149 Exchange Invest Weekly Podcast June 25th, 2022

Transcript

This week in the parish of bourses and market structure:

Binance bets big

David Goone is forming an ICE tribute band at tZero (and why on earth not?)

Les Male quits DGCX

Math Nerds love BMLL

…and FTX buys Embed

My name is Patrick L. Young.

Welcome to the bourse business weekly digest.

It’s the Exchange Invest Weekly Podcast Episode 149.

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.

Hong Kong Exchange celebrated its 22nd Anniversary of its listing in Hong Kong and the reopening of the Hong Kong Exchange Connect Hall following an extensive refurbishment programme. As it turned 22 CEO Nicolas Aguzin was saying Hong Kong Exchanges must learn from tech firms to deliver new products and services at low cost. HKEX are considering opening offices in New York and London as they take the battle for IPO fundraising to North America and Europe, while also planning to offer more A-share derivatives and financial products. Exciting times for HKEX as hopefully, the COVID problems are being overcome in the special administrative region of China.

Slightly further afield from where we’re talking today in Valetta, Malta down under in fact the new Australian Stock Exchange chief is a ‘big supporter’ of CHESS Plan A (thats CHESS Plan A, the several 100 million dollar seemingly open pit project of sunken technology funding) I suppose that marks the end of that honeymoon. Let a million discredited “technology company” memes bloom, I suppose. Tragically, it looks as if we might have to catch up with ASX in another 4 years to see if they’ve got to grips with the 21st century after being remarkably coherent towards the end of the last millennium.

NASDAQ they’ve stepped into the green debate. They’re urging the SEC not to move ahead with climate disclosure plans. There are too many overlapping rules about carbon greenwashing that seem to be adding to corporate complexity and company frustration. To quote a NASDAQ letter reviewed by Bloomberg News.

NASDAQ stated: “We are concerned that the proposal would impose additional complexity, costs and burdens on issuers, suppliers, and ultimately, investors and thereby undermine the commission’s core goals”.

Nobody wants to be ant-Gaia but there is a point where the burden on companies and the plethora of conflicting regimes becomes a problem. The other key point is that there may be a reason for this to be established in due course but it isn’t the remit of the SEC so far as my understanding of things go. That over-reach is a crucial failure of the Gensler SEC. There is also that point that actually private capital has proven more of a solution to the problem than the dull clunking fist of government and its interventionist for the sake of its agencies.

Out of London, the London Stock Exchange, they have pulled it pouring cold water on merging listing segments. That said, the positive detail and reports as to what exactly the pros and cons are, it was somewhat frustrating.

In the Philippines, by the time you listen to this, it will be all over in Manila. That’s trading on the stock exchange floor I’m referring to the PSE president and CEO Ramin Monzon is noting the physical trading floor in Taguig, Manila will officially close on June 24. In other words, after you get a chance to listen to this podcast. At the same time the Philippine Stock Exchange have been asked to speed up the launch of short selling as many different veteran investors are looking towards having a better balanced market.

Also in Manila this week, the London Stock Exchange have reopened precisely they’ve reopened the doors of their Manila-based service operation 2 years after implementing a work from home setup amongst their employees due to the pandemic.

Something else that was closed this week and for a very noble cause to, for the first time ever, the United States of America stock markets were closed on Juneteenth. It wasn’t actually June 19th, which is the date when Juneteenth is celebrated marking the end of slavery but in fact, they were closed on Monday, June 20th, as Juneteenth itself was a Sunday.

A national holiday marking the end of slavery is an entirely reasonable premise. Bravo the exchanges who were commemorating this important event in the US history this year.

Euronext, they’re taking their first steps towards the European clearing house and that marks an interesting moment in the VaR debate as we saw new VaR processes at the London clearing houses repo clear, and also Euronext seeking to manage to become a competitor on the par, they hope with the London Stock Exchange, or at least Deutsche bursa within the Euro zone.

New markets this week, two interesting stories, first of all, one with a degree of self interest of Valereum, of which I’m an executive director will be launching an NFT marketplace platform in due course, we can’t really say much more suffice to say, well, we have a cunning plan, watch this space.

Best new market of the week to actually appear physically is a plethora of leading global banks and the data and analytics provider Moody Analytics have launched Octaura holdings, which is an independent company whose goal is to create the first open market electronic trading platform for syndicated loans and collateralized loan obligations.

There were also two notable deals this week, of course, all the deals are reported daily in the watercooler of the bourse business Exchange Invest.

