154 Exchange Invest Weekly Podcast July 30th, 2022

Transcript

This week in the parish of bourses and market structure:

NASDAQ strong and steady leading the first wave of parish results from the quarter while the SEC and CFTC appear to be at war over crypto regulation.

My name is Patrick L. Young.

Welcome to the bourse business weekly digest.

It’s the Exchange Invest Weekly Podcast Episode 154.

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.

ED&F Man has given up their LME ring status amid takeover talks with Marex. That leaves the LME ring looking somewhat precarious a cause for concern as there are now only going to be 8 ring dealers in the world’s one key remaining open outcry forum.

Over in India, Chitra Ramkrishna was sent to 14-day judicial custody in the NSE phone tapping case. She was actually released from bail that morning and promptly bundled up and taken to court where she was put back into a further period of remand on the new charges. At the same time, it seems to me that “phone tapping” has amounted to telephone lines in the exchanges being recorded – which surely has been given for my entire financial market career over the course of the last several decades on the buy/sell side…and we were implementing it even on the exchange I ran 10 or 15 years ago. So why is that such a bad thing at an exchange per se? It strikes me the barrel bottom has been found in his being assiduously scraped in the NSE legal purge – perhaps there are some show trials to come but this strikes me as a great example of all that is wrong with India’s legal system where for example, the efforts to resolve the NSEL fraud have been essentially unproductive to date.

FESE, the European Federation of Securities Exchanges they’ve produced their essential reading on the 2021 year for European stock trading the European exchange report.

Meanwhile, FESE has also launched the European small and mid-cap awards alongside their partner European issuers. This is the 10th anniversary of the awards and they’ll take place in Prague in the Czech Republic as part of the European Commission’s annual SME assembly at the end of November. It’s great to see these awards returned as always and plaudits to FESE and European issuers on reaching the 10th-anniversary milestone this year. Who knows, perhaps the guest speaker from the European Commission will even come up with a new speech, especially for the occasion.

The Shanghai bourse they’ve made a rather brave proclamation they’re vowing market stability all the way through the Communist Party Congress in China, which is of course the politically significant 20th Party Congress taking place later in the year.

It was a hugely busy week for results in the parish, all the details were in Exchange Invest daily, the newsletter no person can afford to be without in capital markets and market structure. Looking at the highlights from a helicopter hike distance, Deutsche Börse had excellent numbers all together net revenue +15%. NASDAQ similarly impressed leading earlier in the week they were in double-digit gains and in fact double-digit gains in profit terms were quite common over the course of the early stages of the results season. Fiserv and MSCI also noting similar amounts of growth, perhaps the most shocking results of the week, however, came from the first half of Euroclear‘s net profit of 351 million euros which is up 42%. Very impressive results from the often moribund Euroclear organization. The only disappointment of the week was, well, at best trading water the Japan Exchanges Group.

New markets this week, also a busy week for new markets, we have got back up to 20 SEFs in the USA with the CFTC granting edges SEF registration as a swap execution facility. There’s also going to be another new agribusiness commodity Exchange in Nigeria, the State of the African Diaspora (SOAD) – that’s a new acronym in the Exchange Invest universe I believe, says it plans to create an agribusiness commodity exchange aimed at helping farmers in the country.

Finally, the Moscow Exchange they’re looking at opening a new stock derivatives market for non-residents from ‘friendly’ countries. Of course, it’s the great conceit of the Russian invasion of Ukraine remaining the notion that Western sanctions have been adopted wholesale by planet Earth, whereas in reality, a lot of folks are wary of supporting US-centric initiatives. Thus, a ‘friendly’ aka non-sanctions state oriented stock exchange may have legs for MOEX and indeed, the management of the Moscow Exchange continues to exercise a high degree of dynamism in their efforts to secure the future of the Russian capital market.

Deals this week, are similarly interesting niche deals. Let’s just pick one, ICE (Intercontinental Exchange) has extended its climate risk management offering by acquiring Urgentem. Another little niche data purchase, further enhancing the enormous ICE’s data vault in climate and far, far beyond.

If you’re trying to get to grips incidentally, with what’s happening within the data economy, you ought to pick up a copy of my most recent book “Victory or Death?” – Blockchain, Cryptocurrency and the FinTech World. It’s explaining how technology is affecting life and markets, 20 years on from the excitement of my original FinTech best-seller “Capital Market Revolution!”. “Victory or Death?” is published by DV Books and is distributed by Ingram worldwide, while you’re waiting for your copy of “Victory or Death?” to arrive, don’t forget to check out our Livestream, Tuesday 6pm London, 1pm New York time – the IPO video live show.

Catch the back episodes on LinkedIn and YouTube via IPO-Vid. We had a cracking show this week, our special guest was the EEX CEO Peter Reitz. He was discussing Building Sustainable Commodity Markets Worldwide – How Can An Exchange Build Sustainable Markets? Absolutely a must view that, catch the highlights on YouTube, the whole show is there, look for IPO-Vid. Coming on Tuesday 7pm Europe, 1pm USA, Steven Sears is going to be discussing Developing Your Options.

