137 Exchange Invest Weekly Podcast March 26th, 2022

Transcript:

This week in the parish of bourses and market structure:

A week of blunders, ASX tech fails again, LME struggles to get Nickel trading coherently while the US SEC’s response to the war in Ukraine appears to be becoming the Securities and Environment Commission.

My name is Patrick L. Young.

Welcome to the bourse business weekly digest.

It’s the Exchange Invest Weekly Podcast Episode Number 137.

Good day ladies and gentlemen, this is a very brief reduction of highlights from amongst the key headlines this past 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

“The London Metal Exchange Nickel Mayhem,” that was how the South China Post described us frankly we reached the GUBU zone this week with LME alas, things that looked like a fiasco topped with shambles alas as the market simply couldn’t get to grips with pricing coherently for several days. The embattled boss of the LME Matthew Chamberlain was saying the banking business bears some responsibility for the conditions that led to a massive short squeeze that broke the nickel market.

It’s a point where perhaps LME can begin to push for a form of Dodd Frank reshuffling of the legendarily opaque metals markets, can they achieve a movement towards light and transparency?

Elsewhere, it never rains, but it’s pores, one has to feel sympathy with the LME. They have no plans to shut out Russian metals despite concerns amongst user committees. The difficulty being of course, that banning the metals from the LME may be unlawful if no actual sanctions against producers are put in place.

The good folks of Intercontinental Exchange are not facing the same sort of worries. They have launched a multi-faceted global brand advertising campaign. The ad had a premier ahead of the brilliant ICE Energy breakfast last week at Boca Raton, and the image is clearly one of an Intercontinental Exchange, which is fast, focused and innovative as all parties “Make the Connection”.

The Moscow Stock Exchange has had various limited reopenings for business, it’s anything but businesses usual as the Sydney Morning Herald noted during the course of this week while over in India, some might say there’s been some welcome perspective this week, such as articles in Mint newspapers saying NSE: An agent to Separate The Wheat From The Chaff. Welcome perspective or is it a case of lifeboats being launched to rescue brand NSE ahead of what many are still clinging to as the possibility that it might finally IPO onto its own market during the course of this year.

Brexit news: the Bank of England said they have not seen any major ECB grab for UK bankers so far. That amounts of course to zeroshock for those who’ve been informed about Brexit by Exchange Invest…unless, of course, you’re working for the Bank of England who have been behind the Brexit game for the past 6 years, not that they did much better admittedly with balancing QE and inflation risks but remember, crypto is dangerous as money is a job for ‘grown ups’ central bankers.

The Tel Aviv Stock Exchange announced net profits up 23%, a 50% dividend increase as well, perhaps most heartening of all 94 IPOs during 2021, including 61 high-tech companies and research and development partnerships. That’s the highest number of IPOs on the Israeli Stock Exchange since 1993. It amounts to highly encouraging numbers from the TASE, especially managing to (finally!) have that long-awaited uptick in IPOs that the “startup nation” had previously been delivering broadly to the US stock markets without making much impact on the local bourse.

New markets this week: MEMX (that’s Wall Street cooperative) they’re looking to launch their very own Options Exchange, it’d be interesting to see how that goes. Meanwhile, FTX the cryptocurrency futures exchange they’ve established a local presence in Australia. That follows on from an excellent fundraising round for local Sydney crypto exchange Mercari just the other a week.

Over in China, the Carbon Emissions Trading Exchange in Hainan is expected to be operational during the course of 2022.

Deals this week: the London Stock Exchange, they’ve actually managed to divest an asset from their Refinitiv portfolio. They’re selling off BETA+ to Clearlake and Motive partners, entering a strategic partnership in Wealth management software. That comes almost 14 months after completion of the deal that already threatens to reshape the LSEG for a generation and the slow lane, all of a seeming sudden: a bit has been cleaved off from Refinitiv and sold on. There was quite a long lead in this whole process if this was always a logical sale, of course, albeit I suppose some might blame COVID here for the delay. Those with longer memories might reckon we’re back to the usual Reuters Financial cycle which involved a quasi-endless financial stagnation being assuaged to some degree by an asset being judiciously discovered/valued, and then hastily sold.

