122 Exchange Invest Weekly Podcast November 27th, 2021

Transcript:

This week in the parish of bourses and market structure:

The European Union’s letter to Santa Claus is leaked. And we have IPO records across the world even before we reach Thanksgiving for the calendar year.

My name is Patrick L. Young.

Welcome to the bourse business weekly digest.

It’s the Exchange Invest Weekly Podcast Episode 122.

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 many events taking place over the course of the last seven days 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.

So as we enter Thanksgiving week, in fact, we’re recording as Thanksgiving takes place. We’re already in record IPO territory for the year while Euronext has been eyeing up their options in the Great Game for Euroclear and beyond.

Meanwhile, the European Union has leaked their letter to Santa Claus, or perhaps it’s what they called the mafia review letter. It seems to be a pipe dream of reforms that the European Union has let loose towards the media as it flails post-Brexit to get its act together, then again, at least the one good sign is that deregulation is now feasible after the dire over prescriptions of Brussels for many years. Not admittedly that I think they can actually pull off the reforms that they’re mentioning, but it’s good to see bureaucracy underlining a core reason why Brexit was a good thing, competition, and better-regulated markets.

The Intercontinental Exchange they’re going to host Carbon Credit Auctions for Permian Global, a leading developer of large-scale tropical forest protection and restoration projects. We seem to be heading closer and closer towards the one true global carbon price, albeit whose one true global carbon price it will be. Well, that remains to be seen between the voluntary and indeed also the less voluntary compulsory sector for example through the European Union auctions.

Anyway, a Reuters headline this week around the world exclusive exchanges will be forced to show their hand on trade prices. The European Union is proposing transparent pricing for trading by exchanges. The draft is outlining a plan to give more data to investors reforms in derivatives are going to help the European Union branches in London and they’re talking about payment for order flow to be banned while listing rules are to be reviewed.

There’s much talk about consolidated tape inefficiencies as a result of not having a tape for share prices can cost as much as 10.7 billion euros or $12 billion a year. The documents say there would also be according to this document mandatory contributions from exchanges to a tape for each asset class like stocks, bonds, derivatives, and exchange-traded funds in return for fair remuneration.

There are all sorts of other issues in the Santa wishlist subscription fees for professional investors would be set high enough so that retail investors can be given access to the tape for free or with minimal cost.

There’s also the possibility of suspending a rule requiring European Union banks to use an approved platform for trading derivatives.

In other words, we could be back to the bad days of OTC. The commission also proposes banning brokers from forwarding retail client share orders to high-frequency traders for execution. In other words, payment for order flow.

Under the plans, Brussels would also create a single access point for investors to get free information on companies and financial products scattered across member states. So went the article in Reuters.

Now is this a plan or a pipe dream? I mentioned earlier on I think it was the European Union’s letter to Santa for Christmas. Given the European Union’s haphazard approach to crowdfunding which took over a decade and was backed up by the monstrous shambles of non-execution which has been CMU (Capital Markets Union) over the course of the past decade. The only real conclusion to be drawn from this leaked document is that the European Union is very, very, very worried indeed, by the overly regulated markets they have created, resulting from their own often profoundly flawed plans.

Prior to this document, I’d rather presumed the whole consolidated tape notion had died to death – especially after the Federation of European Securities Exchanges (FESE) made a reduced proposal and probably got slapped in the face by the European Commission having rowed back their original ambitions to try and fit with what the EC seemed likely to accept. I’m frankly not convinced that substantively any of this is going to happen. It really does read as if the European Union’s wishlist for Santa has been published.

In new markets this week – there was obviously a lot of excitement in Beijing the first trading week of the Beijing Stock Exchange, that was the new market-oriented towards SMEs meets expectations with no fewer than 340,000 new investors coming online.

At the same time, news that the Bullion Exchange that’s going to open at the Gujarat Financial Centre Gift City in India is now pushed back to January having originally been suggested it was going to go live October the 1st.

Equally Tadawul – they’re doing great things but we’ll get to that in just a moment.

In results: the Tel Aviv Stock Exchange reported their financial statements for the third quarter of 2021 revenue up 4% adjusted EBITDA more encouraging up 18%

In deals this week: yes, it was a very busy week for deals in the parish all of them were in Exchange Invest daily, the newsletter no person can afford to be without in capital markets and market structure. Let’s look at a couple of added highlights.

The TadawulIPO I teased earlier on – that’s all happening. It looks as if they’ve already been covered at the top of the range. Everything that’s in the institutional investor playbook. So therefore it’s going to look like a very, very successful event altogether.