While we look forward to that show upcoming, let’s just peruse what’s been going on in the last week in crypto land. Crypto giant FTX, according to Bloomberg are in talks to raise more funds after their recent buying spree and buying spree which indeed is ongoing. Now look, I applaud FTX for raising money when they need it but then again, given their desire to revamp CCP clearing to their advantage (and Exchange Invest continues to believe: the systemic disadvantage of the entire derivatives world…and beyond…), it’s also somewhat perturbing that FTX needs to bolster their balance sheet.

As we mentioned in Exchange Invest Issued 2393 (Monday, July 4th) and I quote, well quote myself Good grief, there’s an egotism for you folks.

I quote myself how “$250 million here, $250 million there and sooner or later, you’re talking about real money”…in the context of FTX’s somewhat frenetic round of bailouts.

That the Bahamas group parent and the FTX US entity are both seeking funding sounds sensible but it may also lead to concerns about the overall stability of the crypto market. Can FTX justify their $32 billion valuation from the January round? That may be a very significant benchmark…the perception of how FTX is performing, how their many funding deals are believed to help the business and also the issue of just how influential/favourably Giselle Bunchen chatting with Sam Bankman-Fried in lavish Vogue advertorials is viewed by investors remains to be seen. The rounds are in parallel tandem and for a lot of circuitous calculation as to subsidiary versus payment. Some might see that as a modicum of desperation, others will presumably perceive vim, vigor and progress.

Put simply, #itscomplicated. At the same time, will this influence the CFTC? While applauding the communitarian actions of SBF and FTX, the idea they have investments/loans backstops in struggling crypto entities, which have not been made public could provoke discomfort amongst crypto investors? After all, even if the beach was distributed, those tidal rules (attributed to Warren Buffett) exposing naked swimmers remain acutely relevant?

Elsewhere in the FTX deal sphere an attempt to be allowed Voyager was rejected this week, leading to a somewhat angry Twitter stream from Sam Bankman-Fried himself, while FTX continue to negotiate an acquisition of the South Korean market Bithumb according to reports.

One exchange that is not so far rumoured to be in discussions with FTX is Zipmex, they suspended withdrawals last week. At which point in time the management said there was no problem but then again, ladies and gentlemen, “You can’t have your collateral back but we are in rude financial health” is a phrase nobody has ever believed. Sadly, this didn’t bode well when we reported it in Exchange Invest last week and indeed by the time we were recording this podcast, it was being reported on the wires that Zipmex is seeking at least an investor or a purchaser and there are rumors that there could be a more than $50 million hole in the exchange’s accounts.

Coinbase meanwhile, they’ve been doing a little bit of the profit in 1984 routine they scrubbed their blog of the product manager indicted for insider trading in the historic crypto crackdown case, which has indeed provoked a very angry reaction from Coinbase itself.

Look, there’s a good argument to be made in a transparent world that you were your PR mistakes and don’t meddle with a website to recreate a perfect narrative in the style of 1984. In this case, Coinbase are not helping their image by papering over their cracks. Indeed Coinbase shares tumble 21% in just one day this week after the report that it’s facing an SEC probe. That investigation seems to have come just a few days after an outburst by the CEO of Coinbase himself against the SEC’s investigation for insider dealing.

Cypto startup Blockchain.com they’ve laid off 25% of their staff as the fallout spreads through crypto winter. That’s equivalent to about 150 roles in total. Most of the layoffs about 44% affect employees in Argentina, while 26% are based in the USA and 16% in the UK and indeed you can see a brief review by Exchange Invest of crypto exchange layoffs published via Medium and LinkedIn which we sent to subscribers of Exchange Invest earlier this week. Enjoy the read.

Binance’s CEO see CZ Changpeng Zhao on Monday sued Bloomberg Businessweek’s Hong Kong publisher Modern Media CL on defamation claims over a translated article. That’s interesting of course as Reuters have been strident critics of CZ and Binance in recent months but don’t seem to have attracted any legal cases, where Binance overall has found itself a lot more sympathetic coverage generally speaking in Bloomberg

Brought product news this week the Taiwan Futures Exchange (TAIFEX) held the opening ceremony of the OTC derivatives clearing business. The premiere of the Executive Yuan and high profile financial executives and professionals from the financial industry attended to witness a milestone moment in the OTC derivatives market within Taiwan itself.

In Japan, the Tokyo Financial Exchange Inc. (TFX) announced they’re going to launch compounded Tuna-based products, while, Alibaba are applying for a primary stock listing in Hong Kong, seeking to add to their overall investor base, and the Lagos Commodities and Futures Exchange (LCFE) is set for real-time trading on gold and 12 other products when it launches later this month.

