134 Exchange Invest Weekly Podcast March 5th, 2022

Transcript:

This week in the parish of bourses and market structure:

Indian stocks now settle on a T+1 cycle while Indian scandals are settling on T+ forever as the Holy Hoax colo scandal rages on…

My name is Patrick L. Young.

Welcome to the bourse business weekly digest.

It’s the Exchange Invest Weekly Podcast Episode 134.

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 of the past 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.

In what the Hindu newspaper has aptly termed “the Holy Hoax” NSE’s co-lo scandal took on a yet more bizarre turn this week when India’s CBI determined that the Himalayan mystic guiding when NSE CEO, was in fact none other than Anand Subramanian, the controversial beneficiary of Chitra Ramkrishna’s promotions… Hence at least it may now be clear just why the guru kept recommending the elevation of Subramanian in the NSE hierarchy.

Indian media went gaga once again at this arrest and promptly showed a photo of former NSE CEO Ravi Narain labelled as Subramanian himself. At least they haven’t mixed up Chitra Ramkrishna… yet.

Anyway, determining that the Himalayan “yogi” who proposed employment and pay rises for Anand Subramanian was in fact Anand Subramanian took the CBI longer than a builder can knock a hole in the wall but it was still impressive work compared to, say the resolution of the NSEL fiasco.

Naturally, the Subramanian laptop appears to be missing too… And that raised questions over at the multi-commodity exchange where there may be similar data storage issues pertaining to many Indian exchanges, where there’s been a penchant for destroying executive laptops, data and all and indeed, in the case of Mr Subramanian, it seems his laptop is currently missing.

On a happier exchange note the stock markets this week rolled out a T+1 settlement cycle in India, which regulators SEBI had permitted last September. Indian scandals, frauds and suchlike will continue such as NSEL to be settled on a T+forever basis, we presume.

However, one side effect of the NSE co lo holy hoax could be the very notion of the stock exchange duopoly concentration which has long been favoured by SEBI.

Today the National Stock Exchange of India commands a breathtaking market share of 93% in cash equities, 100% of cash equity futures, 94% of equity options and well by comparison only 73% still a crushing monopoly of currency derivatives apart from NSE investors and traders have really only one solid option – the BSE (former Bombay Stock Exchange).

Now, I have long railed against the SEBI policy to extinguish exchange competition in India by essentially forcing out of business many of the almost 2 dozen regional exchanges which once operated. If a result, a byproduct if you will, of the recent NSE colo-guru folly is to see a U-turn in this horribly flawed SEBI monopoly policy, it will be a very good thing indeed. Albeit many will be reluctant to enter or re-enter the market, given the capricious eccentricities of the Indian national regulator.

In the Middle East, the Kuwait bourse is planning derivatives trading amid a push for more IPOs. EuropeanIssuers welcome the European Commission’s initiative on an EU listing Act. In fact, that’s a no brainer to try and help CMU (Capital Markets Union) a dream in the European Union for the course of the last 10 years to exist meaningfully. The problem is the European Union generally can separate the wheat from the chaff with alacrity, then spend five years legislating for the chaff. Hopefully, the European Union will finally get something right and deliver some coherent CMU framework.

Meanwhile, full marks to EuropeanIssuers for doggedly pursuing something which might be a proxy for capitalism, if the European Union can somehow curtail its inherent corporate socialist ethos.

Meanwhile, we are not going to dwell on the horrible happenings in Ukraine this week. But we did note that the London Metals Exchange said some members may have positions subject to sanctions. Frankly, ladies and gentlemen, it would be a bad day for me if ever members do not have exposure to sanctioned entities when there is a major dislocation, like last week’s hostilities.

Speaking of major dislocations, it’s been a year since the city of London’s love affair with the London Stock Exchange Group abruptly soured. Xavier Rolet was far from perfect, but he was a rock star and communication compared to the current LSEG CEO “Out of His Depth Dave”. Then again investors had adopted a fallacious herd belief that the LSEG stock could only go up while ignoring the fact that execution and integration had become disaggregated behind what amounted to facile hype. There is decent value in the core execution franchises of LSEG, the problem is the company probably needs to write down Refinitiv to zero and start again, which is going to prove a challenge as it means mass decapitation.

Indeed, there was an exciting point in an article in The Times this week where they imputed that Out of His Depth Dave has to beat investors’ expectations to return to favour. That investors maintain expectations that LSEG or indeed odd can achieve anything as opposed to being well a dead man walking under corporate entity in need of a major write-down point to an ongoing refusal amongst investors to realise the peril that the Refinitiv madness has left the LSEG in.

While the LSEG board itself must bear a certain amount of culpability for the nuttiness of the course of the last few years. On the topic of numpty boards beyond compare this week saw the TP ICAP share price dropping below a billion pounds and through 120 Pence, it was around 116 Pence as this issue was being recorded of the IPL vid start again of the Exchange Invest podcast. TP ICAP stock is a far cry from the 4.92 pounds they attend in only 2018 and certainly, there must surely be calls for action across the C Suite on the board by now.