Hellenic Exchanges purchased back 35,887 of their own shares while FTX (the Bahamas best derivatives exchange, their US subsidiary) have acquired a stock market clearing firm Embed, which will enhance their ability to offer access to stock trading via the FTX platform in the near future. The moves by FTX of course, are all part of what one might call the Victory or Death economy. I reviewed that in my most recent book “Victory or Death?” – Blockchain, Cryptocurrency and the FinTech World, discussing how technology is affecting life and markets and therefore giving you an opportunity to understand better your position moving forward in order to profit. “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, that’s Tuesday 6pm London, 1 o’clock New York time – the IPO-Vid live show. Catch the back episodes on LinkedIn and YouTube via IPO-Vid. Sadly this week we had a slight hiccup when there was a power cut in Malta, therefore Mark Gill is going to return to the studio in the near future. We are rescheduling that event.

And coming this week we’re looking forward to speaking to Mark Schaedel – Defending the Data Economy. Catch that Tuesday 7pm CET, 6 o’clock London, 1 o’clock New York.

In crypto land this week, Coinbase came in for huge amounts of criticism, what was described as their chaotic day of job cuts by Bloomberg following the rapid hiring spree. We had been trying to give Coinbase management the benefit of the doubt originally, but unfortunately, this appears to have been an inhumane fiasco of firing. The fetishization of automation led us to a sort of smart contract stupidity, where adult pragmatism would have suggested a human approach was vital. Of course, whether or not that relates to other possible proposals in the world of say central counterparty clearing, I will leave it to you, dear listener to think about in your own good time. Certainly the crypto winter is in full swing and post bubble litigation is now flowing fast and thick to Coinbase amongst others.

In the Philippines, they have had a think tank asking to suspend Binance as a crypto exchange and indeed at the same time we’ve seen the withdrawal of a crypto exchange Huobi Thailand have closed down after their licence was revoked. Those are just a few of the many headlines we had about the crypto world of exchanges in Exchange Invest this week.

One fascinating area just to think about before we move on from the crypto patch how FTX and other crypto firms are ditching sports deals as the cryptocurrency market collapses. Crypto exchange FTX, which had shelled out $135 million to rename the home of the Miami Heat in March 2021 – pulled out of talks recently to provide a jersey patch to the MLBs Los Angeles Angels just as the crypto market tanked.

The struggle is real ladies and gentleman. Sports franchises can now look forward to a very different realm of crypto purchase – indeed a good sign of the peak was the way every sport perceived as the realm of younger blokes with cash to burn was plastered with crypto branding since the middle of last year.

In other news, will FTX be reducing their spend on the fashion industry? I for one felt the SBF – Giselle Bundchen multipage Vogue US discussion on crypto was perhaps the perfect anecdotal high point of the bubble?

Product news this week, one large seismic piece of news in the wake of the nickel nightmare, despite marked member reluctance in the overall series of responses to the discussion paper that was published last month. Nonetheless, the London Metal Exchange will be introducing OTC reporting and accountability levels despite those concerns of the members. Ultimately transparency as a step forward for LME, prompted by the recent nickel nightmare, and given the latest Chinese scandal surrounding aluminium (nothing to do with LME, I hasten to add but tarnishing once again, the metals market as a whole) there is an urgent need for more transparency.

Technology news this week, several interesting stories the Uganda Securities Exchange spoke out about reported personal data leak from their servers last week. Seems like there was no unauthorised access to its servers per se but there may have been a third party access issue with someone who was able to access the USE infrastructure. That brings us neatly to outage protocols. FESE (Federation of European Securities Exchanges) they published this week and fascinating list of good principles that many of us in the industry have been arguing for 4 years and indeed some of them are actually I was even looking at last century that was also last millennium and indeed sound stuff all round that FESE is leading the debate on making our markets safer.

Otherwise to make our market safer is of course the application of good quality big data, the New York University’s Mathematics in Finance programme, they’ve selected BMLL for market microstructure research. Absolutely the best way to deploy those 15 petabytes of data is by using agile young minds on masters of finance and doctorate courses.

First Derivatives they’ve opened a new operation in Poland and PNGX (Papua New Guinea Stock Exchange) they’ve signed an MOU for the use of their blockchain technology from exports to accelerate the Pacific Islands capital markets. Great win there for Xboursend founder Tony Mackay on their first sale in the region.

