142 Exchange Invest Weekly Podcast May 7th, 2022

Transcript:

This week in the parish of bourses and market structure:

A shock management reshuffle at LME, the Tel Aviv Stock Exchange Chairman resigns and sadly another parish veteran Chris Prior-Willeard has passed away.

My name is Patrick L. Young.

Welcome to the bourse business weekly digest.

It’s the Exchange Invest Weekly Podcast Episode 142.

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.

We begin today with some sad parish notes and appreciation of Christopher Prior-Willeard.

A one-time junior naval officer Chris Prior-Willeard died after suffering from ALS in recent months following a significant period of ill health. That said, Chris remained indefatigable, still working passionately on plans such as for a new issuer-based CSD amongst other projects and eagerly enthusing about the exciting world of opportunities in the parish of exchanges and related market structure. We exchanged emails most days – Chris was a devoted EI reader. He was top of my list of people to invite to the IPO-Vid Livestream but there followed an anguished email where he apologized that, due to a stroke, he hadn’t been able to speak for some months.

The stroke seemed to barely slow Chris, although it robbed us of the chance to do investor briefings together. All the same, he still appeared on Zoom calls excitedly typing in answers on occasion while listening thoughtfully throughout. Likewise, he was an active audience participant via a keyboard on the IPO-Vid Livestream, even if he could not be the principal guest.

Chris was delighted some years ago when I called him a “market maven” in the first Exchange Invest 1000 list of the most influential people in the parish. He styled himself thus for the rest of his career. That was only appropriate as – like Brian Taylor, who prematurely left us just weeks ago, Chris represented the passionate pro-market enthusiast who got things done.

It would be impossible to discuss every project which CPW had been involved with, but they ranged from introducing ECU/USD futures with the New York Commodity Exchange soon after an abortive attempt to create the London Meat Futures Exchange which ran via the Baltic where Chris had become overall director of Baltic Exchange futures markets. Chris was an earlier participant in stock dematerialization and in central counterparty clearing. He was involved with CapClear which had a fascinating model for a guarantee-based clearing house, sadly curtailed by the financing drought post dotcom bubble. Chris was a leading participant in the internationalisation (through ADRs et al) of the London Stock Exchange, launching SEAQ International. After Big Bang, he was transferred to the market department where he acted as UK Equities Market Manager and Secretary of The Markets Committee of the Stock Exchange Council.

We shared a passion for new markets and particularly microexchanges, regional stock markets et al. Chris had been involved with several attempts to revive UK regionals right up to his untimely demise and was part of Birmingham InvestBX Exchange, which launched in the early years of this century.

Ultimately, Chris had a passion for markets which was undimmed by his conditions, and he maintained a very passionate belief in the power of exchanges to improve the world. Chris has focused on regional smaller exchanges – and frustration at the lack of funding for such endeavours – was an ongoing bugbear for both of us. In commodities, Chris saw huge opportunities everywhere – even in the redevelopment/repurposing of the London Metals Exchange floor outside ring dealing hours, while he was actively improving the clunky models of settlement from so many angles, including spells with Computershare, running a BNY project to create a new CSD and many others.

Chris summed himself up better than I can in one exquisitely mot juste sentence: “Insatiable curiosity around market development and the application of new technology to improve the use of formal markets by all stakeholders”.

I was already missing our regular chats as his health declined, Chris will be missed throughout the parish.

Over in the world of CSDs this week Russian sanctions are giving Euroclaer a capital headache. At the same time in India, they’ve issued another of their 2 Crore recovery notices. Last week the $261,000 question was received by Ravi Narain and then Anand Subramanian was the latest recipient.

I suppose that means we either missed the Chitra missive or it’s coming soon.

Still in India, an interesting comment from the boss of the Bombay Stock Exchange this week, he reckons that Prime Minister Modi of India should get the Nobel Peace Prize for his work on COVID.

The good news in Turkey, Borsa Istanbul, they are going to be reopening the equity market trading floor on June 1st as the threat of the COVID pandemic passes.

Worrying news in Addis Ababa, the security forces in Oromia State (this is an Ethiopia that has been somewhat troubled by civil strife in recent times). In Oromia State they’ve closed 6 branches of the ECX (Ethiopian Commodity Exchange) and detained staff with no explanation. We wish all the staff all the best and hope that they will be released soon.

Meanwhile, Matt Chamberlain has been making some statements about the world of LME post nickel. The bourse could revamp margining after the nickel kerfuffle he has noted. They may end the LME’s unusual policy of allowing clearing members to net initial and variation margin calls – a method aimed at reducing the funding burden of metals hedges on producers. LME is grappling with heavy criticism as the article in Risk Magazine noted of its handling of extraordinary price moves in nickel contracts in the wake of Russia’s war in Ukraine.

Results, it was a busy week for results 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, I’m going to pick a couple of key edited highlights.

