138 Exchange Invest Weekly Podcast April 2nd, 2022

Transcript:

This week in the parish of bourses and market structure:

A Chinese Olive Branch for US listing while a key shareholder finally comes out against TP ICAP Management and the ASX delays CHESS replacement yet again.

My name is Patrick L. Young.

Welcome to the bourse business weekly digest.

It’s the Exchange Invest Weekly Podcast Episode 138.

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 newsletter, the unique guide to the bourse business sent daily to your inbox.

More details at ExchangeInvest.com or via our social media

The Chinese authorities appear to be shifting their stance on the longstanding audit stand-off with a proposal that may cohere sufficiently to keep Chinese listings happening in the USA and thus the Chinese more in the global financial system as they work towards Yuan convertibility at a cautious pace.

The plan relegates the CSRC to the back seat in the auditing dispute between the US and China from the role it has held since 2016, as the collector and gatekeeper of China’s audit working papers.

Meanwhile, in India, in the National Stock Exchange Co-lo Holy Hoax fiasco, even the guru can’t get the accused out of jail. Both Chitra Ramkrishna and Anand Subramanian’s attempts to secure bail have both failed as we record this podcast

Over at the LME, they are doubling, pretty much, the size of the default fund to $2 billion during the course of the month of April. I think that’s what we can call a start to resolve the Nickel crisis. Meanwhile, other news of a start is news that one TP ICAP shareholder is seeking urgent change, that’s long overdue, but welcome all the same. Justin Hughes has – understandably been driven to write to those stewarding the aspirant penny stock TP ICAP in a direction far from prosperity.

Sadly, the management of TP ICAP themselves are broadly discredited, the board of directors would be challenged by supine sheep. This fiasco needs to end. Bravo Justin Hughes for calling the shots on what has become a sorry fiasco.

Meanwhile, Hong Kong Exchanges they announced very exciting plans Chief Executive Nicolas Aguzin steered through the 2022 corporate day with news of digital trading platforms ETF Connect Schemes and overseas offices as part of the Hong Kong exchanges growth plan under his stewardship.

Elsewhere, the Moscow Exchange they resumed share and bond trading, in what might be called ‘normal mode’ during abnormal times last Monday. Nevertheless, non-residents are having to wait, therefore, through the time when we’re recording this podcast. They’re barred from selling stocks and OFZ rouble bonds until the first of April. Perhaps a fitting tribute to All Fool’s Day.

In Shanghai, the latest COVID lockdowns have led to exchange staff camping in the office to keep the Shanghai Stock Exchange buzzing during the lockdown. Exchange Invest takes our hats off collectively to the devotion of the Shanghai Exchange staff.

Happy birthday to Intercontinental Exchange more specifically to their IFAD, the Intercontinental Exchange Futures Abu Dhabi, they’ve marked their first anniversary of trading as an exchange and of course with their new benchmark ICE Murban Crude Futures. All the best to CEO Jamal Oulhadj, who made a surprise appearance as a very welcome special guest on the IPO-Vid Livestream. You can catch that on YouTube search for IPO-Vid, just a couple of weeks ago when along with Trabue Bland we were talking about the ICE features business. Moreover, it’s a great tribute there are now 365 days into trading with a market which itself only took something like 504 days to build.

Other good news for the New York Stock Exchange of course itself an element of the Intercontinental Exchange framework this week. They amongst other exchanges defeated a high-frequency trading lawsuit. It’s been going on for many years in a 46-page decision, US District Judge Jesse Furman in the Manhattan courts said investors in the proposed class action could not prove that they had suffered harm because of the exchanges’ actions. The judge clearly didn’t read the expert witness report among other aspects of the documentation provided to him.

SIX (the Swiss Exchange) they’re realigning its operational structure to support growth in its international capital markets infrastructure business. As PLY put it in the Exchange Invest newsletter this week, If I’ve read this correctly from the original Switzer-Deutsch between the lines I think this reads “were carving out a more flexible way for our exchange business to really frustrate Stephane Boujna…” but then again, my Swiss-German is very rusty, so I may have missed some nuance.

In results this week: spectacular year numbers for Aquis Exchange fresh from their double listing on their own platform alongside the London Stock Exchange, the audited results for the year ended 31st of December 2021 see revenue up 42% but it’s the bottom line we have to look out with great excitement. Profits pre-tax up 540% to 3.2 million pounds and basic earnings per share up 300%. Excellent Aquis results all round plaudits to Alasdair Haynes and his team.

New markets this week: one key new market IncubEx and Trayport announced the successful launch of their voluntary climate marketplace.