One C Suite that is doing a marvellous job this week was the FESE Director-General Rainer Riess. He issued a passionate cri de coeur defending his markets venues and seeking to implore some common sense from the EU, as the worry is that the European Union’s markets are going to bend once again to the forces of darkness and banking et al. when it comes to the method review proposal.

On to results well, at the top of the parish the Hong Kong Exchange, they announced a record revenue up 9% with profits attributable to shareholders up 9% as well and EBITDA of 11%. Coinbase, crushed expectations but the stock still sank as they reported a slower start to the new year.

In new markets this week: Ghana will launch a dedicated Green Bond Exchange and the Philadelphia based sports betting market. Sporttrade has gained access to the Louisiana, Indiana markets expecting in early 2023 launch in Indiana.

In deals, this week: S&P Global and IHS Markit finally reached the ultimate hurdles. Approval has been given across the board for their merger, and it promptly closed on February 28, 2022 creating a data titan. The Japan Exchange Group have invested in Digital Asset Markets, they’re the people who are selling the Mitsui & Co Gold token, a Crypto-Asset Exchange in Tokyo.

Valereum (in which of course I happen to have a vested interest as Executive Director) they’ve exercised an option to move to 90% of the Gibraltar Stock Exchange with final transfer, of course, subject only to the Gibraltar Financial Services Commission’s approval. As of now, Valereum has a stake of 50% already paid for making for exciting times. Clearly, the macro environment is dampening the progress of stocks in the parish right now. But as we look to emerge from under the cloud of Ukraine, and indeed while Valereum which regulatory permission for the Gibraltar Stock Exchange transaction, the future looks very, very bright indeed.

Over in Luxembourg, the Luxembourg Stock Exchange announced that they have sold their interest in FE Fundinfo and Fundsquare.

Don’t forget ladies and gentlemen if you’re interested in this podcast, if you’re interested in Exchange Invest, you may also be interested in my current book “Victory or Death” – Blockchain, Cryptocurrency and the FinTech world. “Victory or Death” is published by DV books and is distributed by Ingram worldwide. While you’re waiting for a copy of “Victory or Death” to arrive don’t forget to check out our livestream Tuesdays at 6 pm London (that’s a 1 o’clock New York Time, 1900 CET) the IPO video live show. The livestream this week is going to be featuring Nigel Feetham he’s a renaissance FinTecher, lawyer and a senior partner, and a QC no less in Gibraltar at the leading law firm there Hassans.

Meanwhile, in crypto land this week: crypto exchanges have been blocking certain Russian users but nonetheless, they’ve stepped back from a blanket ban on Russian counterparties. That strikes me coming from the likes of Binance and Coinbase as a pretty dumb strategic error by the new guys who are caught in a tricky position – their transaction costs are high and there’s a gold rush going on. Nevertheless, that’s not a good way to gain the attention of Gary Gensler et al., just as the sanctions bandwagon is rolling against Russia.

Product news this week: ICE have announced the first expiry in their Midland West Texas Intermediate American Gulf Coast Futures 1.4 million barrels went to delivery in March. That’s 1400 contracts delivered after a healthy start on January 27th this year.

The Chicago Mercantile Exchange, they’re launching “micro” versions of their Bitcoin and Ether options, while retail investors in India will be able to trade US-based stocks via National Stock Exchange of India’s IFSC and indeed that’s in Gift City in Gujarat, from the 3rd of march under the Liberalised Remittance Scheme (LRS) limits. Rest of the world’s retail investors remain entirely shut out of the Indian marke alas.

The Ethiopian Commodity Exchange funded this weekend’s products they’re adding 5 new commodities to the trading floor: vetch (grass pea) and four spices (black, cumin, coriander, black pepper, yellowish fenugreek and greenish fenugreek). Good luck with all those product launches.

In technology: congratulations to Exchange Invest sponsor BMLL -they won a “Best Trading Analytics Platform” at the 2022 TradingTech Insight Europe Award. NASDAQ, they’ve launched a fascinating facility a universal test facility no less in partnership with Sequitor. NASDAQ seeks to help us all test, test and test again. As I bemused this week to read a Transatlantic survey revealing that office workers are tempted to resign over bad software. That struck a chord with me as I’ve been wading through legacy kit on various due diligence and integration projects of late and it’s been fascinating to see just how supposedly digital but nonetheless legacy digital entities can now be held back by their own IT – and indeed the stunning limitations in certain cases of their own IT staffing cohort.

The Madras High Court they’re going to hear please against the MCX’s payments to their ill-fated London IT developer (that’s taking place on March 8th) stockholders are not happy about payments being made. And finally, this week, a brilliant innovation the The International Stock Exchange (that’s the Channel Islands stock Exchange that used to be called) they’ve launched a new trading system NOVA, it’s the opening of their secondary market with their first auctions. Clearly, somebody has been reading from the PLY mantra that illiquid markets need auctions much more than continuous trading. Good move from the Channel Islands.

