts on holidays as competition heats up for foreign currency futures across the region. Same time, the chairman of the Hong Kong Exchanges Group Laura Cha, points out that Asia needs uniform ESG rules to avoid greenwashing. One could say the same applies to the rest of the world as well.

It was an incredibly busy week for results this week. All the insights were in Exchange Invest, the newsletter no sensible or even slightly less than a sensible person in Capital Markets can afford to be without when trying to understand what’s going on in the business of bourses.

Anyway, Euronext day sort of 71.2% or revenue and income jump in Q3 2021, in part thanks to the arrival of those Borsa Italiana assets. Overall, not quite so exciting but still double-digit gains from the TMX group during the quarter and the Warsaw Exchange‘s quarterly report was frankly rather disappointing as the exchange was flatlining even though the nine-month basis looks a little bit more healthy. At the same time, Coinbase reported third-quarter revenue that misses analysts’ estimates. Nevertheless, it has to be noted that Coinbase’s stock price has jumped up again, its running neck and neck with the Intercontinental Exchange and Hong Kong Exchanges Group just behind the Chicago Mercantile Exchange which is currently the top of tier one of Young’s Pyramid.

Elsewhere, TP ICAP produced their well by now a somewhat commonplace a disappointing set of results. TP ICAP launched their rights issue at 140 pence to overpay for Liquidnet. At the time I could not have been more transparent in why this was a poor idea perpetuated by management and board who was at the time I suggested, somewhat naive about the outlook for Liquidnet.

This has been proven absolutely correct as the block stock trading platform has been eaten alive on all fronts, thanks to its own stubborn attitude, which perpetuated the folly of being untouchable. In a matter of years, they’ve turned from super profitable to what looks dangerously for TP ICAP like a super liability. Ironically, Liquidnet how to fillip of dealing in recent days, I believe as rumor has it big blocks of stock were trading in TP ICAP.

New markets this week: excitement in Chicago CBOE Global markets, they’re continuing to build out their hugely comprehensive market plan. They plan to launch a new US Treasuries Trading Platform.

Elsewhere, the marketing hype is ramping up for Beijing’s new stock exchange, which is officially expected to begin trading on November 15th as China’s third major stock market.

Don’t forget you can still get a copy of “Victory or Death” – Blockchain, Cryptocurrency, and the FinTech world. If you’re looking for some reading, whether you’re in lockdown or one of the lucky people who could not take a transatlantic flight in order to get into the USA, or indeed you’re quarantined somewhere like say, Mainland China or Hong Kong. Anyway, to understand how technology is affecting life and markets, it’s the book for you. “Victory or Death” is published by DV books and is distributed by Ingram worldwide.

Don’t forget while you’re waiting for your copy of “Victory or Death” to arrive, check out our Livestream Tuesdays at 6 pm London time, one o’clock New York lunchtime. It’s the IPO video live show. You can catch the back episodes on LinkedIn and YouTube via IPO-Vid. And this week, we have a fabulous discussion with Ivana Gazic, the CEO of the Zagreb Stock Exchange about many opportunities and indeed other issues in the Balkan marketplace.

In crypto land: Huobi Group is moving to Gibraltar from its current base in Seychelles following the recent China crypto crackdown. Elsewhere Huobi also announced that not only are they cutting off 30% of their users from China, but they’re also going to jettison their client base in Singapore as well.

Meanwhile, in the Helvetic cantons the Swiss crypto exchange SDX, backed by the incumbent monopoly, the Swiss Exchange is said to be going live later this month. Who knows that rumor could even be true.

Product news this week: we had a welter of all manner of ESG related products. Gosh, it’s as if there was something happening in the world of green that might have been focusing people’s attention. London Stock Exchange Group and Japan Exchange to develop Net Zero Climate Indices covering Japan’s equity market. ICE to launch their first nature-based solutions Carbon Credit Futures contract. ICE plans to launch for MSCI climate Paris Aligned Index Futures contracts. Interactive Brokers their ESG-focused trading platform has debuted and the London Stock Exchange is developing a new market solution for the voluntary carbon markets.

