150 Exchange Invest Weekly Podcast July 2nd, 2022

Transcript:

This week in the parish of bourses and market structure:

Shanghai leads in IPOs

Binance bending to regulation?

SETL Sold

FTX denies RobinHood talks

NASDAQ announces another SaaS Sale as their 18th Technology of the Future Conference gets under way in New York City…

My name is Patrick L. Young.

Welcome to the bourse business weekly digest.

It’s the Exchange Invest Weekly Podcast Episode 150.

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 and happenings during the course 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.

On the external links to the show notes, I must say I enjoyed a very productive time at the 23rd AFM Conference in London recently. It’s a fascinating location opposite the hallowed Lord’s Cricket Ground while the conference was illuminating throughout the whole event and is available to watch on YouTube. You can get that by googling the YouTube AFM 23rd Annual Conference and spoiler alert my keynote was the first thing on the agenda in the morning so not much need to scroll through.

Leading our news this week, the Shanghai Stock Exchange is the world’s number one IPO venue and indeed Shanghai and Shenzhen stock exchanges are leading the global chart for financing scale in the first half of 2022 as well, according to research from Deloitte.

The London Metals Exchange: they’ve named the consultants Oliver Wyman to conduct an independent review of the nickel nightmare chaos recently. Meanwhile, a win for the Minneapolis Grain Exchange (MGEX) they’re going to be providing clearing as a service to the intelligent medicine exchange. We highlighted that new market just the other week, which is advised by amongst others, the excellent former CME Group CEO Phupinder Gill.

The Qatar Stock Exchange: they’re planning to launch short selling and therefore increase their listings and liquidity while over in the USA, the US Congressional Committee has released findings from their 18-month probe into the wild market swings of January 2021. As you may recall, that was the “meme stock” market frenzy. Despite the report coming from Maxine Waters, who is in my humble opinion, pretty anti-market alongside Congressman Al Green – with him I’m not so clearly au fait in terms of his politics per se – although he is a Democrat, there are nonetheless a fair few worrying questions raised by this report as the FT headline put it: Report Questions Robinhood’s Depiction of Liquidity During The ‘Meme Stock’ Frenzy.

Meanwhile, of course, splatting Robinhood would allow the SEC to have the double whammy of being seen as tough on meme stocks (and thus presumably killing Payment For Order Flow) as seems to be one of the wants of the Gensler’s administration. It would also amount to an attack of sorts on the current Robinhood general counsel and former Republican SEC Commissioner Dan Gallagher.

Farewell to the floor of this week and their Philippine Stock Exchange has gone fully electronic. Congratulations to them on managing a very smooth transition after closing the floor on Friday, June 24th and restarting as an all-electronic market last Monday.

One podcast I’ve got to mention this week ladies and gentlemen, it’s the ICE house as you may recall, I was a guest many moons ago on that excellent podcast. This week, ICE is talking internally with Chris Edmonds, and they’re discussing clearing credit and crypto.

It’s a really excellent podcast from the ICE team which – given the urgency of the central counterparty clearing debate driven by the FTX, somewhat flawed in my opinion proposals. It’s a really really important must listen, an excellent discussion between Chris Edmonds (who’s been given the presumably much coveted in one Atlanta office Top Gun derived call sign “ICE Man” by the ever smooth host Josh King.

New markets, it was a busy week for new markets in the parish. All the information was 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.

Over to Zimbabwe, FINSEC have pioneered derivatives trading, launching the first ever derivatives trading platform in the African state last Wednesday at the same time we got the first new market in 12 years in Japan, the Private Exchange ODX (Osaka Digital Exchange) began trading stocks and exchange traded funds.

Deal news this week, the Zagreb bourse got the regulatory nod to raise their stake in the scoop yet counterpart Macedonia. Remember actually the Macedonian Stock Exchange’s boss was our guest on IPO-vid just a couple of weeks back. You can catch that via youtube.com, search for IPO-Vid.

Also, of course, the Zagreb Stock Exchange’s CEO Ivana Gažić, she was a former guest of the podcast and the IPO-Vid livestream. You can catch that too via YouTube.

Anyway, Zagreb Stock Exchange can buy shares in the Macedonian Stock Exchange to increase their stake up to as much as 30% according to local regulators, so far, they’ve managed to buy up to 9.92%, in the Macedonian Exchange. And indeed, no sooner had they achieved that threshold of 9.92 then they acquired another 7.13% of the Macedonian Stock Exchange during the course of the last few days, as we were indeed recording this podcast.

Over in Warsaw, the Warsaw Stock Exchange have confirmed that they’ve acquired the Armenian Stock Exchange in Yerevan. That’s the deal finalized after a long COVID induced wait much more about geopolitics and macro or even micro markets, me thinks as a $1.5 million takeover takes space, what was it perhaps 1.5 million euro. Anyway, either way, a microscopic transaction compared to the near half a billion dollar Warsaw exchanges group valuation.

