158 Exchange Invest Weekly Podcast August 27th, 2022

Transcript

This week in the parish of bourses and market structure:

Crypto is dead!

Long live crypto!

Goes my argument in an Op-Ed for City A.M.

The FDIC issued a blistering cease and desist crypto warning

…and the New York Stock Exchange half a billion dollar tick tweak

My name is Patrick L. Young.

Welcome to the bourse business weekly digest.

It’s the Exchange Invest Weekly Podcast Episode 158.

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 from 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.

A price improvement study as explained by CEO Michael Blaugrund from the NYSE this week on LinkedIn explains that a little tick tweaking here and investors can save a billion dollars or so what’s not to like about the concept of tech harmonization.

The Hong Kong Exchange are going to be diversifying products and pursuing listing reforms in the special administrative region of China. HKEX CEO Nicolas Aguzin was revealing that plan in interviews in the aftermath of the HKEX results. Meanwhile, Stock Connect it’s going to have fewer holidays next year. Thanks to the wonders of the calendar and weekend coincidence, that ought to bring a $110 billion dollar trading boost to Hong Kong exchanges and the pertinent Chinese mainland forces in Shanghai and Shenzen.

The UNCDF (United Nations Capital Development Fund (UNCDF) has signed a Memorandum of Understanding (MoU) to help develop Cambodia’s security sector.

Over in Bangladesh, they’re having problems due to cabinet directives to save electricity in the wake of the current various issues relating to the power supply the world over. The new timing for all stock exchanges in Bangladesh will be from 9:30 am to 1:50 pm, that started last Wednesday, 24th of August.

In results this week, it was a 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. For the sake of this podcast let’s look at some edited highlights.

Singapore Exchange Group has posted record revenue, but unfortunately, net profits were only up, fractionally revenues +4% to overall $794.3 million, EBITDA however only creeping +1%.

ASX Limited their revenue was +7.5%, their profits slightly better in improvement terms than the SGX +5.7% and meanwhile NZX they were a bit more flattish, EBITDA +2.8% over the course of the quarter.

New markets this week, another busy week for new markets and of course naturally what else could I say at this juncture but ladies and gentlemen, all of the details of the new markets that are coming developing with added pith can be found in Exchange Invest daily.

Anyway, Russia they have presented a proposal to create a new precious metals exchange. They’re even proposing their own ambitious international standard for precious metals, dubbed the “Moscow World Standard” (MWS).

Presumably, if you don’t settle promptly on the “Moscow World Standard” a man called Vladimir ensures 3 divisions of tanks arrived to demand the trade has made good?

Over in deal news this week, lots of buybacks taking place, the Hellenic Exchange has been buying back their own shares as has the London Stock Exchange group. Meanwhile, a revaluation rumba Robinhood slashed their acquisition offer to crypto app Ziglu by more than half. An aggressive unilateral reprice, has the Musk-Twitter playbook spawned a trend in FinTech? I wonder.

Elsewhere, Zagreb Bourse is on the open market boosting its stake in its Skopje counterpart, the Macedonian Stock Exchange to 29.98%.

Good news from Cape Town, the Cape Town Stock Exchange (CTSE) that’s the native city’s FinTech’s best stock exchange looking to encourage SME business, announced the closing of a $5 million or 85 million (R85-million) funding round.

Elsewhere, Valereum (that is of course a group of which PLY, the person talking to you from behind the microphone today is an Executive Director). Valereum we conditionally acquired a major shareholding in Vinanz Limited in exchange for the sale of our Bitcoin mining assets on Bitcoin holdings. Can’t say much about this as an insider but the modest mining arm of Valereum has been sold on to one of the biggest VLRM investors, David Lenigas and an associate will now build Vinanz so that they will be concentrating on their aspect of Bitcoin and cryptocurrency mining while Valereum will concentrate on its previous public aims of Gibraltar Stock Exchange takeover, awaiting regulatory permission and NFT projects.

If you’re looking to try and understand better what all this FinTech malarkey means for you, then remember there’s a book for you “Victory or Death?” – Blockchain, Cryptocurrency, and the FinTech World, with a foreword by Jeff Sprecher is my most recent tome discussing the future of finance, markets, the blockchain cryptocurrency, and much much more. “Victory or Death?” is published by DV Books and is distributed by Ingram worldwide.

Don’t forget also that you can access a huge raft of information free of charge, go to, for instance, YouTube, and look for IPO-Vid, where you can find a huge number of different Livestream, interviews as recorded over the course of the last couple of years and that series is coming back in just a few weeks time.

