136 Exchange Invest Weekly Podcast March 19th, 2022

Transcript

This week in the parish of bourses and market structure:

CBOE prepares global management, FTX pushes real-time clearing, NSE plans a Bullion Exchange and SovMEX is the soubriquet for LME.

My name is Patrick L. Young.

Welcome to the bourse business weekly digest.

It’s the Exchange Invest Weekly Podcast Episode 136.

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 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 India, a court has slammed the CBI (that’s the equivalent of the FBI in India) for their tardy progress in the National Stock Exchange of India holy hoaks probe nonetheless. Anand Subramanian and Chitra Ramkrishna are in custody, I doubt there any connecting cells and Indian prisons?

Meanwhile, CBI Judge Sanjeev Aggarwal of Rouse Avenue Court hearing the National Stock Exchange (NSE) a colo scam case took an adverse view of the matter asking “who will invest in India with scams like this?”.

Bravo judge Aggarwal, we say the problem remains that NSEL is a festering mess, let alone the holy hoax at one-time poster child of Indian bourses, the entirely unrelated NSE.

Meanwhile, outgoing NSE MD and CEO Vikram Limaye was at pains to urge an IPO aimed at offering liquidity to shareholders and not for raising money for capital requirements still coming for NSE coming soon.

There’s a bit of a crackdown on ‘Stock Tips’ as well on social media, SEBI conducted a series of search operations and arrested a vast multitude of people who’ve been passing stock trips through WhatsApp, Telegram and the like.

Meanwhile, the Nickel market oscillation at the London Metals Exchange has been much discussed throughout the media in the course of the last week, it can be surmised in one sentence: “When markets are open, not everybody is happy but when markets are forcibly closed or cancelled, absolutely nobody is happy.” Such as the tale of Nickel where the man we haven’t heard of until last week, running the company nobody knew about in a city nobody remembers hearing of has managed to upend the entire market and possibly take the reputation of a major global exchange with it. Moreover, the Chinese company in question doesn’t seem to even produce the right quality of raw nickel to deliver? (Did I follow that correctly? I fear so).

Nevertheless, a spot of toy pram exit manoeuvring has been taking place as it seems, some hedge funds at least have been pondering their options to ensure they get their own way even when what occurred was a disorderly market broken by LME within its rules – albeit it has to be said in a catastrophically cackhanded manner given the extent of the trade breaking, which was vast in both time and deal size. One hedge has apparently resorted to calling the LME the Soviet Metals Exchange – now, SovMEX that does have a certain ring to it.

Anyway, it’s back to tin and copper and well, the rich tapestry of history at the LME which is apparently once again about to disappear from view as previously prophesied umpteen times in the past.

Results this week: OTC Markets Group (the people behind originally the Pink Sheets and more) not only have they cleaned up their act in recent years in terms of regulatory oversight, but they’ve also hugely cleaned up their act in terms of profits. Gross revenues for 2021 up 45%, Q4 gross revenues up 32%, a dividend increase of 18 cents per share, which contrasts elegantly with the absolute worst performer in the field of the year, TP ICAP Group profits down at 1% over the course of the year.

Yes, they might have managed to find some revenue numbers that had squeaked off a bit but to describe the wannabe penny stock TP ICAP as clearly marooned in management mediocrity may be a generous reading of the ongoing train wreck of value destruction, which has been consistently the TP ICAP C-suite approach for many years.

Even mediocrity would be a positive in this sense. There’s a parallel universe inhabited by TP ICAP within market structure. Achievements with the company fast approaching penny stock status as profits drop over 80% are simply not achievements that should be remotely loaded. It’s time for a reality check over a TP ICAP.

New markets: the government of Rio De Janeiro and NASDAQ will create a stock exchange to negotiate carbon credits and sustainable assets.

