143 Exchange Invest Weekly Podcast May 14th, 2022

Transcript

This week in the parish of bourses and market structure:

Terrific numbers from ICE as their laser-like execution focus delivers to the bottom line once again while they also buy Data Corporation Black Knight.

My name is Patrick L. Young.

Welcome to the bourse business weekly digest.

It’s the Exchange Invest Weekly Podcast Episode 143.

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.

CME shareholders have sent a resounding note to the management: “The CEO Got Paid Too Much”

Footnote of the week came from the CME AGM: “The advisory vote on the compensation of named executive officers was not approved.”

AKA Shareholders of CME Group overwhelmingly voted against the unusually large 2021 compensation package for CEO Terry Duffy.

Seeing usually pliant shareholders actually complain about something at CME and LSEG has been a major development (not before time) for both stocks in recent months. Certainly, $23 million for the relatively low profile CME Chairman/CEO Terry Duffy does appear to be somewhat north of egregious.

In South Africa, the Johannesburg Stock Exchange, they’re relaxing its listing rules on appointing a new board just for technology companies. In the USA, the mayor of Carteret joined NASDAQ CEO Adena Friedman and various other dignitaries to break ground on the expansion of the new cloud data centre there, while in Cyprus, a law has been deemed unconstitutional. It had forced all investment companies to invest 80 per cent of their funds in the Cyprus Stock Exchange during a downturn 20-something years ago. Ultimately, the state is going to have to pay millions over the unconstitutional stock exchange law.

In political news, the Colombo Stock Exchange has been closed amid unprecedented unrest throughout Sri Lanka. That was after violence erupted following the brother of the president Gotabaya Rajapaksa resigning as prime minister.

In Brexit news this week, some encouraging updates, a Britain is back on top in sterling swaps trading post Brexit. New York had taken the top spot for starting swaps trading in early 2021 as swaps trading left London for the European Union and the United States after Britain fully executed on Brexit on December 31, 2020.

The European Union’s hostility to various financial markets issues has not been sufficient to prevent British pound swaps trading returning in the majority to London.

In results, it was a frantically 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 let’s look at some edited highlights:

Stars of the week the Intercontinental Exchange (ICE) are strong first quarter of 2022 net revenues at 6%, operating income at 11% and adjusted diluted EPS at 7% year on year as Chairman and CEO Jeff Sprecher noted:

“Importantly, the “all-weather” nature of our business model enabled us to grow through geopolitical unrest, inflationary concerns and rising interest rates. We remain focused on innovating across asset classes to serve the needs of our customers and deliver growth for stockholders”

Elsewhere, the disappointment of the week was undoubtedly Coinbase. Their revenue of 1.17 billion was 27% lower year on year causing the stock to slide yet further. Indeed, Coinbase stock has been in freefall for some weeks now, it stands as we record at barely a quarter of its post IPO megahype highs. As a result, Coinbase is seeing such a stock slide that it is stealing the mantle of TP ICAP as the biggest parish loser of stock value in recent times.

In new markets this week, it was also a rather busy week for new markets to particular highlights. The London Stock Exchange Group is launching a new non-deliverable forward matching venue in Singapore to support strong demand from the Asian market and LedgerEdge, they’ve launched the first regulated distributed ledger trading platform for corporate bonds.

In deals news this week, one megadeal Intercontinental Exchange have entered into a definitive agreement to acquire Black Knight.

You may never have heard of Black Knight amongst parish of exchanges because it’s not directly in there. It is, of course, a US property data company where #despiteUSMortgageRates ICE’s dudes with the digital slide rules have found it a haven of value as the Intercontinental exchange continues its big property pivot.

Absolutely fascinating ICE crunches data in an insatiable fashion akin to that plant and “Little Shop of Horrors” albeit with a much better return on equity. This is an intriguing multibillion-dollar bolt on to the existing ICE mortgage business, which is exploding, albeit one may have concerns about real estate burning white-hot in some areas of the USA right now. At the same time, those relatively isolated spots excluded, it isn’t looking like 2008.

Real estate is all about Location, Location, Location. ICE is playing the property market with Digitisation, Digitisation, Digitisation. With their incredible execution record, it’s hard to bet against the ICE integration excellence and growth mojo.

