139 Exchange Invest Weekly Podcast April 9th, 2022

Transcript:

This week in the parish of bourses and market structure:

ICE moving some CCP out of London. The European Union kills crypto privacy at the same time as messing around with clearing house access, restructured Tokyo trading begins, Johannesburg Stock Exchange enjoy a spectacular private launch and FTX invests in the ‘Flash Boys’ exchange IEX.

My name is Patrick L. Young.

Welcome to the bourse business weekly digest.

It’s the Exchange Invest Weekly Podcast Episode 139.

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 over the course of the 7 days cycle 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.

A Reuters exclusive this week by the fabulous Huw Jones, ICE are considering relocating their London CDS clearing to Chicago. “The European Union’s constant bickering with London post Brexit has fundamentally destabilised the business case for derivatives in Europe, making the US appear the more flexible, pro-business choice” said one Patrick L. Young in that particular Reuters article.

Attabo… I say…

The sense of Mutually Assured Destruction in the European Union’s approach to nose cut-off repo to spite faces all round is looking very real as apparently the folks at ICE ponder sending some of their CCP business to the USA.

Meanwhile, in a week of curious messaging from the European Union once again on the clearing house issue where they are a morass of contradictions to put it politely. The DGCX ‘s Clearinghouse the Dubai Commodities Clearing Corporation (DCCC) has received renewed recognition as a third country CCP by ESMA.

Ladies and gentlemen, DGCX’s clearing house (DCCC) absolutely deserves this recognition. But remember this for a few years hence when the EUropsychosis dictates that the London clearing houses will no longer be equivalent (presuming the European Union doesn’t of course indulge in its frequent habit of conveniently ignoring its own outpourings)… DGCX (a perfectly sound business and possesses a perfectly good clearing house) it is recognised but according to the current craze dogma all the European Union, or the London CCPs at LCH and ICE have to struggle to be recognised or will be struck off if the doctrinally blinded of Brussels are to be believed – that’s because the European Union doesn’t understand (or doesn’t want to understand) economics, free markets free currency and indeed appreciate that Brexit was as much of their making as it ever was a British democratic movement. ‘Plus ca change’ as they say in Dagenham essex, I suppose.

Then we got the final sting in the tail notice for the week the European Union widened access for US exchanges and clearing houses to investors in the block, as Reuters noticed, adding in the Reuters article, a move which contrasts with Brussels’ intention to shut off clearing houses in London in 2025.

In the Valley of the deranged, volume umpteen… Mad Mairead (that’s Mairead McGuinness, the European Union Commissioner for these things) noted: “These decisions are in the interest of the European Union – we want our capital markets to be better integrated with other international markets”

Well, yes, but if you’re going to cut off London, the most cosmopolitan financial centre in the world, the largest multi currency clearing centre in the world, this amounts to little more than an EU suicide note by opening the floodgates to alternative CCPs so long as they are not in the Brexit UK, that is unacceptable and the simply perverse point of view.

Worrying the potential perverse points of view could be raised this week over the holy hoax NSE co lo fiasco, the new Sebi chairman, which as you remember is a practitioner from the banking community, the first Last time this has happened in Sebi history is likely to be questioned on the NSE scam by a parliamentary panel at the same point in time. While this chairman is looking to be called to Parliament to discuss the holy hoax co lo for farago NSE, the Indian regulator themselves launched a panel to strengthen the governance of stock exchanges. Notwithstanding the arrival of the first ever financial practitioner at the helm of Sebi, the truth is this is an engrained anti-free market organisation riddled with the worst suspicions of Socialism as to how growth works through commercial interaction. It’s a very worrying moment as the NSE holy hoax co lo shenanigans gives Sebi a chance to roll back on any vestige of recent liberalisation.

True, the composition of the committee could be far worse, but it’s still a huge concern. Let’s hope that Sebi can come up with some sensible benchmarks for the organisation of for profit exchanges in the future.

Great news from South Africa this week, the Johannesburg Stock Exchange‘s private placing platform attracted more than $342 million in investments in it’s opening weeks. Absolutely fantastic news all together.

Over at the Japan Exchange Group, they’ve opened in Osaka Head Office but that’s actually a miniscule amount of what they’ve been doing. The major league restructuring was on during the course of this week and finally we have an all new singing and dancing look to the Tokyo Stock Exchange. At the same time, we also had some great news on product with JKM (Japan Korea Marker) futures on the energy business being launched via the Platts benchmark on TOCOM which is also now, a subsidiary of the Unified Japanese Exchange. How will the Tokyo Stock Exchanges biggest revamping over 60 years workout? Well, time will tell some call it long awaited that’s certainly true. Many have called it largely symbolic. Let’s see how this pans out and indeed will the TOPIX index used by the Japan Stock Exchange find a broader audience with its multi year reconstruction having long been dwarfed by the Nikkei 225 in the public imagination?