The Ukrainian war has dented the London Stock Exchange’s revenue. The shares subsequently fell on this announcement. Well, it’s a case of the “cat got my finger” and “the dog ate my homework” have now expired as excuses for the non-integration of the Refinitiv purchase. Thus, we now see “blame Ukraine” as the latest somewhat sorry justification for what amounts to at best stasis while Reuters ‘Stockholm Syndrome’ takeover of the LSE continues apace.

Elsewhere in the parish, to the spectacular numbers of the week in a week when we also saw Hong Kong Exchanges, CBOE, Tradeweb and others reporting including the CME. Well, the ducks of the field were the Indian Energy Exchange once again, their growth has slowed a little ladies and gentlemen, but nonetheless, they were quite spectacular revenue in Q4 up 28% profit, after tax of 45%, such as being the spectacular growth of IEX in recent times to 45% profit growth appears almost pedestrian by comparison to some of their recent results.

Deals this week, a fairly quiet week for deals in the parish, two highlights: CBOE completed their acquisition of ErisX which means they’re entering the digital asset market space, while FTX has closed their acquisition of liquid exchange albeit a few days later than they originally scheduled.

Don’t forget ladies and gentlemen, there’s still time to pick up a copy of “Victory or Death?” – Blockchain, Cryptocurrency and the FinTech World, my book 20 years on from the excitement of the original FinTech bestseller “Capital Market Revolution!” discussing how blockchain, cryptocurrency and the FinTech world is impacting on you, your career and your business. “Victory or Death?” is published by DV Books and is distributed by Ingram worldwide.

Don’t forget while you’re waiting for your copy of “Victory or Death?” to arrive, you can check out our Livestream, that’s Tuesday 6pm London, 1pm New York time – the IPO video live show. Catch the back episodes on LinkedIn and YouTube via IPO-Vid. Our most recent show “From SMEs to Cannabis Power Player” profiled the Chief Executive Officer of the Canadian Securities Exchange Richard Carleton in what was a cornucopia of discussion topics, and we’re looking forward to another cornucopia of discussion topics with one of the parishes finest exchange architects Thomas McMahon. He’ll be discussing the topic of “Energising New Markets” coming this Tuesday at 6pm London time or 1pm New York Time.

In crypto land this week: well exciting news from Binance according to “CZ” their CEO and founder they ‘already have’ a holding company, the location will be announced soon. The problem is of course, ladies and gentlemen, having heard this story so many times before. How do we know it’s not just another case of Binance flirting with the notion of physical presence under-regulated headquarters.

Elsewhere Coinbase they’ve unveiled strong measures to curb potential leaks and front running related to new crypto listings as the lure of regulation comes ever closer and tightens in around the cryptocurrency and digital asset base.

In product news this week: the CME Group they’re going to launch Canadian wheat (Platts) futures on June the 13th. That came in the same week that the Moscow Exchange announced that they are updating the deliverable wheat futures parameters. Actually what they mean is they’re significantly shrinking the wheat futures contract.

Elsewhere, China they’re concerned about the weakness in the stock market and they halve stock transfer fees to endeavor to invigorate the capital market. stock transfer fees will be cut generally to 0.001% of stock trading turnover. The China Securities Depository and Clearing Company said

In technology news this week: great news for DataBP, nother major exchange joins the portfolio of DataBP clients and partners Deutsche Börse in this case, DB1 joining up with DataBP to digitalise market data licencing.

Meanwhile, Trayport & Tradition announced the successful launch of Refined Oil Trading Technology.

Regulation news this week: well, an interesting article in the Wall Street Journal was worth reading: “Gary Gensler’s Regulatory Raceway.” It noted even many Democrats are objecting to the SEC’s rapid rulemaking during the Gensler era.

And I quote: “We write to express concern over some of the Securities and Exchange Commission’s comment periods for complex rulemakings that may hamper the ability of the public to provide effective and meaningful input,” some 47 House Members including 28 Democrats wrote to Mr. Gensler recently. They were citing in particular two new proposed rules that would expand SEC control over private markets.

Gary Gensler is proving himself an excellent example of the Goldman Sachs removed from reality set alas, where privileged folks reckon they know more about running a business than say the people who actually run the business. I was hoping that the Gensler era would clear up the wild west of crypto instead a year on Chairman Gensler appears mired in just far too many activities with fingers and toes in every pie which is resulting in a complete execution failure across the board. In that sense, Chairman Gensler shone at the CFTC during the Obama administration, as GG’s CFTC got a lot of stuff done (whether you liked the minutiae or not). Of course, here we have even Gary Gensler falling foul of the Brezhnev doctrine, “dream big, waffle large, threatened hugely and achieved nothing” – arguably it’s worse as Brezhnev-omics are about to tip the US into a major recession (liberally – in every sense – aided by the Fed.