In regulation news, a European Union lawmaker the MEP and former commissioner Danuta Huebner from Poland is proposing an interesting market data waiver for small bourses as part of the attempts to cobble together a consolidated tape in the EU. She proposes “exempting platforms which represent less than 1% of total EU daily trading from supplying prices to the tape, according to an excerpt from her upcoming report on the consolidated tape, which has been leaked to the press. Platforms which “do not contribute significantly to the fragmentation of EU markets” will also be exempt but bourses that do not make use of an exemption should get a higher share of the tape’s revenues”

It’s interesting as clients will know, I have a fair bit to say these days about the split between what I termed ‘superliquidity’ and its lesser forebears, that’s a major issue for regulatory and indeed exchange development thinking which appears to be somewhat absent across the parish currently, at least Danuta Huebner is one person trying to push forward, the desperately needed consolidated tip for the European Union’s markets.One other snippet from Danuta Hubner, she is also calling for a ban on ‘payment for order flow’.

We mentioned that earlier, Coinbase’s product manager at least former product manager Ishan Wahi and his brother Nikhil Wahi and friend Sameer Ramani have been charged by us prosecutors with wire fraud, conspiracy and wire fraud. This is all part of an alleged insider trading scheme. Of course insider trading only applies per se to stocks and securities and that has caused a huge regulatory spat between the CFTC and the SEC Coinbase themselves blasted the SEC over the insider trading case, saying none of the tokens concerned that it lists are securities. It’s #AllAboutGary versus #CFTCWasFirstMover in the latest regulatory spat to come between the charges of the finance and agricultural committees of the US Senate and House of Representatives respectively. At the same time, Gary Gensler finds himself under fire from an unlikely source, a fellow Democrat and fellow former chairman of the SEC Harvey Pitt this week. He argues that the courts are likely to undo a great deal of what the SEC is currently proposing, particularly in terms of their environmental legislation. That’s one mega-slapped-on from Harvey Pitt. Indeed, the Wall Street Journal ran a story with a fascinating headline this week: Gary Gensler Stonewalls Congress going on to note. SEC Chairman Gary Gensler, it’s acting as if he’s above all that. Our comment at Exchange Invest was, of course, the pithy rejoinder how disappointing, don’t Congress know their place by now?

Career paths this week Ashishkumar Chauhan has quit as the Bombay Stock Exchange (BSE) chief executive. A committee is going to be managing affairs for an interim period and of course, the reason for that is that Ashishkumar Chauhan no gardening leave for him, he has taken instant charge as CEO of the NSE (National Stock Exchange) of India, which of course has been beleaguered by many scandals of late.

Down under in Australia the latest person to leave from a massive exodus over the course of the last year from the Australian Securities Exchange, the ASX monopolist is their compliance chief Janine Ryan. NASDAQ has expanded its board of directors to 11 members adding Johan Torgeby, the chief executive of leading Skandinaviska Enskilda Banken (SEB). Good news for Andy Ross, he’s departing the London Stock Exchange Group where until recently, of course, he handed up the CurveGlobal platform, which the LSEG decided was a piece of low-hanging fruit it could close down and save some money on as opposed to actually getting to grips with integrating Refinitiv. Anyway, Standard Chartered has appointed Andy Ross as global head of prime and financing, financing and securities services(FSS) worldwide and he’s also going to play a leading role in the London office. Delighted to see IPO-Vid alumni Andy Ross. He was IPO-Vid 008 way back when joining Standard Chartered after a successful attempt, at least personally, where he added a great deal to his reputation in his efforts to make the CurveGlobal Exchange derivatives platform work.

Finally this week in career path, Kemperlesnik they have appointed parish veteran David Prosperi, as executive vice president and managing director. You will recall that previously, David held senior communication roles at Aon, CME Group and the Chicago Board of Trade as well as the OCC until recently. Delighted to see David back full time in the parish joining Kemperlesnik.

Finally, ladies and gentlemen, to step over to ‘Big world’. Just in case you missed it, no fewer than eight rounds of Parliamentary voting were required to elect the new 12th President of Vanuatu, Nikenike Vurobaravu this week.

And on that mysterious and magnificent note ladies and gentlemen, my name is Patrick L. Young, creator of exchanges the world over.

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

LINKS

ED&F Man Gives Up LME Ring Status Amid Takeover Talks With Marex
Market Screener

Chitra Ramkrishna Sent To 14-Day Judicial Custody In NSE Phone Tapping Case
Republic World

European Exchange Report 2021 Published By FESE
FESE

FESE: Launch Of The European Small And Mid-Cap Awards 2022
FESE

Shanghai Bourse Vows Market Stability Before Communist Party Congress
The Economic Times

Deutsche Börse Group Achieves Strong Organic Growth
DB1

Nasdaq Reports Q2 2022 Results
Nasdaq

MSCI Reports Financial Results For Q2 And Six Months 2022
Business Wire

Fiserv Reports Q2 2022 Results
Fiserv