In regulation this week: the market is begging the European Commission for more time to mull Euro clearing proposals. Haste is the latest addition to the existing closed-mindedness, paranoia and panic in the European’s approach to clearing their beloved- endangered (delete as you prefer) Euro currency. It’s not a good look from any angle and it’s a dreadful way to maintain confidence in the banking system, especially one underpinned by such a vacuous currency.

Over in the USA, the founders of BitMEX (the cryptocurrency exchange) pled guilty to Bank Secrecy Act Violations and money laundering. Under the terms of their respective plea agreements, the founders HAYES and DELO each agreed to separately pay a $10 million criminal fine, representing pecuniary gain derived from the offense. After watching the Coinbase IPO while wandering the streets of New York City wearing an ankle bracelet, Arthur Hayes will presumably be relieved to get away with only a fine even if it is $10 million. That’s at the same time as the US SEC’s top enforcer said a crypto company amnesty is not on the table. that left Exchange Invest week at scrambling to ascertain just how large an orange jumpsuit inventory has been allocated to the crypto clampdown. We’ll keep you posted.

Over in the UK: the financial watchdog has a problem. Last month FCA employees voted in support of industrial action in a non-binding ballet in response to a planned transformation programme being pushed by the watchdog’s new boss Nikhil Rathi.

Restive regulators are considering striking and following in the footsteps of the London underground tube drivers. Of course, if the UK Government had a backbone or any strategic nous, they would use the prevailing infrastructure and automate the underground. Then again, when it comes to financial regulation if the government had the backbone and strategic nous, well, I wonder.

Career paths this week: the Thai bourse has re-appointed as SET president for a second term Pakorn Peetathawatchai to continue his position.

Lots of interesting articles coming out of India this week as well, they were looking back on the hits and misses of Ajay Tyagi as SEBI Chairman, while applauding the arrival of Madhabi Puri Buch as the new Chairman of SEBI for a term of 3 years. Very interesting, the former banker Buch, her appointment has been hailed by the market as a refreshing change from the bureaucratic stranglehold over the market regulators office in the three decades of its existence, SEBI has always been headed by an Indian civil servant. So thus, Ms. Buch becomes the first woman and the first person from the private sector ever to be appointed to a senior Sebby post – we live in hope this might involve even a modicum of reform from the central planning mindset of India’s financial regulatory body.

Speaking of central planning mindsets, “Putin has no idea what’s coming” the US president has said while admiring the drapes and pondering how his office seem to have grown to ally about 1200 people in during the course of the State of the Union address this week.

The worry about gerontocracy used to be that Soviet leaders were aged fossils, and thus more likely to loose off a nuke because their lifespan could be measured in hours.

Right now when it comes to having “no idea what’s coming” we appear to have a worrying stalemate between the Mad Vlad and Joe Brezhnev.

With Joe Brezhnev in the White House and Vlad having gone mad according to the Western agitpop, it might be time to “party like a Russian” and forget our woes?

At the same time, the Ukrainian government was on Monday of last week demanding immediate membership of the European Union.

I minded to think the good citizens of that unfortunate country have suffered more than enough already? Certainly, it’s the epitome of desperation during a wretched time for the people of Ukraine.

In reaction to that, Russian markets mostly been closed, but risk-loving Korean mom-and-pop investors piled a record amount of money into a Russia-linked exchange-traded fund as it sank following the invasion of Ukraine, prompting the ETFs operators to issue an alert.

And on those mysterious on magnificent notes, ladies and gentlemen. My name is Patrick L. Young, Executive Director of Valereum PLC, and publisher of Exchange Invest daily bulletin of the bourse business. I wish you all a great week in blockchain, life and markets.

LINKS:

Police Ratchet Up Pressure On NSE After Yogi Saga
Deccan Herald

Deep Dive Into NSE Co-Location Scam
Youtube

Full Text Of Controversial NSE Email Exchanges Between Chitra Ramkrishna And ‘Faceless Yogi’
Theprint

NSE Case: Ramkrishna Denies Allegations, Blames It On Technical Glitches
The Economic Times

The Tel Aviv Stock Exchange is Interested in Burj Khalifa Investors
PR Newswire

Tel Aviv Stock Exchange Looks For Investor Base In UAE
Nasdaq

CBI Arrests Ex-NSE GOO Over Irregularities In National Stock Exchange
Times of India

CBI Questioned NSE It’s Muralidharan In Co-Location Case, Says Official
Business Standard

Co-Location Scam: CBI Arrests Ex-NSE COO Anand Subramanian
The Hindu Business Line

Inside The NSE That Chitra Ramkrishna Ruled
Mint

Anti-Superstition Crusaders Seek Action Against Ex-MD NSE For “Baba” Claim
Hindustan Times