Equally, the St. Petersburg bourse it covered at the top end of its range, raising $175 million, which was $25 million in excess of the 150 million they’d originally targeted as that becomes the second quoted stock exchange in Russia.

Elsewhere in India, there was an exclusive this week in Zee Business, SEBI the Indian regulator not only are they thought to be on the cusp of permitting the National Stock Exchange of India to list finally as an IPO on their own platform, as we reported last week, but also it looks as if SEBI is on the verge of giving a nod between the NSE and their offspring, the NCDEX (National Commodity Derivatives Exchange) thus creating a cross equity commodity platform that merger news could come soon with avenues for Agri-commodities to grow significantly according to news reports.

Don’t forget ladies and gentlemen, there is still time to get your copy of “Victory or Death” – Blockchain, Cryptocurrency and the FinTech world. My latest tome, if you’re looking for some reading, perhaps over the Christmas holidays, maybe you’re looking for something to stimulate some interesting and exciting debate about the future of finance. “Victory or Death” -Blockchain, Cryptocurrency and the FinTech world is published by DV Books and is distributed by Ingram worldwide.

Meanwhile, while you’re waiting for your copy of Victory or Death to arrive by mail, check out our live stream. You can hear that Tuesdays at 7 pm London time or 1 pm New York time.

This week coming attractions the IPO video live show will include Rosa Armesto – she’s the Deputy Secretary-General of the Federation of European Securities Exchanges, and she’s going to be addressing the topic of regulation from Brussels with love. Last week, online already you can manage to listen to Steve Zwick environmental finance pioneer and presenter of the excellent bionic finance podcast. He’s going to be discussing all aspects of the world of carbon and environmental markets and you can listen to that already. It’s at IPO-Vid if you search at YouTube.com.

Crypto news this week: the crypto exchange Gemini run by the Winklevoss that Winklevoss brothers. It’s seeking to raise $400 million in funding at a $7 billion valuation. While Binance US is apparently going to close pre-IPO funding in the next one to two months according to its Founder CZ. So while Binance US is doing a pre IPO funding round in the near future, the founder and CEO of the exchanges parent company Changpeng Zhao (CZ) was talking at the Bloomberg New Economy Forum in Singapore on November the 19th. Waxing lyrical about the fact that regulation is now required in the crypto market.

For my money, I rather like the fact that the totally pro-regulation all of a sudden that is after the Damascene conversion Binance didn’t actually disclose their headquarters location once again, despite being asked several times.

Elsewhere, we heard that Binance are pioneering ESG practices to provide users opportunities for sustainable trading. Of course, ladies, gentlemen, you want to do your own research. But clearly the heads up is that this comes from a firm that can’t even disclose their office addresses, let alone their headquarters location.

Now call me old fashioned when it comes to the governance word but well as the headline went on YouTube this week: Massive Metaverse News!! Oasis Labs x Meta!! Binance Joining Metaverse? Well, I couldn’t resist including that headline in Exchange Invest daily newsletter given the aversion of Binance to reporting their physical location, where else is Binance but in the metaverse?.

Product news this week: we got the SIX Digital Bond was launched this week giving an inaugural product onto the Six digital exchange run by the Swiss exchange. SDX, therefore, issued a digital bond in a fully regulated environment. Interesting moment thereafter the troubled gestation period, and the trio of chief executive officers that the SDX got through before it managed to arrive at launch.

The Dubai Financial Market is allowing market making services and all the listed securities that in a week when there’s a lot of good hype about the Dubai financial markets, of which we may have more later. Options trading is poised to overtake the stock market in terms of total volume, John Detrixhe noted: “By one measure options activity in the US is on track to exceed that of the stock market for the first time: The average daily notional volume of trades at single-stock options has risen to more than $450 billion this year, compared with about $405 billion for stocks, according to CBOE global markets data”.

Very good spot by John Detrixhe. This of course was always inevitable. It was really more a case of when there would be enough options coverage across the US stock market to mean that the US options market would be larger. Let’s face it even back in the 1980s US major name options traded 3X their cash underlying volumes in options versus the stock.

Technology news this week: well what a slap around the face for the Australian Stock Exchange. Finally, we heard from ASIC and finally, ASIC was very very miffed indeed. In a normal world, the management of ASX would engage in soul searching but in this era, it seems personal responsibility as a boardroom afterthought. At least finally, ASIC has done something to sanction ASX after their prolonged tech omnishambles, which has been allowed to cast a humiliating shadow over Australian markets for far too long. The corporate regulator has taken the unprecedented step of imposing conditions on the licence of the Australian Stock Exchange as the market operator moves to a new technology system. Using of course as we know blockchain technology, the old chess replacement for the antiquated settlement system.