Away from the world of green finance, the Indian Stock Exchanges have announced a plan to roll out a T+1 day settlement in phases from the 20th of February 2022. And finally, in product news this week, the Abu Dhabi Securities Exchange has proposed the Middle East region’s first SPAC regulatory framework.

Technology news this week was dominated by the CME Group signing a 10-year partnership with Google Cloud to transform global derivatives markets through cloud adoption. At the same time, Google is investing a billion dollars into the CME Group. And just to make things even less simpler still, in the highly convoluted shareholder structure of the Chicago Mercantile Exchange Group, Google’s $1 billion investment will be a whole new class of shares separate from the multiple class of shares that are already in circulation.

Complaints of plenty in the world of technology for exchanges, the Jamaica Observer had an article: The Jamaica Stock Exchange – A Comedy of Errors Or A Mismanaged Market of an all manage process and tech innovation problems.

Elsewhere, the aftermath of the Pakistan Stock Exchange, having first implemented their new trading system procured from the Shenzhen Stock Exchange to replace the 20-year-old Karachi automated trading system, which then subsequently had to be rebooted once again after having been long declared outdated and reportedly containing many loopholes and security lacunas that pose a security risk to the integrity and reliability of the financial market of Pakistan. However, KATS is back, of course, having been brought back into service because of a huge number of bugs on the Shenzhen Stock Exchange derive new trading system.

Speaking of bugs on a trading system SEBI in India, they’ve issued notices to the top National Stock Exchange executives in relation to the February 24 trade glitch at the exchange.

Regulation this week dominated by one story, the Commissioner for Financial Services of the European Union Mairead McGuinness has announced the Commission’s proposed way forward for central clearing.

To nobody’s surprise, at least those people who were hoping that the European Union wasn’t going to engage in an act of ritual suicide and adopt a common-sense position. The good news is that we can expect early next year an announcement of an extension of access for central counterparty clearing to London, where of course, the world’s largest multi-currency clearing takes place, not just in the euro, but in 25 other currencies too.

Career news this week: Archax subsidiaries Montis Digital, they’ve expanded their team to build a digital post-trade ecosystem. They’re onboarding BNY Mellon and Broadridge veterans Steve Higgins and David Gest. Presumably, that means that more fundraising has got to come as the $1.5 million raised to date surely won’t last long with those big hitters sitting around under CEO Martin Watkins.

Finally, in career paths this week that Tehran Stock Exchange – they announced their new CEO Mahmoud Goudarzi who had been assigned as interim CEO of Tehran Stock Exchange since last September, was appointed as the company’s Chief Executive with effect from November 8th. Goudarzi of course, stepped up permanently after his predecessor was caught in a scandal about illegal basement Bitcoin mining on the Tehran Stock Exchanges premises.

And on that mysterious and magnificent note ladies and gentlemen, my name is Patrick L. Young and on behalf of my other gig as Executive Director of Valereum, I wish to wish you a great week in blockchain, life, and markets.

Catch me daily on ExchangeInvest.com, the newsletter of the business of bourses.

LINKS:

Mainland Capital Markets To Triple In Size In 10 Years
South China Morning Post

Saudi Bourse Tadawul Ends IPO Wait, Plans To List 30% Stake
Gulf Business

Bank Of England Says Won’t ‘Politicise’ Dealings With Foreign Clearing Houses
Reuters

Euronext Announces Its New Strategic Plan, Growth For Impact 2024
Euronext

Euronext Open to More Acquisitions Under New Strategic Plan, CEO Says
Bloomberg

Euronext To Ditch London Stock Exchange For Clearing By 2024
Reuters

HKEX Plans To Offer Derivatives Trading In Some Products On Public Holidays
South China Morning Post

Asia Needs Uniform ESG Rules To Avoid Greenwashing, HKEX Chair Says
Bloomberg Quint

Euronext Publishes Q3 2021 Results

Euronext Sees 71.2% Revenue And Income Jump In Q3 2021
LeapRate