In crypto land this week, well I have to lead with something that I contributed myself: Crypto Is Dead Long Live Crypto! That was the message that was coming from my Opinion Editorial piece (OpEd) in the City A.M. Newspaper, the voice of the City of London itself. It was mid-summer, it was Friday and Bitcoin may not be dead (yet) but I do believe it’s about to give way to the nextgen…those are #Excitingtimes as we look at how the big ex-Bitcoin transition is likely to happen over the course of the rest of the crypto winter whenever that might end and how that bites the legacy crypto industry and the great transition begins to crypto 2.0.

Speaking of those who are trying to make the transition to crypto 2.0, none are feeling the pain more acutely than Coinbase. Their CEO Brian Armstrong, he’s been giving some quite interesting interviews this week, most notably on CNBC, about how they can possibly manage the crypto winter. “Anything could happen”, he said issuing stock crypto market predictions after a recent price collapse in Bitcoin and Ethereum. Somewhat of an endorsement, I think for my “Crypto Is Dead Long Live” crypto message.

Meanwhile, Crypto.com got UK regulatory approval this week, but at the same time, Crypto.com has reportedly laid off hundreds of employees. Now that hundreds more employees than we were discussing on medium and LinkedIn in an article analyzing job losses across the crypto sector in the course of the first half of this year. Indeed, the latest round of cuts at Crypto.com appears not to have been mentioned publicly as one Crypto.com employee commented on LinkedIn: “The company is hiding the fact that they’ve laid off more than 1,000 employees even though they officially announced laying off 260”

Meanwhile, as the crypto winter bites, the regulators have been biting admittedly slightly toothless on the part of the FDIC (they’re the people who ensure banking deposits in the United States of America) nonetheless, they sent a strongly worded letter cease and desist, they said to FTX US and four other entities who it seems had been hanging out we put this charitably erroneously stating that they had FDIC insurance backing for their customer deposits.

I must say I found this a rather gutless statement by the FDIC. Hopefully, we’ll see a bit more backbone from the likes of Senator Elizabeth Warren in due course to make the US government actually enforce what amounted here to be, it seemed to the parish of exchanges, a prima facie example of companies fundamentally misleading clients to the safety of their deposited money. Whether this was just abject incompetence or outright nefarious activity was tough to discern but either way, it is, frankly a disgrace that US regulators are not taking more action, particularly given the fact that just a few months ago, the FDIC issued the same message to Voyager and what happened to Voyager? Oh, yeah, it’s going through chapter everything at the moment and about to disappear into, I would imagine bankruptcy emulation.

We had lived in hope, of course, that the CFTC is paying close attention to this FDIC initiative and will use this compliance lapse by FTX is another reason not to pursue their flawed “a little $250 million – clears us of the deed” CCP proposals as Lady Macbeth might have termed them, had she been doing public policy advocacy for FTX.

Speaking of FTX, they had an interesting leak last week, apparently, their revenue grew 1,000% during the crypto craze, and their revenue soared more than 1,000% from $89 million to $1.02 billion in 2021. Operating income was $272 million up from $14 million a year earlier. FTX saw a net income of $388 million during the course of last year, up from just 17 million in the previous year.

Now, an optimist would be hugely impressed by these numbers in raw statistical form, they look awesome. A more cynical soul might ponder a series of points, for example. Just how much fundraising FTX may need, as, after all, it has been spending a lot on rescuing / acquiring different burning crypto entities of late. A billion dollars has been mentioned even in interviews with the FTX founder Samuel Bankman-Fried himself. Then again, some might consider the angle that FTX has been rumoured to be doing the twin funding tango on their own corporate assets (that’s topco and the US subsidiary) a little bit of a concern given just how profitable they were during the course of the last year.

That doesn’t altogether the fact that they’re looking for twin funding, ie they’re trying to raise funding at the topco and/or the US subsidiary or indeed on both, we believe it may be that ultimately FTX balance sheet is just as safe as it might be despite the stratospheric growth before crypto winter bit. Then again, what would the multiple of FTX US actually be at the moment as it only amounts to apparently 7% of total US crypto business, presumably that spin is a big growth number which is part of the reason why they’re trying to raise on either or indeed both of these entities.

Others might say it’s just convenient to have such a document leak at this point when we believe FTX are trying to raise money, or it’s a case of this document has been so widely distributed, which some might say could smack of funding desperation that in their search for series, whatever, ultimately the results have appeared in the public domain.

Meanwhile, over at Binance, their CEO CZ has cautioned investors against crypto bad players. I wonder who on earth he could have been speaking about.