The Nigerian Commodity Exchange AFEX have expanded their operations to Kenya, and indeed they’re seeking funding for further East African expansion, in part aiming to help tackle ramp and food insecurity in East Africa triggered by the Russian invasion of Ukraine. Whether or not the Russian invasion of Ukraine ends up being precisely “Victory or Death?” for one party or the other, that’s the name of my most recent book, which isn’t interested in pugilism. It’s talking about blockchain, cryptocurrency and the FinTech world. Wherever you’re going to be on the beach this summer, you may want to pick up a copy, if you haven’t already, so you can understand how FinTech and the world of finance is moving forward in order to impact your career and what is a very binary world, you may profit or ultimately you may not, but if you read “Victory or Death?”, you’ve certainly got a head start on the opposition.

While you’re waiting for your copy of “Victory or Death?” to arrive (“Victory or Death?” being published by DV Books and distributed by Ingram worldwide) don’t forget to check out our live stream IPO-Vid, Tuesday at 6pm London or 1pm New York time.

This Tuesday, July 6th we’re on holiday celebrating belatedly the 4th of July in the United States of America but there was a cracking show last week that you really ought to check out that was IPO-Vid #71 with Mark Schaedel, the boss of a DataBP and he was Defending The Data Economy and defending it with gusto, I might add. Our next show after the Independence Day break is going to be on July 12th and we have got John Kim, he is going to be discussing CBDC & The Future of Money.

In crypto land, Bloomberg ran an interesting story this week about the billionaire run FTX platform, how they’re supporting distressed peers. Describing it in the Bloomberg article is looking more like a sticking plaster than a credible backstop. Of course, I would paraphrase this as – a couple of 100 million dollars here, a couple of 100 million dollars there and soon you’re talking about real money but the realpolitik is that of all these crypto exchanges (many of which are barely known in the wider world) need these sorts of sums, then how does that stack up against the great FTX folly of modernising the world’s CCP with a process based on almost no data and barely $250 million as a backstop for when we reach that Titanic moment as occasionally occurs in markets and by the way, I use the word ‘Titanic’ advisedly for tuck was famously unsinkable at the point of design and build due to separate compartments to hold water if holed…the problem being that a surge as ultimately took place that fateful evening in the middle of the Atlantic, the surge led to the water cascading over the top of the partitions and the whole shebang sank. In my humble opinion, that’s a perfectly apt surmise of what looks to me like some failures of design in the FTX CCP plan.

Speaking of that FTX plan, the Bank of England’s John Cunliffe was giving some mot juste responses to the ‘new new thing’ of the FTX derivatives rule change proposal just last week as well at a conference in Zurich. He didn’t seem entirely confident that this was the way forward either. Nonetheless, the FTX’s regulatory head says the CFTC has a ‘considerable amount of openness’ to their proposals. That is, of course #worrying but then again, we have this feeling in the Exchange Invest newsletter all the way back to March when the FIA appeared to be more narrowly focused on outmoded broker’s rights to intermediation and being coherent on a potential torpedo blasting through the CCP system.

One definitive word we got from Sam Bankman-Fried this week, FTX says no talks to acquire Robinhood. I would note we must take SBF in his word here for if he proves to be not 100% accurate with his denial, where does that leave trust in clearing?

Over at Binance, Binance US has launched a zero-fee bitcoin trading. Any reduction in the fairly egregious cost of trading and Bitcoin will be welcomed but it won’t save crypto from the bear market at least not right now as winter is upon us. Nevertheless, it’s a tweak which significantly impacts Binance’s main US rival market leader Coinbase and what did we see about Coinbase this week? Well, Goldman Sachs downgraded them to a ‘sell’ and Moody’s equally was downgrading their outlook due to ‘substantially weaker revenue’.

Back to Binance the road to Damascus conversion seems to be complete. The ‘come to Jesus’ interview was in Bloomberg this week, replete with pouting posed portraiture and glamorous but moody environs – how very classic film noir. “CZ” had repents – or at least realises – that his previous incarnation: the regulatory blob versus Binance was a variation of the logician Raymond Smullyan’s classic theory. What happens when an indestructible cannonball hits an immovable post, thus Binance emerging with a volte face. It’s slightly bitter ‘the blob is slow, we had to change’ kind of narrative, but it suggests a growing consciousness that avoiding the orange jumpsuit is vital…to which CZ appears to have added a further hedge by the way and relocated himself to Dubai from Singapore.

Speaking of Binance, one final word on the subject and it comes from Aurore Lalucq, S&D and EP, who commented in Brussels that the French market regulator AMF granting a crypto exchange license to Binance was incomprehensible, her words, not ours.

In product news this week, the CME Group is expanding their suite of voluntary carbon emissions offset contracts amid record volume in open interest. While the CME has become a little bit controversial, certainly under the eyes of European and Australian regulators by launching event contracts on September 19th. In other words, they’re going to be having daily options stroke futures, which are de facto binary contracts, something that the European regulators, the Australian regulators and others have been eagerly trying to burn in recent times.

Fascinating news from the metals market, Comdaq Metals Trade Weighted Average Prices (CM TWA), were launched last week (available via direct vending contracts or on the system via the CME TWA tab after login). Traded PGM data now calculates and vends the Trade Weighted Average prices and movements based on continuous online trade across the 5 PGM commodities (Rh, Ru, Ir, Pt & Pd sponge).