Aquis Exchange, they made a fascinating purchase this week, an acquisition I suppose one good pun, they are taking over the UBS MTF. That’s very exciting news altogether, it continues their expansion plans with a move into dark trading as part of their long-standing ambition of becoming an all-encompassing exchanges services provider.

If you’re interested in the future of finance and the trends in FinTech, then don’t forget, you can still pick up a copy of my book “Victory or Death” – Blockchain, Cryptocurrency and the FinTech world by myself, Patrick L. Young, distributed by Ingram world wide published by DV Books. While you’re waiting for your copy of “Victory or Death” to arrive, check out our Livestream, IPO-Vid. That comes at Tuesday’s 6 pm in London depending on the curvature of the earth that ought to be most of the around 1300 New York time, the IPO video live show. You can catch the back episodes on LinkedIn and YouTube via IPO-Vid. Our latest show was “Success in The US Alphabet of Crowdfunding” with Etan Butler, co-founder and Chairman of the Dalmore Group with some 200+ successful mandates in the crowdfunding arena in the USA in the last few years alone.

Coming this Tuesday: After Brexit Where Next For World Trade? Our guest there is going to be an esteemed Brexiteer and academic fellow, Catherine McBride.

One spot of Cum-Ex news this week: Denmark agree an extradition treaty with the UAE. That means they’ve got their eyes on one particular Briton, who has been charged with defrauding Danish tax authorities by the so-called “cum-ex” trading schemes.

In crypto land and FTX Europe became the First Crypto Exchange Licenced under Dubai’s regulatory framework.

Binance they’ve been granted a crypto assets service provider licence from Bahrain’s Central bank, and Binance US are inching closer to approval in all 50 US States.

Coinbase they’ve been sued for allegedly selling 79 unregistered crypto securities in a class-action suit. The NASDAQ listed cryptocurrency exchange is the recipient of allegations that the platform has allowed customers to trade 79 cryptocurrencies that are unregistered securities, amongst them are XRP, Dogecoin (DOGE) and Shiba Inu (SHIB).

At the same time, Jim Chanos (the famous fund manager investor) he’s revealed a new short position in the crypto exchange Coinbase. “Coinbase is what we would call a bubbles stock”, the Founder of Kynikos Associates has said.

Binance they’ve been sued by Colombian users for frozen accounts and Taiwan’s leading crypto exchange MaiCoin Group, they’re reportedly considering going public on the NASDAQ within the course of the next two years.

Product news this week: ICE benchmark administration have launched ICE Term SOFR Reference Rates as a benchmark for using financial instruments. SIX (Swiss Exchange) they’re partnering with LMAX Group to deliver 24/7 traded crypto futures and TsingShan, they’ve inked a deal to swap their lower quality Nickel products for LME delivery grades, hopefully helping underpin to some degree, the rather marked volatility, which led to a closedown of the LME Nickel market in recent weeks.

On that topic, Don Wilson, Founder of DRW, was quoted in the Financial Times this week: “This is one of the most inept moves an exchange has made that I can think of”.

Rostin Behnam, Chair of the CFTC had commented previously at the Boca Raton conference that the public in the market had to have confidence that agreed rules would be upheld, rather obliquely and without referencing LME per se. It does appear that he might have had the Nickel market in mind when he commented in his bogus speech: “It’s extremely important that we don’t make up rules as we go” Certainly, the history books I suspect are already beginning to record that the LME Nickel fiasco of 2022 is a case of concentration gone wrong, spectacularly.

We’ve discussed previously in this podcast the issue of Chinese IPOs overseas. Now it sounded as if a Chinese move is headed towards the Swiss Alps. Three Chinese companies are preparing for IPOs in Switzerland, in a sign that the country’s issuers are looking for alternative offshore listing venues beyond the US and of course, the special administrative region of Hong Kong itself.

