130 Exchange Invest Weekly Podcast February 5th, 2022

Transcript:

This week in the parish of bourses and market structure:

Excellent results from NASDAQ.

ESMA, are they moving from Procyclical to Pro-Kamikaze?

Valereum PLC buys the Gibraltar Stock Exchange and FTX is valued at $32 billion.

Welcome to the bourse business weekly digest.

It’s the Exchange Invest Weekly Podcast Episode 130.

Good day ladies and gentlemen, this is a very brief reduction of highlights amongst the key headlines from the past week’s news in market structure. All the analysis of these 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.

In the Middle East in the United Arab Emirates to be precise, Bahrain has signed an MoU. Bahrain Clear with the Securities Clearing Centre company Muqassa, which is of course the central counterparty division of the Tadawul Group in Saudi Arabia.

The London Metals Exchange has got the first new ring dealing member in some 15 years. Welcome to Sigma Broking joining the last pit in the financial centre of the city of London. Egypt won’t be joining Euroclear until the second half of 2022 according to one of the ministers there. While the Baltic Exchange has postponed a rather controversial auction following ‘concerns’ from members. The Baltic Exchange sea nymphs statue which dates back to 1907 will not be auctioned off during February 2022 as previously planned.

Results news this week: lots of results, all the details were in the parish bourse business digest Exchange Invest. Here are some highlights:

NASDAQ reported spectacular numbers, 2021 net revenues up at 10% year on year. Nasdaq made it three excellent earning beats out of three. Will they be making a fourth in the next quarter? Or will the Imperial analytical guild strike back?

#Whatever – the simple reality is excellence being delivered every day at NASDAQ and that’s great news for the parish and raising money for Main Street USA and indeed Main Street Europe as well.

MarketAxess by comparison missed their estimates with their Q4 profits retreating. Japan Exchange relatively anemic profits numbers there as well.

It was a busy week for new markets in the parish. All the information was of course in Exchange Invest daily, the newsletter no person can afford to be without in capital markets and market structure. For the sake of this podcast, here are some highlights:

tZERO’s venture with the Boston Exchange (the BSTX joint venture) has finally received approval as a National Securities Exchange Facility by the SEC in the United States of America. Blockchain Feed faster settlement but at the same time, relatively speaking, a proposal that was cut down from its original ambitious scope. Not sure that it’ll take as long it took nearly three years, four years in fact of negotiation to build tZERO and BOX Digital’s Incorporated, BSTX.

Over in China, there looking at Guangzhou, are planning to set up a Greater Bay Area carbon exchange.

And finally in new markets this week, a final note from one which is bowing out CurveGlobal Markets sent round a note mentioning their many achievements as they became truly the one credible London alternative to the internet rate futures oligopoly across the world and the roster chief executive said some farewell words, praising the current global market and thanking all those who’d supported it before sadly the London Stock Exchange group pulled the rug from under it during the final quarter of last year.

Deal news this week: shareholders of Chile’s Santiago Stock Exchange have approved integration with the Peruvian and Colombian markets. Latin Exchange unified markets are becoming quite the thing. Over in India, an NTPC subsidiary has acquired a 5% stake in the Power Exchange of India, which is promoted by the National Stock Exchange’s investment arm and the National Commodity Derivatives Exchange (NCDEX).

In Gibraltar, the exciting news from the rock this week: Valereum PLC, of which of course full disclosure, Patrick L. Young, the person who’s bringing you this podcast today is Executive Director. Valereum PLC, they’re buying the Gibraltar Stock Exchange to create a crypto hub according to the headline in Reuters. We had added good news coming over the weekend as well, the acceleration acquisition and increase of that stake are going up to 90% of GSX compared to the previous options on 80%. And indeed, the funding is all there as well and RNS were posted on Monday with an additional $10 million funding facility with a US-led syndicate enabling Valereum to complete their transaction, of course, subject to regulatory approval for the Gibraltar Stock Exchange.

That led us to well some quite interesting publicity this week, Gibraltar could launch the world’s first crypto stock exchange was amongst the stories. That one was published by wired.com. Thank you very, very much to the many parishioners they’ve already passed on their good wishes. It’s an exciting time for us, an exciting time for me being involved with this acquisition of a small European exchange.

Over in the crypto world: crypto unicorn Amber Group, they acquired the Japanese Exchange DeCurret Inc, giving them a foothold into the Japanese market.

Maktoum Bin Mohammed (he’s the big mover and shaker around financial markets in Dubai) made an interesting statement: “We aim to consolidate the presence of Dubai Stock Exchanges regionally and globally”. Very interesting choice of verbiage. Is a Dubai bourse singularity finally looming?