Career paths this week, tZERO they’ve announced appointment of new directors to the board, having appointed long standing former CME man and then of course one of the architects of the ICE rise to prominence David Goone as the CEO. Now tZERO is getting two more key ICE folk added to the board. Edwin Marcial, the former founding CTO of ICE and also the former COO of NYSE Michael Blaugrund.

One shock this week Les Male has resigned as chief executive of the DGCX (Dubai Golden Commodities Exchange) after 4 sensationally successful years when he replaced Gaurang Desai, quite a surprise in the industry. In the interim chairman Ahmed Bin Sulayem will run the exchange until a new chief executive is found. Finally in job news this week, reappointment of Mr. Marek Dietl, congratulations to him. He has returned as the president of the management board, in other words, CEO of the Warsaw Stock Exchange for another term in office.

Of course, the big news other than individual moves in the course of the last week was the rapid removal of headcount amongst a multiplicity of different crypto exchanges. Nonetheless Binance are betting big, they’re hiring more than 2000 people despite the multi trillion dollar slump in the crypto market. Quite incredible to think that Binance are looking to add to their headcount roughly 1/3 to half the headcount of most really serious legacy exchange players, which, of course, begs the question, if they didn’t have smart contracts with these new new crypto exchanges be employing more people than say the Indian railways board?

There was also an entertaining piece of cattery as CZ, the CEO of finance had a quick swipe at the exchanges for him till recently had been lavishing money on things like advertisement said American football’s finest evening the SuperBrawl amongst other major spending issues.

Speaking of major spending issues that takes us neatly to France and Italy, the French Presidential elections and the aftermath where President Macron has been reduced to a lame duck by failing to have a parliamentary majority brings us very neatly to another big spender, Italy, which has been broadly ignored in the political limelight recently because of French elections, as I mentioned a moment ago. However, it’s all go in Italy, the recent local elections, certainly in the first round alone, point to Giorgia Meloni, now being the major player in the coalition of centre right parties. She has revolutionised what was once the somewhat far right National Front into a populist conservative party for patriotic libertarians based on the views of the late brilliant British academic Roger Scrutton.

The relatively Eurosceptical nature of La Meloni’s party will cause widespread angst in Brussels and across the entire canvas of big world. Given the fact of course that Brussels has a habit of imposing Italian Prime Ministers when they don’t happen to suit the Brussels world view. Interestingly, Meloni’s party went from the laggard on the right to the leader by not joining the Mario Draghi EU backed national unity coalition which fellow right wing parties Lega Nord and Forza Italia had agreed to.

Elections in Italy must be held by June 1, 2023 and after months leading in the polls, the first round of local council elections showed La Meloi’s Fratelli D’Italia party having a sensational victory, they led the right coalition to victory in the first round in 9 of 13 major cities all the way from Genoa in the north to Palermo in the deep South.

Overall, the right poll 44%, which would be sufficient for an overall majority in a general election, that, of course, would trigger shockwaves inside an EU which is likely to be under financial pressure, if the current economic volatility continues even in a muted fashion. And indeed, how does one react to the current economic volatility? Well, if you’re the vast Kellogg’s Corporation, then you decide to split yourself into three separate business units. Presumably they can brand them “Snap, Crackle and Pop?”.

And on that mysterious and magnificent note, ladies and gentlemen, my name is Patrick L. Young founder of Exchange Invest, the daily bourse business newsletter, and of course away from the newsletter business, permanently building the markets of the future.

I wish you all a great week in blockchain, life and markets. Join us next week for a milestone the 150th Exchange Invest weekly podcast.

LINKS:

HKEX Celebrates 22nd Anniversary Of Its Listing In Hong Kong And The Re-Opening Of HKEX Connect Hall Following An Extensive Refurbishment Programme
HKEX

As It Turns 22, CEO Says HKEX Must Learn From Tech Firms To Deliver New Products And Services At Low Cost
South China Morning Post

New ASX Chief A ‘Big Supporter’ Of CHESS Plan A A
FR

Nasdaq Urges SEC Not To Move Ahead With Climate Disclosure Plan
Bloomberg

Analysis-Overlapping Rules To Curb Greenwashing May Only Add To Company Frustration
Nasdaq

London Stock Exchange Pours Cold Water On Merging Listing Segments
Reuters

Philippine Stock Exchange To Shut Trading Floor From June 24
YouTube

PSE Asked To Speed Up Short Selling Launch
Inquirer Business

London Exchange Re-Opens
Manila Standard

Is The Stock Market Closed On Juneteenth?
Wall Street Journal