The big news in career path this week: the LME massive management reshuffled in entirely unexpected too. The outgoing Chief Executive Officer Matthew Chamberlain is remaining in a role, exiting previously was his plan, but instead, he’s going to be staying permanent, well, presumably near perpetuity. Adrian Farnham, who was about to step up as the Acting Chief Executive of the LME, he’s going to retire as LME Clear CEO in July 2022, with a successor to be announced in due course, while Catherine Lester the group CFO is going to be succeeded by the current Acting LME Group CFO Tabitha Silverwood.

It’s a total volte face within LME. Blame round one portioning seems to have taken place as Matt Chamberlain reverses his departure and stays to sort the Nickel Nightmare out while Adrian Farnhman and Catherine Lester are the first casualties of the affair.

Over the parent group of the London Metals Exchange, the Hong Kong Exchanges have reappointed their chairman Laura Cha has another full term of office coterminous with her directorship.

Robinhood announced fairly average numbers this week and slashed 9% of their workforce which was a huge cutback while one person has left the Tel Aviv Stock Exchange their chairman Steinberg has resigned over a pay dispute. It was and I quote:

“Because of a lack of willingness in principle on the part of a substantial shareholder in the stock exchange to consider awarding stock-based compensation as part of the employment agreement for the position of chairperson at the Tel Aviv Stock Exchange.

In other words, it looks as if the finger is pointing toward Shane Finemore more on Russell Aboud of Manikay Partners who previously ran afoul of the SEC some years ago which foreshortened their ASX board terms before they invested significantly into ASX. Is it their being obstinate about delivering options to the outgoing chairman, which is presaged his resignation?

One chairman going nowhere, the OCC (Options Clearing Corporation) they’ve re-elected Craig Donohue as Executive Chairman at their 2022 Shareholder Meeting. All the best to Craig for his next term in office.

Over at the SEC, they are nearly doubling the size of their Enforcement Divisions, Crypto Assets and Cyber Unit, hiring 20 more staff.

Meanwhile, in ‘Big World’ this week: a mega shift is taking place in Central and Eastern Europe. Poland, despite a rather socially reactionary, one might also add, left wing economically, government has leapt to the forefront of world attention. In part, the government was a passenger, as Poles unilaterally helped millions of Ukrainian neighbours to flee Putin’s invasion folly. However, the government has talked tough and not diverged from being strong in their military support of Ukraine, even when Joe Brezhnev’s masquerading as policymakers excuse for a government blinked volubly before regaining their mojo and going near full war-hog (not a position admittedly, that leaves me entirely comfortable given the incapability cum senility of the US administration).

Anyway, in recent moves, the Czechs have said they would send their Soviet-era fighter jets to Ukraine provided somebody covered their airspace while new fighters were assembled out west. Poland promptly stumped up as a new regional leader.

Poland was in the vanguard equally of ensuring an oil boycott over the Russian demand for payment in Rubles – exposing the declining German hegemony, which (as I have noticed previously in Exchange Invest) is stuck in its version of Britain’s 1970s.

There are big ramifications here and for the EU that is probably bad news as Brussels was still in punishment beating mode towards Poland weeks into the Ukraine conflict, while the world has given Poland an exponential lift in soft power influence.

The contrast with Brussels – which as a bureaucracy can never expect to be loved – gives Poland incredible leverage. Meanwhile, US-Poland relations remained strong through US military imperative and hugely leveraged by the wisdom of Donald Trump delivering ESTA visa-free travel for all Poles to the land of the free.

Watch this space – CEE SEE region doesn’t have anything remotely like the equivalent economic clout of the neighbours out west, but it is growing and Western Europe is conflicted and in stasis. A subtle shift of power east across Europe is happening.

And on that mysterious and magnificent note ladies and gentlemen, my name is Patrick L. Young builder of exchanges, publisher of the Exchange Invest daily and much else besides.

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

LINKS

Medium: Christopher Prior-Willeard – An Appreciation

LinkedIn: Christopher Prior-Willeard – An Appreciation

Russian Sanctions Give Euroclear A Capital Headache
Reuters

SEBI Issues Rs 2-cr ($261k) Recovery Notice To Former NSE Official Anand Subramanian
Indian Express

PM Modi Should Get Nobel Peace Prize For Covid Work, Says BSE Chief
The Indian Express

Borsa Istanbul: Announcement Regarding The Reopening Of The Equity Market Trading Floor On June 1, 2022
Borsa Istanbul

Security Forces In Oromia State Close Six ECX Branch Offices, Detain Staff With No Explanation
Addis Standard

LME Chief: Bourse Could Revamp Margining After Nickel Kerfuffle
Risk

Ukraine War Dents London Stock Exchange Revenue, Shares Fall
Reuters

HKEX Quarterly Results For The Three Months Ended 31 March 2022
HKEX