Fascinating news of the week on the IPO front MIAX (Miami International Exchanges Group) they are filing for a US IPO. Asides from that billion-dollar deal a rather smaller deal has raised the ire of the UK antitrust authorities. Competition watchdog the CMA has raised concerns over the London Stock Exchange’s Group takeover of Quantile asking for various pieces of information to justify the acquisition.

In a world of mad mergers, crazy IPOs and all sorts of wonderful and exciting new opportunities for business. How do you understand what’s going to be the future of finance. Well, there’s a book to help “Victory or Death?” – Blockchain, Cryptocurrency and the FinTech world is my latest tome – explaining the future of finance. It’s available via Ingram worldwide and published by DV Books.

While you’re waiting for your copy of “Victory or Death?” to arrive, check out our livestream that’s Tuesday at 6pm London time, at 1pm New York time – the IPO video live show. Catch the back episodes on LinkedIn and YouTube via IPO-Vid.

Most recently, we have a great guest Thomas McMahon Energising New Markets. He was our guest last week while this week coming on Tuesday Disrupting Exchange Data Internationally, we’ll have our guest Jonathan Bloch.

In crypto land this week, London has missed out albeit it could be missing out on a poison chalice as Binance has chosen Paris as a home for its European regulated HQ.

Is that a lucky escape for London?

The AMF has welcomed Binance where other EU nations like Malta ultimately had a difference between the politicians cum carpetbagging stakeholders and the actual regulators and regulatory probity. I cannot help but feel there is a poison chalice element here particularly as Binance eagerly tries to point to a form of decentralization – or at least equivalence between their EU and EMEA (Dubai- based) arms.

Coinbase they’ve ended M&A talks with the Brazilian crypto firm 2TM and there’s an excellent commentary piece this week from Barney Reynolds city lawyer extraordinary: The city can dominate crypto if we ditch the Brussels rules, catch that on telegraph.co.uk.

Binance, meanwhile, is backing Elon Musk’s Twitter bid. Binance have also disabled derivatives services in Spain while seeking regulatory approval having been ordered to stop by the Spanish regulator the CNMV.

Equally Binance is taking legal action against fake billboard ads in Turkey. And at the same time, there’s a little bit of controversy as well while Binance could be courting approval in Italy, having recently had a meeting with the former PM Conte and CZ, the founder and CEO of Binance.

In product news, fascinating news from Spain, the BME Exchanges MEFF have launched xRolling Stocks – a new form of a perpetual stock futures contract. In essence, it’s a de facto exchange-based CFD given the track record of MEFF on single stock futures innovation, I think this could be a winner.

London Metals Exchange they’ve suspended Russian lead from their system, that comes in the same week as nickel prices have finally gotten back to where they were before March’s two days of chaos on the LME. And that comes in the same week as the CME are said to be exploring a nickel contract after that LME trade chaos. “We can do for Nickel what we did for WTI Futures”is clearly a compelling sales pitch from the CME until you factor in the Cushing crisis quotient I suppose.

Terra Blockchain backer is lending Bitcoin after the USD tether is losing the dollar link. In fact, it’s broken the buck in the stable coin market below 70 cents by the time we looked at the time we were recording this podcast.

There’s a big big mega caveat emptor in the stable coin market – a looming crisis as buck breaking is appearing more prevalent – and it may yet come to pass that the lacklustre crypto market (not responding to being a safe haven or an inflation hedge nor an asset uncorrelated to major western stock markets) is about to hit further teething troubles as the stable coin moniker may yet prove broadly illusory.

In technology news this week, ASX’s CHESS project has been delayed yet again. We’re still the April 2023 “go-live” date of the $250 million and growing CHESS clearing and settlement replacement project is not merely no longer viable, the ASX is no longer offering a start date for the project.

Post trade is looking more like GUBU for ASX. With the date now being a blank, it strikes me as if the ongoing thesis we raised a few months ago in Exchange Invest is more plausible than ever. A new CEO will dump the new CHESS provider Digital Asset in due course. If so, that will be a seismic shift by ASX to make up for their spectacularly failed seismic shift to blockchain.

Johannesburg Stock Exchange they’ve launched an innovative new equity market data analytics platform in collaboration with big XYT and meanwhile Aquis have waded into the 15 petabyte BMLL data lake and we’ll be delivering venue market quality and liquidity analytics to their members.