Bloomberg had an interesting story this week: Some Companies Are Now Re-qualifying Their Old Bonds As Green that prompted Exchange Invest to ponder retrogreenspectively, we were all more eco-friendly once upon a time.

While the National Stock Exchange, the Bombay Stock Exchange they’ve agreed on a common sectoral classification of stocks, which will be good for Indian investors across the board. The Intercontinental Exchange launched its biotechnology index futures and semiconductor index. Meanwhile, on NCDX (National Commodity Derivatives Exchange) in India, they’ve launched refined castor oil futures.

Technology news this week: the London Metals Exchange halted Nickel trading again as a systems error had disrupted the reopening. Sadly, we went beyond disaster and went into GUBU territory with the LME story during the course of recent days. Elsewhere, the Australian Stock Exchange had another meltdown, even ASIC the regulator which some might argue has traditionally protected the Australian monopoly exchange, issued a rather steaming statement about the whole affair. Well-functioning financial market infrastructure is critical to the integrity and reputation of the Australian financial markets, and the trust and confidence investors have in them, ASIC said in a stinging remark. Alas, things at ASX seem to have gone from bad to worse. The parish has indeed come to rely on one factor of dysfunction in recent years: the ability of the self-styled “technology company” ASX to keep digging when things go from bad to worse.

It’s a travesty I want world class tech stack that led the world only a generation or so ago has now turned into an operational shambles on all fronts – whether it’s in the area where ASX have installations – or arguably worse still – the bits they can’t even manage to install umpteen years later.

On the latter point, Exchange Invest mooted this week. Is anyone willing to wager the Digital Asset will still be the chosen one as settlement supplier when the ASX finds a replacement for Dominic Stevens as the CEO? Leaving aside that for the outage on a crucial day for the ASX.

Some better news in Miami, sunny Miami where we’re actually recording this podcast this week. Miami International Holdings, they announced the selection of Vermiculus financial technology. You may recall of course that we had a fabulous IPO-Vid with Taraneh Derayati the CEO of Vermiculus a few months ago, you can pick that up on YouTube IPO-Vid. Anyway, Miami International Holdings, they’ve announced the selection of Vermiculus Financial technology to provide a real-time clearing solution for the Minneapolis Grain Exchange.

Crowdfunding news: StartEngine, they’ve returned to self-crowdfund more money, they’re aiming to raise this time around $46 million as one of the largest security crowdfunding platforms in the USA.

Regulation news this week: well, a spot of relief imbecility avoided, for now, the European Parliament have voted down a Bitcoin mining ban. Elsewhere, the European Commission proposed simpler rules to make European Union settlement more efficient, pairing their disputed rule for failed stock and bond settlements. Meanwhile, the Financial Conduct Authority (FCA) the UK regulator warned exchanges on ‘Operational Resilience’ after the LME shock.

Concentration is of course everything and all the evidence we have right now suggests that the LME had, well, a bit of a colossal failure of late. At the same time, as I might want to describe them passenger regulators go, the FCA has once again failed to appreciate what it manages it seems, all the while usually making life more difficult for smaller players while being what some might deem well, a teeny bit craven to some large quasi-monopolists? That certainly seemed to be one of the topics of conversation of the cocktails at the Boca Raton conference we attended last week.

Back at the LME, I imagine there’s some full and frank discussion ongoing between the FCA and their former director, the now LME Chairman Gay Huey-Evans, who was unfortunately unable to attend the Boca Raton conference last week as a result of the LME meltdown keeping her in London.

The US’s SEC they have proposed a series of rules to enhance and standardize climate-related disclosures for corporates and thus to investors.