This week in results in the parish: the Nairobi Securities Exchange they’re distributing a record dividend but at the same time profits were down 21% to $1.15 million during the course of 2021. Nonetheless, they had a very highly encouraging daily equity turnover rise up 74% during the course of the year.

One new market this week: Slovenia and Serbia will establish the first regional power exchange ADEX.

In deals: it was a busy week for deals in the parish. All the deals were 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 let’s look at some edited highlights:

Binance US say they’re on track for an IPO. It’ll be exciting to see how that can possibly work out in the future perhaps they’ll actually managed to find themselves a physical headquarters in the meantime. Equally, possibly the much more exciting news as it was a deal right in front of us, FTX they’re expanding yet further into the US marketplace. FTX US and IEX are joining forces to help shape market structure for Digital Assets.

What an exciting investment FTX are buying into the ‘Flash Boys’ exchange in a crypto trading push. IEX will build upon the company’s existing market structure and regulatory principles to safeguard the best interests of investors and the public at large as the Digital Asset securities market emerges and grows to reach its full potential for US participants. It’s very interesting move IEX clearly need to keep their high standards while FTX invests. It’s not that we see anything improper per se with the SBF vehicle of FTX but there is a clear derivative envelope push going on in the three dimensional world of Exchange Traded Derivatives and that push and clearing is certainly a cause for some concern.

Meanwhile, the SIX Exchange in Switzerland they’ve completed the acquisition of the remaining 50% stake in REGIS-TR that they did not own, they bought that from Deutsche Börse Group to become the sole owner and the Nairobi Stock Exchange as well as announcing their results this week, they mentioned the fact that they’re eyeing stakes in other East African stock exchanges, having recently bought a 4.9% stake in Tanzania’s Dar es Salaam Stock Exchange (DSE) and indeed, they’re already looking at a stake in the Uganda Stock Exchange.

Don’t forget ladies and gentlemen, there’s still time to pick up a copy of my latest book “Victory or Death” – Blockchain, Cryptocurrency and the FinTech world. If you’re looking for some reading, whether or not you’re lockdown, or now possibly you’ve got the opportunity to get on an airoplane and go fly somewhere what could be better than reading all about the future of blockchain, cryptocurrency and the FinTech world in an easy read. “Victory or Death” is published by DV Books and is distributed by Ingram world wide. Don’t forget while you’re waiting for your copy of “Victory or Death” to arrive, check out our livestream, Tuesday 6pm London, 1pm New York time – it’s the IPO video live show IPO-Vid, you can find it on YouTube. We are going live at 6pm London time (thats 1pm in New York Eastern Time) on Tuesday, and we’ve got a fantastic guest PLY that’s Patrick L. Young myself, who’s on the microphone at the moment is going to be meeting Patrick Young. And no, it’s not another AMA. It’s a completely different realm of interview all about financial literacy and much much more. Stay tuned coming next Tuesday at 6pm London time that will be our latest show is already streaming online. “Sinara Bringing Trading Solutions to Life” – a very lively discussion we had last Tuesday with Hamish Adourian find it on YouTube.com IPO-Vid.

In crypto land, well, it’s a bit of a bubble alert I fear, Binance signed a partnership agreement with the Recording Academy of America to become the first ever official cryptocurrency exchange partner for this 64th Annual Grammy Awards and Grammy Week events which are taking place as this podcast is being recorded.

Elsewhere, European Union lawmakers have backed a new series of tracing rules for crypto transfers. In essence, what it means is that where originally the thought had been that transfers by crypto of more than 1000 euros would have to be recorded. In fact, lawmakers within the European Parliament last week voted to scrap the ‘de minimis’ threshold meaning all transfers would be in scope. Well, #Zeroshock as we said in Exchange Invest last week, that privacy notion within the EU amounts to annoying cookies on websites and little else. For all other transactions its transparency to tax everything in the Sisyphean socialist superstate. True, these cross party ‘compromises’ need to go to triologue but the EU doesn’t miss open goal chances to over regulate anything. Ultimately, as Brian Armstrong of Coinbase put it, the US new law on hosted cryptocurrency wallets is anti-innovation, anti-privacy and anti-law enforcement. Or, as one might say, isn’t that merely #NormalOperatingProcedure for the European Union itself?