Fascinating news in Brazilian green markets, they’re powered by NASDAQ, Marc Lore and Alex Rodriguez, who are apparently sports people in America who co-founded a new sports stock market. It’s all the rage on the 20 odd years after PLY was one of the co-founders of Intrade trade sports.

Cannabis ‘Stock Exchange’ launching in Europe promising clear labels for the booming CBD market. The Cannabis Stock Exchange is based in Geneva in Switzerland.

And finally this week in India, the National Stock Exchange and the Indian Bullion and Jewellers Association, which represents industry members in the world’s second-largest consumer of the precious metal are planning an exchange for spot gold.

Deals this week: the Aquis Stock Exchange have announced an intention to dual list on their own Aquis Stock Exchange growth market.

Meanwhile, the Mercari Exchange of Australia just hosted a wonderfully exciting party last evening at the Boca Raton conference from the FIA in Boca Raton in Florida, which we were delighted to attend. They announced the completion of their series ‘A’ Fundraising to expedite the development of a crypto-asset offering including derivatives as part of the FEX exchange and Mercari it’s crypto derivatives arm. The Australian tier-one exchange closed a funding round to enable it to further expand its current activities and develop new institutional product solutions, including crypto assets, and much more besides fabulous series of investors they’re in led by amongst others, the digital currency group, a leading investor in the field led by CME alumni Rumi Morales.

If you’d like to stay up to date with all of the exciting developments in the world of cryptocurrency and how that can affect your future, pick up a copy of “Victory or Death” – Blockchain, Cryptocurrency and the future of finance and fintech by myself Patrick L. Young, published by DV books available worldwide distribution by Ingram.

While you’re waiting for your copy of “Victory or Death” to arrive through the snail mail, don’t forget to check out our live stream this week we had a spectacular show with Trabue Bland he is the ‘Master of ICE’s Futures’ the most of all of the futures markets within the Intercontinental Exchange empire. That you can find on YouTube, go find the channel IPO-Vid and you can find it as IPO-Vid, the live stream “Master of ICE’s Futures” along with others in the series.

Coming next week we’ve got “Success In The US Alphabet of Crowdfunding” with Etan Butler of Dalmore. You can check-in for that at 6 pm London time which for this week only due to curvature of the earth issues and lack of ISDA master agreement in terms of the timing of changes to the clock for summertime and wintertime is going to be 2 pm New York time.

Crypto land this week: Binance are plotting an M&A Spree as regulators scrutinise the crypto trading unit, they are looking to push into new markets and presumably acquire themselves some regulation as they go along.

Meanwhile, Coinbase has steps towards what they call ‘Zero-Fee’ trading but it actually involves a subscription that’s in Beta for certain parties. And speaking of licences, Binance has obtained a third money transmitter licence in the United States of America.

Product news this week: the Saudi Exchange they’re going to allow single-stock futures from the next quarter as a very early advocate of single stock futures. I even read a book on it way back when working with early Western adopters (Hong Kong exchanges had left the feed that was actually the Hong Kong futures exchange before the HKEX was even born) I was delighted to work with LIFFE and Montreal back in the day starting the development of single stock futures and I am ecstatic to see Tadawul joining the single stock future fraternity.

The London Stock Exchange Group, they’re launching themselves into global private markets. Interesting to see how that goes but presumably, it’s more than anything akin to others in the field who are major international stock markets going to get a better pipeline of new issues happening on London’s somewhat beleaguered IPO market.

Technology news this week: Vermiculus who of course, we saw Taraneh Derayati the CEO of Vermiculus Technology joined us for the IPO-Vid live stream just a few months back, you can catch that on YouTube IPO-Vid. Vermiculus is collaborating with Miami International holdings to deploy their microservices-based clearing solution to the Minneapolis Grain Exchange. Excellent news for Vermiculus and MIAX and Minneapolis Grain Exchange.

India’s National Stock Exchange they’re planning to move its data centre after the coLo holy hoax fiasco. This is very exciting news, it’s also rather interesting to see them taking it out of their own premises. Will there also be a series of special mystic tech gurus employed to ensure a harmonious move? I wonder.