Finally, even the seemingly unhealthy degree of regulatory-bourse camaraderie which has long worried many in the Antipodean parish has eroded, as even ASIC had to take steps following the self-styled technology company ASX’s latest utterly disastrous meltdown in a long and sorry string of IT failures in recent years.

The ludicrously delayed digital asset founder CHESS project is specifically in the crosshairs of ASIC going forward – this is all welcome if enormously overdue stuff.

As always, alas, the ASX has responded with inertia. Perhaps I’m just harking back to a previous age when there was a sense of shame at failing the institution, let alone a degree of personal responsibility for what you were charged with overseeing.

Meanwhile, in IT issues this week: Coinbase had a bit of a foible, their service suffered over 5000 problem reports and had conductivity issues since 5 am on Tuesday morning for a period of time.

One piece of good news in the technology world this week, the Trinidad and Tobago Stock Exchange, they’ve upgraded their trading platform. Their Avvento Trading and Surveillance System for brokers and traders has had its first upgrade since the platform was launched at the beginning of 2017. Another satisfied client of the STT vendor from South Africa.

Career news this week: Matthias Voelkel he’s going to succeed Michael Völter. Michael Völter is leaving the Boerse Stuttgart group at the end of the years as CEO. Meanwhile, Harold Patt will be the new CEO and Managing Director of Borse Stuttgart Digital Exchange.

For what has been a rather progressive organization on occasion, Boerse Stuttgart struggles with a board who are frankly Pennywise, pound foolish and remarkably short term and their approach. This may be not altogether unrelated to their considerable rotation and senior management over the years, which is a pity as the exchange has done many great things despite having almost no name recognition, I’d say the German speaking world.

The other storm in a teacup of the German speaking world this week, Deutsche Bank named a Dutchman as the next chair and a changing of the guard. That of course means that there’s no job at the head of Deutsche Bank for the man who runs another DB, DB1 Theodor Weimer, who also sits on the Supervisory Board of Deutsche Bank, as well as being chief executive of Deutsche Boerse.

Brilliant news of the week in career paths: the New Zealand Exchange – they’ve appointed a new director. John McMahon has resigned from the board with effect from the end of the year and he will be replaced from January 1st, 2022 by Kiwi Exchange technology guru Peter Jessup, who has previously sat on the NZX IT committee. Elevating Peter to the NZX board is a brilliant move for all concerned, it reinforces the NZX approach to improving its tech stack given Peter’s excellent pedigree forged from a career with various founders, perhaps most notably a long spell with NASDAQ.

And that brings us to ‘Big World’ this week: Crypto Crowdfunding Goes Mainstream with a ConstitutionDAO Bid went the headline in Bloomberg. A group generated $14 million to buy a copy of the US Constitution up for auction, albeit when it came to who vanquished the crowd, it was just one man who had much more money, the plutocrat trader and investment manager Ken Griffin, who scooped the prize. At the opposite end of the scale of the economy, meanwhile, in North Korea, having shut its borders completely to do with COVID trade with its largest economic partner China has decreased by at least 80%. Meanwhile, things got even worse with Russia’s Q3 trade amounted to a pitiful $651 in 2018, which amounted to $34 million dollars.

And on that mysterious and magnificent note, ladies and gentlemen, my name is Patrick L. Young – publisher of Exchange Invest and Executive Director of Valereum.

I wish you a great week in blockchain, life, and markets. Catch up again next week for Episode 123 of the Exchange Invest Weekly Podcast

LINKS:

ICE To Host Carbon Credit Auctions For Permian Global, A Leading Developer Of Large-Scale Tropical Forest Protection And Restoration Projects
ICE

EXCLUSIVE Exchanges Will Be Forced To Show Hand On Trade Prices – EU Document
Reuters

New Bourse In The Market For Innovation
China Daily

1st Trading Week Of Beijing Stock Exchange Meets Expectations With 340000 New Investors Coming Online
Global Times

The Tel-Aviv Stock Exchange Reports The Results Of The Financial Statements For The Third Quarter Of 2021
Yahoo Finance

Bullion Exchange To Open At GIFT City In January
Times of India

Tadawul Sets Price Range For Up To $1 Bln IPO
Reuters

Zee Business Exclusive: SEBI’s Nod On NSE-NCDEX Merger Likely To Come Soon; Avenues For Agri-Commodities To Grow Significantly
Zeebiz

Crypto Exchange Gemini Seeks To Raise $400m Funding At $7B Valuation

Seeking Alpha