Very good article this week in The Washington Post well worth a read: Why Users Are Pushing Back Against The World’s Largest Crypto Exchange as the Washington Post article notes. Despite its distributed – still mostly unaccountable – corporate structure Binance probably faces significant legal head winds. Its decline as the world’s preeminent crypto exchange could be as steep as its rise. Watch this space ladies and gentlemen, there’s certainly something very interesting going on around the Binance environment.

Product news this week: trading in over 30 Hong Kong listed firms were halted on delays in results this week, mostly developer stocks. Over at the LME, the Hong Kong exchanges subsidiary, the LME board are going to evaluate lessons from the Nickel halt. They made a joint statement with the FCA and various regulatory authorities this week. And indeed in the wake of the Nickel fiasco as the ‘South China Morning’ Post credit the world’s metals trading hub is grappling for its mojo after an unprecedented trading snafu.

The naughty step was inevitable. And already we’ve seen more non executive directors one short term move to be added to the board of the LME with a lot more likely to come as a full on inquiry goes into the depth of what’s been going on with the LMe’s recent meltdown.

Regulation news this week: the CFTC have issued an Order of Registration to FEX Global Pty to permit direct trading access from the USA. That’s terrific news for FEX Global (the Sydney-based futures market) run by Brian Price. Well done to the good guys down under making competition in the futures market.

Equally the CFTC is looking at expanding its authority to regulate crypto for less than a 10% budget increase, perhaps that incredibly reasonable cost effective proposition was what drove Gary Gensler to say that the SEC and the CFTC should be exploring a shared roll over crypto regulation.

In career path this week: the former Hong Kong Exchanges Head Charles Li his latest venture has raised some $70 million from a series of Hong Kong tycoons, His venture is going to invest in Chinese small firms. The project was first funded by Li and Zhang, the CEO of Hong Kong-listed Oriental Patron Financial Group.

Meanwhile, all the very best to Chris Fix, the CME Group’s Managing Director and Head of Asia Pacific has announced his retirement after serving the financial derivatives exchange for close to 7 years.

In ‘Big World’ this week: well more worrying news from the EU, alas, where the fiscal parameters known as the Maastricht criteria, which set member states’ maximum deficit and debt levels at 3% and 60% GDP, respectively. Well, it looks like they’re going to be dumped. Historically, Germany expected everyone else to behave on these numbers while it twisted the rules to its own advantage and thus France just shrugged it off as an Anglo Saxon joke and the Italians… well, you get the picture. Let’s not run through all 27 nations.

Anyway, Spanish Socialist MEP Eider Gardea Gardiazabal Rubial (a report rapporteur for the draft report on the implementation of the Recovery and Resilience Facility) has led the mask of any form of fiscal responsibility in the Eurozone slip. Returned to what she blindly referred to as the ‘’golden fingers’’ of 3% and 60% being “completely out of reality” with a world where the European Union hasn’t stopped Russian aggression leading to a Ukrainian war. And of course, we all know the European Union’s Eurozone is rather something like a festering fiscal emulation of Krakatoa, awaiting its 1883 eruption. We now need debt flexibility. Debt flexibility is apparently key to the European Union they’re saying. Well, #Goodluckwiththat.

And on that mysterious and magnificent note, ladies and gentlemen, my name is Patrick L. Young, the founder of Exchange Invest – the daily bulletin of the bourse business, building exchanges the world over with our day job.

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

LINKS:

EXCLUSIVE ICE Considers Relocating London CDS Clearing To Chicago, Sources Say
Reuters

EXCLUSIVE-ICE Considers Relocating London CDS Clearing To Chicago, Sources Say
Nasdaq

DGCX’s Clearing House – Dubai Commodities Clearing Corporation (DCCC) – Receives Renewed Recognition As A Third Country CCP By ESMA
ESMA

EU Widens Market Access For US Derivatives Clearers And Exchanges
Reuters

SEBI Chairperson Likely To Be Questioned On NSE Scam By Parliamentary Panel
The Financial Express

House Finance Panel May Question Sebi Chief In NSE Scam
The Economic Times

SEBI Forms Panel To Strengthen Governance Of Stock Exchanges, Other Market Institutions
NDTV

JSE Private Placing Platform Attracts More Than R5bn ($342m) In Investments
News24

Establishment Of Japan Exchange Group, Inc. Osaka Head Office
JPX

Time For The TSE’s Restructuring, But Frustrations Linger
The Japan Times