I visited the National Stock Exchange of India data room just before it was fully equipped in the then brand spanking new headquarters. And it’s a vast piece of financial real estate to move the data centre off premises represents a seismic effort to close the coLo crisis by the outgoing CEO Vikram Limaye, who has through no fault of his own – seen his term of office being overshadowed by the festering colo affair.

Last this week in technology the UK government’s Department of Business, Energy and Industrial Strategy they’ve adopted ICE Connect for analysis of the UK emissions program.

Crowdfunding news this week: Funding Circle one of the earliest people in retail peer to peer lending have exited. Retail peer to peer lending permanently closing the business two years after they paused lending at the onset of the COVID pandemic.

Meanwhile, Oman in the Middle East, they have approved the first licence for crowdfunding platforms after the rules were changed to enable crowdfunding to take place.

In regulation: the UK Government have set out plans for a new prospectus regime. See earlier the move towards the LSEG launching a private stock market. That is of course all part of a huge effort to try and make Brexit Britain an epicentre of a new global listings bonanza. The Bitcoin price that surged well briefly at surge, at least on Joe Biden’s crypto executive order. The White House was laying out its rules or ground rules for digital assets. The executive order on ensuring responsible development of digital assets was something that got the crypto kiddies all very excited, but it struck me as well touch millennial behaviour as the realpolitik today it has been that Gary Gensler was lecturing on all this stuff, and then suddenly turned gamekeeper with some (albeit to date fairly muted) frenzy. Likewise, the howling lefties of the Brezhnev regime are die-hard old politburo reactionaries like Fauxahontas and the squad et al. This is likely to be a gentle smothering of crypto with false promises, delays, obfuscations and confusing signals backed up by zero delivery – in other words, precisely the same as every other aspect of the currently incapable ‘grown up’ sick government of gormless Ivy Leaguers and fellow travellers.

I am all for regulation and particularly cryptocurrency. However, it’s difficult to be overly optimistic given the morass of halfwits – sorry “grown-up halfwits” to use the term smugly appended to their cabinet of incompetence without a scintilla of justification. Presumably, Joe Brezhnev feels comfortable with cryptocurrency as there are no pesky foreign leaders involved to ignore his phone calls?

FTX they launched the most incredible regulatory announcement of the week they’re seeking the US blessing for clearing margin-based retail trades. There are some great things to unpick here. For one direct access to exchanges was always inevitable when I wrote “Capital Market Revolution!” 22 years ago, albeit the status quo of finTech development has been reminiscent of seeing brokers within the famous Goldie Hawn Rowan and Martin’s Laugh-In line “And the meek shall inherit the earth, the trouble is the rich keep contesting the will”. Thus the brokers have always seen their role as God-given…

Applying margin and bringing in some of the groovy insta mark to the market of the crypto derivatives business may cause a dose of apoplexy and more established CCP towers but there is no reason why this cannot work albeit the ongoing sensitivity to different sizes of position is key – thus ideal for retail good for a holistic market. Well, I think we have to think again, however, forgetting the dimes did anybody say Nickel? Well, anyway, those CCP issues aside given FTX is talking about exclusively retail flow even allowing for the randomly patchy liquidity of crypto albeit what do we actually do with the wheels of the crypto market in the middle of this mix? This is a terrific idea in outline albeit one that has to be tested and challenged unexpected right as aborted after a spot of due reflection and reading up.

Cyprus, its regulator they are too slow to act says the European what union watchdog ESMA which might cause a little bit of a concern for FTX because of their world domination strategy. Is it well-considered that their European Union regulation has just been announced as being in Cyprus?