I’m all for a sensible approach to doing planetary kumbaya with Earth but I am #seriously worried that the looney left of Gary Gensler Congressman Stracciatella, Mrs. Boris et all, have not merely over reached the mark on this occasion but are spectacularly on the wrong side of contemporary logic in the current geopolitical debate? Where the climate is being dictated by Russia and Ukraine, as much as by Insta worries about the actual Green Movement or as Commissioner Hester M. Pierce pointed out in a very pithy rejoinder: “We are not the Securities and Environment Commission – at least not yet”

Career path this week: a couple of interesting announcements CBOE, they’ve announced the new President of BIDS Trading, their block trading arm appointing Stephen Berte. Meanwhile, the Hong Kong Exchanges have appointed Yang Qiumei as Advisor to the CEO. Ms. Yang was formerly an Asia Pacific CEO at ICI Global and the indeed Hong Kong Exchanges Head of Mainland Development in previous jobs.

Over in India, bit of a shock in the NSEL scandal, some 95% of the smallest investors who got caught up in that scandal many months ago. More than 63 months ago one might say they’ve got their money back. The city police of Mumbai have to debt auctioned over a dozen properties of the accused and reimbursed some 731 crore rupees to investors.

That means more than 95% of small investors (6,150 people out of 6,445) have been reimbursed fully, they have invested originally amounts between 2-10 lakh rupees (that’s like 2,600 US dollars to about 13,000 US dollars) in total over 13,000 investors remain caught up in the NSEL scam.

And as I mentioned previously, we did attend a Boca Raton conference last week where we could go face to face jaw jaw with the brokers and indeed, many exchanges from around the world. Everyone agreed it was a delight to enjoy face-to-face time talking about electronic markets. Perhaps the most intriguing gossip of the week surrounded a spotting of Terry Duffy, the grand vizier of CME Group in late-night conversation and the corner one bar with Sam Bankman-Fried, the emperor of FTX.

That led us to muse perhaps SBF has found the way to acquire CME Group. The leverage push for his $32 billion dollar firm to acquire the $85 billion CME might be tricky, but only for those of us foolish enough to limit our thinking to legacy money. This brings together a whole new dimension for M&A, the mergercoin.

In essence, SPF/FTX, could ICO “TelCoin” which would be crypto (minted with accompanying NFTs showing Terry’s profile – no ape jokes please) that would raise not merely the money to acquire CME Group but also satiate the ego of the great deal denier in chief (well at least wherever CBOE was concerned). Let a billion Telcoins bloom at, say $100 a pop and you ought to have a modest stash to cover the gas fees – provided you don’t think that gas fees are the kind of energy they store in Cushing, Oklahoma.

Speaking of Cushing, the highlight of the main conference day at Boca Raton was undoubtedly the ICE energy breakfast where Texas Governor Greg Abbott was in scintillating form while Continental Resources CEO Harold Hamm was arguably more magnificent still. As a primer on how free markets can change the world without having to rely on government fiat, this discussion was entirely inspiring.

And on that mysterious and magnificent note. Ladies and gentlemen, my name is Patrick L. Young, founder and publisher of the Exchange Invest daily newsletter, builder of exchanges the world over. I wish you a great week in blockchain, life and markets.

LINKS:

LME Nickel Mayhem: London’s Trading Stops As Soon As It Begins As New Daily Price Limit Throws Metal Exchange Into Chaos, Again
South China Morning Post

LME Resumes Nickel Trading After Delayed Opening, Sets New Price Limits
South China Morning Post

Nickel Traders Plunged Into Chaos Again As LME Postpones Trading
City AM

Banks Are Partly To Blame For Nickel Short Squeeze: LME Chief
Gulf Times

London Metal Exchange Says It Has No Plans To Shut Out Russian Metals
City A.M.

ICE Launches Multi-Faceted Global Brand And Advertising Campaign
ICE

Russia’s Stock Exchange Reopens For Business But It’s Anything But Usual
Sydney Morning Herald

Moscow Stock Exchange Partially Reopens Amid Sanctions
Albanian Daily News

NSE: An Agent To Separate The Wheat From Chaff
Mint

Bank Of England Says Not Seen Any Major ECB Grab For UK Bankers So Far
Reuters

The Tel-Aviv Stock Exchange Reports The Results Of The Financial Statements For The 4Q And For 2021
Yahoo Finance