If you’re looking for some inspiration or something to read these days, don’t forget to pick up a copy of my most recent book “Victory or Death” – Blockchain, Cryptocurrency and the FinTech world. “Victory or Death” is published by DV books and distributed by Ingram worldwide. While you’re waiting for your copy of “Victory or Death” to arrive, check out our live stream, that’s on Tuesdays at 6 pm London, 1 o’clock New York time, the IPO-Vid live show. Catch the back episodes on LinkedIn and YouTube via IPO-Vid. This week, we had a fabulous show where we were talking about all sorts of aspects of diversity in the workplace and how to build a better company with Doc. Eliza Filby and the incomparable Julia Streets. After that episode discussing “Two Diverse Tech Musketeers”, next week we’ve got Erja Retzen, one of the leading figures in the NASDAQ explosion in the European listing facility. Catch us Tuesday at 7 pm CET, 6 pm London and 1300 New York.

In crypto land itself this week: the crypto exchange Bakkt shares have now tumbled 90% since their October debut, it’s barely a unicorn, just on a billion dollars in market capitalization at that level. The crypto exchange FTX on the other hand, they’re soaring, they just raised an interesting additional $400 million Series C round. That values the company in total up $32 billion making it the seventh-largest property in Young’s pyramid of exchanges, just above NASDAQ, just below Deutsche Börse at the top of tier 2.

Binance meanwhile, they’ve built up a $1 billion insurance fund amid the worry about possible crypto hacks. And in Thailand, they’ve axed a planned 15% cryptocurrency tax in the same week that the Indians announced that they’re looking at not just a central bank digital currency, but also adding taxation to the mix from cryptocurrency.

Product news this week: the big launch was of course that ICE Midland Maga as they call it. The West Texas Intermediate Midland American Gulf Coast futures began trading in a rather strong fashion, it’s always going to take a while to build up the full liquidity and break down that CME-NYMEX WTI Nexus. But it looks as if already this is the future of oil give it 18 months and let’s check how things look.

The Luxembourg Stock Exchange they’ve jumped into an ESMA sandbox and admitted security tokens which were issued by Societe Generale this week, the first time we’ve seen issuers registering DLT financial instruments on the official securities list. Very, very interesting as Luxembourg moves on the European Union’s recently announced interim crypto token rules.

Speaking of crypto token rules, I was on RT this week discussing with RT International various issues in relation to the regulation thereof. This followed a story where President Putin of Russia backed crypto mining despite the Bank of Russia previously coming out with a hard line and even seeking to bomb the concept of cryptocurrency mining within Russia. It was great fun to have a slot discussing this fascinating development where the Russian president deftly slapped down the central bank’s moves to ban cryptocurrency and embraced a mining strategy centred on regions with an energy surplus such as Irkutsk, Krasnoyarsk and Karelia. It’s not all about being the “wild east” however as President Putin was outlining a clear desire to engage taxation and regulation in the crypto mix.

Technology news this week: Allianz X, they are leading a $21 million funding round for OpenGamma (they’re the people that do all sorts of interesting things with OTC transactions post-trade) and unfortunately, the Eastern Caribbean Central Bank Digital Currency platform has crashed. The Eastern Caribbean Central Bank has been forced to pull the switch on its digital dollar project DCash to deal with ‘technical issues’ leaving holders of the CBDC in limbo.

Over in crowdfunding news: Zopa, they have officially exited the peer-to-peer lending business, a business which they actually inaugurated. They’re the world’s oldest peer-to-peer lending platform, and they closed their business on the 31st of January 2022.

Regulation news this week: the European Union is seeking via ESMA, more influence over margin calls at clearinghouses. ESMA words this asset consulting on CCP anti-procyclicality measures. It’s another tango of trust erosion from Brussels – well strictly geolocated, we’re talking about Paris as the City of Lights most notable financial regulators seeks to impose a sort of murky shadow on quis custodiet ipsos margins to offer a little Latin tweak – but the custodes does well, that remains relevant too.

The phrase “Dangerous Remedies” was once appended to my Global Custodian column way back when, and that’s a pertinent descriptor for this latest ESMA intervention which reeks of control freakery and, frankly, dangerous market manipulation. Set against the backdrop that the next Euro crisis is way more inevitable than say, Comrade Vladimir marching all the way to Kiev (I believe neocon Dems are somewhat delusional in this regard all – albeit, of course, Putin may yet opt to rework the old USSR borders a bit and include a few more ethnic Russians in Russia).

Nevertheless, the CCP plans of the European Union seem to be masquerading as an attempt to try and manipulate the euro and thus see if the next Euro crisis before it begins. The idea of any EU body having influence over how much margin can be charged when the Euro currency isn’t a perma-crisis, or at least on the verge of a permit crisis strikes me as the absolute humdinger way to ensure Europe gets back to living in mud huts. At least I suppose the European community would then be able to trumpet meeting its emission targets but in my humble opinion, that might be a tad pyrrhic as victories go? If I had my Euro collateral in LCH right now, I might breathe easier, but I might also consider whether I want to be exposed at all to a potentially manipulated via margin currency zone? In criticizing procyclicality, Emma has moved the debate on a notch or three, to pro-Kamikaze, a whole new concept for CCP risk.