Over in crowdfunding one piece of news from Canada, crowdfunding platforms are now required to report transactions, that follow the truck convoy protests upon which the Canadian government were very eager to crack down. The government saying that crowdfunding platforms are an emerging risk for terrorist funding. In other words, Canada’s liberal regime now applies the same rules for crowdfunding as the Chinese Special Administrative region of Hong Kong recently proposed.

In regulation, the CFTC is issuing proposed rules that’s to make up for the movement away from LIBOR towards alternative reference rates while Unite (the Union, a rather militant left-wing UK Trade Union body) has lost its bid to become recognized as the official trade union at the city financial regulatory watchdog the FCA. That comes of course in the same week that the FCA staff had gone on strike.

In the Queen’s speech for 2022 the UK government is going to be revoking some EU financial regulations. It appears to be an attack on at least parts of the great waste of time, which was MIFID II.

Career paths this week, the Hong Kong Exchange’s President and COO as expected, Calvin Tai will be retiring. Wilfred Yiu and John Buckley have been named as co-chief operating officers, after Calvin’s resignation following 24 years at the Asian bourse. Good luck to all parties concerned.

Exciting news in the City of London, the corporation has chosen a new political leader, the head of the policy committee for the Square Mile is not going to be a former Sheriff Chris Hayward, who’s going to be replacing the spectacularly failed Catherine flail & flail” McGuiness. It’ll be interesting to see how Hayward, a very sound Sheriff of the City of London during the COVID extended 2019-2021 term will fare as policy chief while not a frontline financier in experience – hopefully he will be a much better and more coherent voice for the City than his immediate predecessor and get to grips with post Brexit reality.

TMX group they announced the election of their Director John MacKenzie and Luc Bertrand were topping the shareholder vote with 99.745 and 99.744% approval respectively.

Over at the NSEL scandal which continues to drag on in India, the Supreme Court has funded a high-level committee headed by retired Bombay High Court Judge Pradeep Nandrajog, for the recovery of money from the defaulters against whom National Spot Exchange (NSEL) has secured money degrees. Not before time, but welcome all the same.

Cheerier news at least from the war-torn lands of Ukraine this week, there is an ability to ship grain (not that we can presume there’s going to be a great summer harvest given the tanks ordinance, and apparently even booby traps that have been left behind by the Russian invaders on the prime agricultural land).

However, via river routes on railways. Ukrainian grain – a full sized Panamax freighter full of Ukrainian grain no less managed to leave the Romanian Black Sea port of Constantia on April 29th, with 71,000 tonnes of grain in what is expected to be the first of many such shipments, helping alleviate some pressure points in the food supply chain (particularly in nations to the size of Ukraine across the Black Sea) – at least for now. Circa 160,000 tonnes of grain ought to be exported by mid-May while shipments of Ukrainian iron ore are also ongoing via similar logistics.

At the same time, the latest economic predictions suggest the War is going to cause the Ukrainian economy to shrink nearly a third this year – according to the EBRD while sanctions for many – albeit often a tad milquetoast when it comes to certain (mainly European) gas importing nations are going to impact something around 12% in decline for the Russian economy…albeit that still places it firmly in depression territory. Those predictions come apparently and a leak from the Kremlin itself, inferring the Russian economy will lose almost a decade of growth during 2022 alone.

And on that mysterious and magnificent note ladies and gentlemen, my name is Patrick L. Young.

I wish you all a great week in blockchain, life and markets in the week when Exchange Invest is celebrating its 9th Anniversary.

If you’re not reading already, check out the watercooler of the bourse business published daily directly to your inbox, ExchangeInvest.com

LINKS

CME Shareholders: CEO Got Paid Too Much
Crain’s Chicago Business

JSE To Relax Listing Rules, Appoint New Board Just For Tech Companies
News24

Carteret Mayor Reiman Joins NASDAQ, Other Dignitaries To Break Ground On Expansion Of Cloud Data Center
New Jersey Stage

State To Pay Millions Over Unconstitutional Stock Exchange Law
Cyprus Mail

Colombo Stock Exchange Closed Amid Unrest
National Herald

Britain Tops Sterling Swaps Trading After Brexit
Reuters

Intercontinental Exchange Reports Strong 1Q2022

Intercontinental Exchange Approves 2Q Dividend Of $0.38 Per Share
ICE