Deals news this week: a trio of acquisitions and investments and indeed sellings of assets owned by Deutsche Börse. First of all the selling of assets. Well, they’ve loaded up with a little more debt, they successfully placed 600 million Euro corporate bonds up the attractive coupon, they were eager to note of 1.5%. I think an attractive coupon here means it wasn’t quite as good as we might have got a couple of months ago, but still pretty spectacular in what is an inflationary and rate-increasing environment. They also announced via EEX, an investment in and partnership with or deed extension of the partnership with the AirCarbon Exchange out of Singapore. AirCarbon Exchange also announced this week that their Abu Dhabi platform is a gogo. Thanks to Abu Dhabi global markets permission from the regulators there.

Given the proximity of previous cooperation between DB1/EEX and AirCarbon Exchange, it strikes me as a logical development of the relationship on all sides.

If you want to learn more about AirCarbon Exchange, check out our IPO-Vid on the topic, we were talking to Bill Pazos just a few weeks ago, again on YouTube, go to YouTube and search for IPO-Vid.com and you can find all of our 60 videos there.

Meanwhile, Deutsche Börse also acquired the fund Data Manager Kneip from Luxembourg and that’s going to be incorporated into their cornucopia of shareholder and issuer services businesses within Clearstream.

London Stock Exchange they made an announcement this week, they were selling $596 million worth of shares on behalf of a series of bailing…I mean some parties selling as a result of the Refinitiv deal. Perhaps not the ultimate gesture of confidence in the ability of LSEG to integrate what is proving a challenging deal.

Speaking of challenging deals, how are you facing up to the world in lockdown or possibly post-lockdown depending on whether you’re in China or the rest of the world? If you’re trying to get to grips with the world of FinTech and the future of finance, then “Victory or Death” – Blockchain, Cryptocurrency and the FinTech world, my most recent book ought to be for you.

After all, COVID-19 has proven a killer but can the aftermath kill your career in this intriguing world of supply-side shortages? To help you understand how technology is affecting life and markets? This is the book to help you, “Victory or Death” is published by DV Books and is distributed by Ingram worldwide in good bookstores now. While you’re waiting for your copy of “Victory or Death” to arrive, check out our Livestream as I mentioned earlier, it’s on a Tuesday 6 pm London that’s 1 pm New York time, the IPO-Video live show. You can catch the back episodes on Facebook, LinkedIn and YouTube search for IPO-Vid. In our most recent show this week, we enjoyed a great conversation with the loquacious Catherine McBride “After Brexit Where Next For World Trade?” Coming next week “Sinara Bringing Trading Solutions to Life” with a special guest Hamish Adourian.

In crypto land this week: Oh! via PR Newswire we have this sensational headline-grabbing story, crypto exchange revenue grew 600% in 2021, surpassing traditional exchanges like NYSE. Well, it might be surpassed the growth number but then again, if you look at the per trade cost of using a crypto exchange it’s staggeringly expensive compared to what this press release hubristically referred to as “The old, venerable names like the New York Stock Exchange, Nasdaq, Deutsche Borse and CME have all been left behind in the dust by crypto.” I hesitate to agree with that viewpoint ladies and gentlemen, I think we can actually leave a marker here, it strikes me that we’re close to peak hubris as the V1 crypto bubble potentially peaks. Elsewhere, I would note that crypto companies have agreed to more than a billion dollars of sports sponsorship already this year. Those numbers point not to the paradigm shifting now but perhaps the VC money being dumb enough to be crowding in and thinking it’s a one-leg upswing in a degree of desperation on FOMO. Value is being built but this is too far too fast to really be in the mainstream just yet, methinks.

Elsewhere, crypto news: Crypto Exchange Kraken’s new CFO has been noted the previously paid $65,000 in penalties for charges related to misleading investors and breaching fiduciary duty. She’d admitted no guilt.

It all reminds me rather of meeting an Australian mining entrepreneur many moons ago who’d recently been in jail for some aggravated taxation dispute. My counsel at the time assured me not to be concerned as in his words “this was a mere rite of passage crime in Western Australian mining circles.” I wonder does the same thing goes for crypto.

In El Salvador degree of confusion. Did they turn to Binance for help on Bitcoin adoption? Did they turn to Binance for helping with Bitcoin adoption or didn’t they? President Bukele had hit out a Bitcoin Bond FUD (Fear, Uncertainty and Doubt) as CZ (the eponymous head of Binance) jetted into El Salvador.

Interestingly, what did Binance’s CEO get from that? Well, it seems possibly COVID. He tested COVID Positive after the El Salvador visit. And at the same time, Binance Academy has launched on ‘Learn and Earn Program.’ Some WAGs are alleging if you can learn the precise nature of Binance’s, office addresses and HQ location you can earn outside the programme, as I suspect a lot of media may pay you handsomely.