Elsewhere, hackers have apparently impersonated the CCO of Binance Patrick Hillmann in a series of video calls with several representatives of crypto projects. Sounds like another nail in the Work From Home coffin to me at least if you make meetings with people face to face it’s a lot harder to plant dummy staff.

In product news this week, well it seemed to be almost all about ICE. ICE launched 10 carbon credit futures vintages extending out to 2030. ICE has seen early industry support for its new US residential mortgage futures and the terminal transfer fees have been waived. Well, actually the wave has been extended I ought to say for the ICE Midland West Texas Intermediate AGC futures, which are making such a fascinating stir around the storage points of Houston. in competing against the rather decrepit Cushing WTI concept contract listed on the CME.

Speaking of the CME they’re going to be launching Ether options on September 12th, which will in fact be just ahead of the infamous ‘merge’ of the Ethereum blockchain as they jumped from proof of work to proof of stake.

Moscow Exchange finally this week they have banned the use of dollars as collateral from August 29th.

In technology news this week, there’s a bit of a whoops nasty brewing at MCX (Multi Commodity Exchange). Even SEBI have raised concerns over the uncertainty of the implementation deadline. SEBI has been told by MCX that MCX has chosen vendor TCS will not be able to deploy the new system in September as planned.

Now, I’m not sure what the Gujarati for ‘schadenfreude’ is, but this is the perfect dictionary example to accompany it.

MCX (Multi Commodity Exchange) of India, as you will recall was the brainchild of Jignesh Shah and indeed it was his poster business as he expanded into the exchange world. Jignesh was unceremoniously thrown out of the MCX over the National Spot Exchange fiasco. Financial Technologies now known as 63 Moons were banned from tendering the replacement of their system at the MCX exchange last year.

Now, TCS has failed to deliver, leaving the Multi Commodity Exchange’s new management having to go cap in hand with Financial Technologies, who at the best of times have retained shark-like perceptiveness when there are a few molecules of blood in the water.

The MCX is now openly bleeding from an artery with no sign of rescue. Clearly, the legacy vendor will not so much be demanding a pound of flesh as pondering whether to leave any flesh behind when calculating its interim fee… From Macbeth and FTX we have Shylock personified in the Indian parish of exchanges.

And thus, in what is only a brief review of the many exciting pieces of news in the world of exchanges. If you want to see and read them all, you need to be a subscriber to Exchange Invest daily, which is well worth the money at only $300 a year these days.

However, let’s look at “Big World” finally to wrap out the week. First of all, a little reported fact: Greece last weekend concluded 12 years of European Union fiscal surveillance that was imposed in return for multiple bailouts after their crushing debt Euro crisis.

Paolo Gentiloni, the European Commissioner for economy stated: “The end of enhanced surveillance for Greece also marks the symbolic conclusion of the most challenging period the Euro has experienced”, that’s presumably until the next Euro crisis and of course, this all happened just days ahead of the Euro crashing below parity against the US dollar.

Over in South America, Argentina is preparing to restrict imports amid a foreign exchange shortage yet again, and indeed, an Argentine Presidential candidate has been sued for promoting a crypto Ponzi scheme.

Given pretty much every Argentine President (and please message me if you can think of any exceptions) since World War 2 has been running a Ponzi scheme masquerading as a national economy, should this not be a badge of honour in the perverse world of Argentine (for want of a better term) political ‘economics’?

And on that mysterious and magnificent note, ladies and gentlemen. My name is Patrick L. Young, creator of exchanges and markets the world over, advisor to exchange markets the world over, and indeed also the publisher of the Exchange Invest news service for the bourse business.

I want to wish you all a very good week in blockchain, life, and markets. We’ll be back next week for episode 159.

LINKS

Price Improvement Study Suggests Tick Harmonization Could Save Investors $1B+
Michael Blaugrund, NYSE COO LinkedIn

Price Improvement, Tick Harmonization & Investor Benefit
NYSE

HKEX Will Diversify Products And Pursue Listing Reforms
South China Morning Post

Hong Kong Exchange Sees Further Headwinds After First-Half Profit Drop
Reuters

Stock Connect: Fewer Holidays To Bring US$110 Billion Trading Boost For HKEX And Mainland Bourses
South China Morning Post

UNCDF Signs Deal To Help Develop Cambodia’s Stock Exchange
NNN

Stock Exchanges In Bangladesh Cut Trading Hours By 10 Mins
The Business Standard

SGX Group Reports FY2022 Net Profit Of S$456 Million
SGX

ASX Limited Full-Year Results 2022
ASX

Russia Presents Proposal To Create New Precious Metals Exchange
ValueWalk