Technology news this week, NASDAQ’s Technology Of The Futures Conference is coming to New York. All very best to NASDAQ with their 18th Technology of the Future event which is happening as we record. One side piece of trivia, they’re going to hold a reception in “The Classic Car Club” Manhattan venue. That “Classic Car Club” was originally created in London many years ago. One of the co-founders of that venture? Ascertain Patrick L. Young, the voice behind this podcast.

Meanwhile, NASDAQ had good news Climate Impact Exchange (Climate Impact X) they’ve selected NASDAQ technology their SaaS offering to power their new global carbon exchange.

One deal this week in the tech world, the blockchain firm SETL has been acquired by Turkey’s Colendi despite raising many millions over the course of the years, SETL have decided to be wrapped into the equally well funded Colendi, a Turkish origin, FinTech banking as a service startup, and therefore SETL’s CBDC and other capital markets units will become part of the anglo Turkish combine.

In regulation news this week, the SEC’s chair urging ‘one rule book’ for crypto to avoid gaps and oversight. Some call for unity from Gary Gensler when it seems that actually the CFTC have been making the running in Washington DC much better than he has. Then again, there was a damning headline of the Gensler era’s SEC this week: “Never Enough Government” says the SEC according to the Wall Street Journal. Well, to be fair, that is the Gensler era SEC rallying cry. The previous admin was rather more impressive it seems in understanding markets rather than simply regulating them or bludgeoning them.

The BIS, they issued a report this week saying Stable coin is ‘unfit’ as money citing the implosion of various stable coins of late. Of course, stable coins have broken the buck too often to be trusted, which is why Central Banks are gleefully reasserting their intermediary relevance and cryptocurrency…will investment newsletter conspiracy theorists seem to be opining that the central bank’s set the whole first wave of stablecoins up does fail? Probably. However, I think that imputes way too much forward thinking on a central banking cabal which was utterly incapable of appreciating the inevitable rise of digital money when it was first shown to them over 20 years ago.

In career paths people news this week, the OCC (Options Clearing Corporation) their board of directors have announced the appointment of Andrej Bolkovic as CEO elect as they prepare for the retirement of John P. Davidson in the near future. At the same time, Izabela Olszewska has been appointed a member of the GPW Exchange Management Board responsible for business and sales development. All the very best to Isabella.

Dilshan Wirasekara has been appointed the CSE chairman and the Dar Es Salaam Stock Exchange has appointed Mary S. Mniwasa as its acting CEO.

Over in Australia Dr. Heather Smith has been appointed to the ASX board with immediate effect. Dr. Ken Henry will be retiring with effect from the next AGM and Thomson Reuters have named the former CEO of Gannett Media, Paul Bascobert as president of Reuters News, turning to tech and media veteran to drive growth at the 171 year old news organization.

Ladies and gentlemen over in ‘Big World’ here’s an interesting statistic buried in various elements of the news media. China’s crude oil imports from Russia have jumped 55% year on year, reaching around 2 million barrels a day. Not only is China benefiting from the steep discount (30% or thereabouts) available to buyers of sanctioned Russian oil. That also means that Moscow now sells the most oil to China ahead of erstwhile largest suppliers, Saudi Arabia .

On that oil theme in the context of those Russian roaring exports to China, given the oil squeeze in prices and despite the deep discounts to market values of circa 30% Russia is enduring in the oil market at the moment. Nonetheless, Moscow is likely to make some $320 billion selling energy this year, an increase of 35% in 2021 and by the way, up to $60 billion of that sum alone could come from Germany.

And on that mysterious and magnificent note ladies gentlemen, my name is Patrick L. Young, exchange builder and principal of Exchange Invest – the daily newsletter information service of the bourse business.

I wish you all a great week in blockchain, life and markets and we’re off to celebrate our 150th podcast. It’s a wrap.

LINKS:

Shanghai Stock Exchange Is World’s No 1 IPO Venue As Chinese Firms Return Home To Counter US Delisting Threat
South China Morning Post

Shanghai And Shenzhen Stock Exchanges Lead Global Chart For Financing Scale In H1 2022: Deloitte
Global Times

LME Names Consultants Oliver Wyman To Conduct Independent Review Of Nickel Chaos
South China Morning Post

LME Boss May Need All His Mettle To Survive As Investors Launch Law Suits
Financial Times

MGEX To Provide Clearing-As-A-Service To Intelligent Medicine Exchange (IMX)
PR Newswire

Qatar Stock Exchange Plans To Allow Short Selling, Draw Listings
Bloomberg

Report Questions Robinhood’s Depiction Of Liquidity During ‘Meme Stock’ Frenzy
FT

Waters And Green Complete Investigation Of Meme Stock Market Event; Release Report Revealing The Troubling Business Practices And Inadequate Risk Management Leading Up To The Trading Frenzy
US House Committee on Financial Services

Philippine Stock Exchange Bids Farewell To Trading Floor, Migrates To Digital
Rappler

ICE’s Chris Edmonds On Clearing, Credit, And Crypto
Inside The ICE House