On a more worrying note, still relating to Binance this week, the Ukrainian crypto exchange founder of KUNA Michael Chobanian says Binance has been working with the Russian government for some time despite global sanctions.

Product news this week: ICE introduced their futures on nature-based solution Carbon Credit Futures. They were announced last November and are now aiming for a March 9th launch for the contract.

Elsewhere, Xpansiv you can remember we had a great conversation with Henrik Hasselknippe on the IPO-Vido show just a few weeks ago, YouTube.com IPO-Vid to search for. Xpansiv they’ve launched digital crude oil with Lundin Energy and Intertek as inaugural participants. ICE had a successful second expiry in their Midland WTI American Gulf Coast futures contract with sub 2.5 million barrels going to deliver in April. That’s very healthy growth indeed, as they try to wrest away the advantage from the post-Cushing crisis pure-play West Texas Intermediate contract at NYMEX CME.

NASDAQ has launched the world’s first carbon removal indexes via their Puro Earth subsidiary. Once again Puro Earth, their fabulous Chairman Fredrik Ekström was a guest on IPO-Vid just a few weeks ago if you want to go and catch that Livestream.

ICE have expanded their renewable futures markets with the launch of renewable volume obligation futures and LCH CDSClear launched client clearing of credit index options.

Exciting news in India, the recognized exchanges have got the SEBI nod to float options on commodity indices. That looks like a material improvement for shareholders of, for example, the MCX (Multi Commodity Exchange of India). CME Group, they’ve gone more than the retail angle once again, they’ve launched micro-sized Bitcoin and Ether options. While over in Russia, the Bank of Russia is backstopping companies if they are delisted abroad, the Russian stock exchanges will maintain the listing of securities of multinational companies headquartered in Russia.

Elsewhere in Russia news this week: Russia is open to selling natural gas for Bitcoin, we learned via NASDAQ. You know, I was in a cafe the other day in Little Havana in Miami, and it had a sign which read “everything is on sale except the barista”. Frankly, I’m not sure ladies and gentlemen that Russia is even that restrictive right now.

Technology news this week: Saudi Tadawul Group announced their intention to launch a bundle of enhancements to develop the post-trade infrastructure. Well, the big tech news of the week was the CHESS Replacement Project under the Pravda-esque headline changes to project schedule which as we all know changes to project schedule means delay. The CHESS replacement is being delayed a fourth time. My fourth time lucky isn’t a thing unless you believe in say WD Gann’s theory of technical analysis but I doubt that was on the mind of the ASX when they announced their latest delay to the CHESS replacement saga.

There was an Independent Expert report released just the other day from EY. Now there’s going to be another delay even though the market view is increasingly that this project (with one ASX CEO leaving the entity he had styled – with it has to be said, a legacy of failures in the field hidden referred to it as a “technology company”). This self-styled technology company is already looking like the IT equivalent of that classic New Yorker meeting schedule “How about never, is never good for you?” cartoon.

Within the report of the update, aka the pending delay report Gems included “As announced last week, we have released the first independent report on the project’s assurance program, with EY finding that the program is fit for purpose and no significant gaps have been identified.”

That’s presumably excluding within “no significant gaps” the project being delayed four times the recent crisis meeting in New York City with Digital Asset and the project being originally scheduled to go live in April 2021. Let’s not even mention the $30-$50 million original estimate, of course, the switch now appears to ballooned to 250 million (Let’s not even go on to mention the investment in Digital Asset Holdings which has already been broadly diluted because it’s the Australian Stock Exchange didn’t participate in subsequent funding rounds).

When Dominic Stevens announced his retirement as ASX CEO on February 10th, it was because he said he couldn’t commit to another six years in the hot seat. The big question is will Digital Asset be powering CHESs before that six-year window ends?

Regulation news this week: Abu Dhabi Global Market FSRA published a consultation paper to advance the capital markets framework and ecosystem. Meanwhile, ESMA extended the UK CCP’s recognition decisions, presumably through gritted teeth, and the CFTC has extended the deadline for public comments on the FTX US request for amended derivatives licence. The comment period has been extended to May 11th. Many FCMs may be harrumphing about being disintermediated (we’d have to say #Whatevs) however the issue of FTM deciding their small lot non CCP clearing with trailing stops concept can work when you have medium level – let alone supersized participants is frankly an unproven assertion, on what might be regarded as being the Titanic hubris unsinkable ship index.