Career paths this week: the CBOE global markets they’ve announced their international senior leadership changes. David Howson has been promoted from EVP at CBOE and President for Europe and Asia Pacific to become president of CBOE global markets effective from the middle of May. Ade Cordell, currently the SVP and President of CBOE Netherlands (that’s their options market initiative, of course, he was looking after) he’s going to become president of Asia Pacific and it’s going to be relocating to the region in the fourth quarter of 2022. Natan Tiefenbrun currently, SVP and Head of European Equities is going to step up to David Howson’s old role as President in Europe.

I must admit I’m really gutted to see that Ade by the looks of it isn’t the next James Bond but Australia and Asia as a whole will doubtless be delighted to encounter suave presence. It’s a seriously interesting shake up on the other hand for the internationalisation of CBOE away from its parochial Chicago roots, David Howson deserves his presidential trappings. While it will be a terrific Asia Pacific President and Natan is the ideal choice to run the equity-centric European business. With the footprint of CBOE having shifted globally, the internationalisation of management has a significant London feel to it. Congratulations to all, as the good folks of CBOE have added some key “DNA” to their international management with a global president for David, Natan and indeed Ade as respectively the European and Asia Pacific presidents.

Finally, this week in career path news two little snippets: BMLL the people with a 15+ petabyte data lake, they have announced that they’re moving their legs with now stretches across the Atlantic with the appointment of Tim Baker as Senior Adviser based in New York. Tim has over 30 years of experience from IEX, UBS, Refinitiv and Thomson Reuters and we were responsible for growing BMLL’s client base in the United States of America, developing and implementing the company’s growth strategy in the region. Exciting news all round.

Finally, a great tribute to a long-standing member of the parish is now retired former CBOE CEO Bill Brodsky recently announced for an American federal government position. He’s been given one of this year’s Order of Lincoln gong’s by Governor Pritzker in Illinois.

In this world troubled time, I was at least delighted to see one spot of good news this week in ‘Big World’ when I spotted en passant from that major league news source “The Jamaica Observer” (which is a bit like the New York Times except accurate): the headline run Pirate attacks were at a 27-year low in 2021 with a total of 132 incidents of piracy and armed robbery reported worldwide. That’s the lowest recorded figures since 1994 according to the International Maritime Bureau in its annual report.

On the other hand, mixed against that was the scary post COVID stat. Well, at least most of the world’s going post-COVID. It seems in China and Hong Kong, they want to have zero COVID which is an entirely different thing and therefore they’re still having massive outbreaks and problems. The scary COVID snap from Hong Kong which like the mainland of China is seeking to achieve zero COVID was the latest lockdown has meant that their wonderful flag-carrying airline Cathay Pacific will fly only 2% of normal passenger capacity as Hong Kong remains sealed off (CNN) as I record this podcast.

And on that mysterious and magnificent note ladies and gentlemen, my name is Patrick L. Young publisher of the Exchange Invest podcast, the Exchange Invest newsletter and much else besides including IPO-Vid and of course, I got a day job where I happen to build exchanges around the world.

I wish you all a great week in blockchain, life and markets

LINKS:

Court Slams CBI For Tardy Progress In NSE Probe
Times of India

‘Stock Tips’ On Social Media: Sebi Conducts Search Ops
The Indian Express

Sebi Conducts Search And Seizure Operations In Social Media Stock Tips Scam
Mint

LME’s CEO Calls For More Powers To Intervene After Nickel Halt
Reuters

Hedge Funds Walk Away From LME After $3.9 Billion Trades Torn Up
Bloomberg.com

London Metal Exchange Rushes To Contain Fallout Of Nickel Trading Crisis
Seeking Alpha

‘Soviet Metal Exchange’: LME Irks Traders By Freezing Nickel Market
Financial Times

The 18 Minutes of Trading Chaos That Broke the Nickel Market
Bloomberg

Nickel Crash Showed How Commodities Exchanges Really Work: Matt Levine
Bloomberg

OTC Markets Group Reports Fourth Quarter And Full Year 2021
GlobeNewswire