Meanwhile, in what amounts to a branding bullseye or a branding disaster depending on your position in life, we noted that last week, that was a headline EU Startups: “Brussels-based Cowboy raises over 70 million euros to grow the E-bike revolution”. However, we’re not done there on the margin stories, ESMA has subsequently discussed and indeed the European Union has roped in pension funds to Boost Post-Brexit clearing capacity. That was the headline in Europe which gives us well clear evidence of an air of desperation of how the European Union has falsely got the impression it must manage everything within its borders post-Brexit.

Elsewhere, interesting consultation from ESMA, they’re looking at trading venue perimeters. The consultation follows up on the final report on the functioning of organized trading facilities under MiFID II which has been committed to publish an opinion clarifying the definition of multilateral systems and providing guidance on when systems should be considered as multilateral systems and in consequence seek for authorizations trading venues.

That’s all very interesting because of course, there are lots of broker-driven platforms that look a tiny touch multilateral but aren’t regulated as such and indeed, there are also a series of technological platforms which some might argue are really multilateral trading facilities. This argument is going to rage on and on and in the USA this week, we have a similar kind of argument as the SEC tries to ring-fence the definition of just what is an exchange.

Finally, in regulation news this week: we’ve got news of industrial action. Trades unions are ratcheting up the threat of strike action that at the UK is financial watchdog FCA. Given the pretty generous terms and conditions for the UK regulatory staff, the notion of their workforce striking at a time when workers (not of the office variety) clearly have been struggling strikes me as ironic, but it means the SEC and the FCA are both beset with labour unrest at the moment.

That leads me to ponder what a world with striking financial regulators might look like. I can’t help but recall that when they didn’t have a government intervene in Belgium for over a year at one time, the country dug itself out of recession thanks largely to the lack of new red tape due to the lack of political wrangling, due to the lack of a government.

In career news this week: ESMA has appointed two new members to their management board, the new members are Thorsten Pötzsch, he works for BaFin (the German regulator who you will recall, of course, were the people who didn’t notice Wirecard happening) and then Rodrigo Buenaventura from the Spanish CNMV, is going to be joining, I can’t believe he’s rejoining. Also, we’ve got Magdalena Łapsa-Parczewska who’s a new member joining from the Polish KNF. Nash Panchal, formerly of Goldman Sachs, he’s going to be succeeding at Nick Themelis as MarketAxess’s CIO.

And that leads us, well, more or less close to the end of this week’s exciting news. Of course, we’ve had also elsewhere stories such as Meta is considering selling off its diem assets as the Facebook Zuckerberg crypto ambition seems to be crumbling. And there was also of course a story I read just last week of how another Worldwide Wrestling Entertainment starlet had tied up with a cryptocurrency exchange, and I just couldn’t understand or indeed decide what might have triggered Bitcoin at all to peak in recent months. The UAE introduced a blockbuster altogether though, ladies and gentlemen, its first-ever corporate taxes. Those are set to start in 2023. The country’s statutory tax rate will be 9% for taxable income exceeding 375,000 UAE dirhams (over $100,000). That seismic corporation tax move is albeit on domestic UAE earnings, free zones and indeed foreign owned companies trading overseas are apparently not affected. Personal Tax that remains solidly and firmly we believe at 0%.

And on that mysterious and magnificent note ladies and gentlemen, my name is Patrick L. Young publisher of Exchange Invest and indeed Executive Director at Valereum PLC. Wishing you a great week in blockchain, life at markets.

LINKS:

Bahrain Clear Signs MoU With Securities Clearing Center Company
ZAWYA

London Metal Exchange Gets New Member For Embattled Trading Pits
Bloomberg

Egypt Won’t Join Euroclear Until H2 2022: Minister
ZAWYA

Baltic Exchange Postpones Sale Of Statue After ‘Concerns’ From Members
Tradewinds

Nasdaq Reports Fourth Quarter and Full Year 2021 Results

Nasdaq Announces Quarterly Dividend of $0.54 Per Share
Globe Newswire

Nasdaq’s (NDAQ) Q4 Earnings and Revenues Surpass Estimates
Nasdaq

Nasdaq CEO Adena Friedman Breaks Down Better-Than-Expected Q4 Earnings
YouTube

Nasdaq’s (NDAQ) CEO Adena Friedman on Q4 2021 Results – Earnings Call Transcript

MarketAxess Holdings Inc. Q4 Profit Retreats, Misses Estimates
Nasdaq

MarketAxess (MKTX) Q4 Earnings Miss on Soaring Costs, Down Y/Y
Entrepreneur