Career paths this week: congratulations to four new CFTC commissioners on very pleasantly by partisan confirmation sessions Christy Goldsmith Romero, Kristin Johnson, Summer Kristine Mersinger and Caroline Pham mark an exciting diversion and a wonderful moment for diversity for ladies simultaneously confirmed as the new CFTC commissioners to add to the bench.

Over at Borsa Italiana, Chairman Andrea Sironi has resigned as he wants to become the Chairman of Generali, the Italian insurance multinational and is staking his claim to that via Mediobanca who is battling for supremacy of the Italian insurance company against an insurgent backlash from a series of investors. Much more significantly for the parish, an elegant Salvatore Ferragamo stiletto has pierced the glass ceiling in Piazza Degli Affari as Euronext chooses Mrs. Claudia Parzani, as the new chairman, the first female chairman of the Borsa Italiana, elevating the deputy chairman to the main position.

Speaking of Deputy Chairman, the Deputy Chairman of MOEX representing VTB Vadim Kulik has resigned from the Supervisory Board of Moscow Exchange on March 12th. With the website down, we have not been able to entirely clarify the state of the board “Following the resignation of Mr. Kulik, the MOEX notes the Supervisory Board of Moscow Exchange has seven directors, four of whom are independent” Being able to once again access the MOEX site after it was down for a prolonged period of time. We note that independent directors, all of them from the western parts of Europe Ramon Adarraga, Paul Bodart, Maria Gordon, and indeed Alexander Izosimov all resign resigned on March 2nd following the Russian invasion of Ukraine on February 24th.

NASDAQ appointed Olivers Albers as EVP Head of Investment Intelligence. All the best to Lauren Dillard who’s occupied that role for many years, she’s taking on a Senior Executive role at a private equity firm. Finally this week in career paths Sharon Shi Ning she has been appointed as Group CEO-Elect of G.H. Financials, the boss of the Hong Kong arm of the G.H. Empire is going to be relocating to London and replacing Mark Phelps who stepped down after a decade in the role last December. Well, actually one final, final postscript Pete Osborne has departed TMX in London for the exciting new pastures of Appold DeFi, a corporate investor in the burgeoning DeFi space which has just completed pre-IPO funding round, all the very best to Pete on his exciting new endeavor.

In ‘Big World’ this week: well as I was discussing on Tuesday in Exchange Invest “Welcome to Generation HighVol”. Lest you haven’t noticed – and I doubt dear parishioners it has escaped your notice – the generation of QE addled funny money low interest rates is all but over.

Jeff Kutler wrote a great article about various macro aspects in his latest missive for GARP: The Risk Landscape Is Crowded and Complicated. What Happens Next?

One of the key concerns is of course, that once all those tediously self-defining ‘grown ups’ of the Davos classes agree on something, it’s quite clear we ought to be looking in another direction – as the WEFsters are experts in observing some trends while missing the Everest’s under the carpet. To which end, we’re now – after a prolonged period of linearism in many respects, entering a very destabilising period.

Therefore we have a very exciting opening which will at the same time strike fear into the hearts of many in the parish, for our divide amongst our brethren and sistren is into what remains a rather modest cadre of lateralists and a vast swathe of linearists. Clearly, Rumsfeld’s ‘known unknowns’ malarkey is impactful here but suddenly after this QE ‘lowvol’ generation (which has been essentially ongoing since 2000AD) we’re moving into as I said, generation ‘highvol’. And of course generation ‘highvol’ could mean golden age for the bourse business. So if you haven’t noticed in the past two years, welcome to generation ‘highvol’. Post-COVID isn’t going away anytime soon.

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

LINKS:

China Plans New Approach To End Deadlock With The US Over Auditing
South China Morning Post

NSE Co-Location Scam: Court Dismisses Bail Plea By Former GOO Anand Subramanian
The New Indian Express

NSE Irregularities Case: Ex-CEO Chitra Ramkrishna’s Custody Extended
The Financial Express

LME To Almost Double Size Of Default Fund As Metals Prices Swing
Financial Times

LME’s Clearing House To Double Default Fund To $2 Bln In April
Financial Post

US Activist Pushes TP ICAP To Sell After “Disastrous” Slide In Share Price
City AM

Broker TP ICAP Shares Jump 11% After US Hedge Fund Urges Sale
Reuters

HKEX Boss Nicolas Aguzin Eyes Digital Trading Platform, ETF Connect Schemes And Overseas Offices As Part Of Growth Plan
South China Morning Post

HKEX Hosts 2022 Corporate Day
HKEX

HKEX Signs MOU With CEEX To Explore Greater Bay Area, International Carbon Opportunities
HKEX

HKEX To Launch New Investor Relations Portal, IR Connect
HKEX