Exchange Invest Weekly 022

Transcript

The rain in Spain. Well, who cares frankly, it's the bid for the horse that’s what interests us in this week's Exchange Invest Weekly

Welcome to another Exchange Invest Weekly. My name is Patrick L. Young, the founder and indeed publisher of the Exchange Invest Daily, the newsletter of the bourse business, and we have a battle for the bourse this weekend: BME the Spanish Stock Exchange which operates all of the exchanges in Spain, including derivatives and also of course the CSD clearing depository and clearing house; they are under a pretty staggering bid actually, Swiss exchange group has made an all cash 2.8 billion euros bid for the beleaguered BME, as it truly is. As we were racing to pixel on Monday the stock had already reached the 34 euro offer price that was some gosh 30+% different to where it had closed as we recording this podcast last Friday. Euronext have been left behind instantaneously, they need to pony up according to the BME if they're going to get into the battle. And indeed who knows it could be a battle royal because of course, that would give the opportunity for Stephane Boujnah’s empire to unify its way all the way from Portugal, right up to through the lowlands and then also its outer points of course in Ireland and Norway. The battle is very, very interesting indeed. Jos Dijsselhof used to run Euronext Amsterdam. He clearly has a very exciting plan going forward for the bourse. It might not even involve delisting the BME stock itself. That sounds very interesting Could it be they're looking at some sort of an interesting vehicle for the SiX group to go forward and make acquisitions in the future, given the fact that of course, the SiX group are not going to be listing in the near future, because of the, well, historically interesting position of the mass duopoly of Credit Suisse and UBS, as well as the many other banks who are held delicately in a state of well diplomatic status through the current ownership of the SiX group. Nonetheless, SiX looking dynamic, Dijsselhof looking dynamic, and of course, only barely days after he said there were no conversations going on about acquiring the BME. Stephane Boujnah, Euronext looking pretty flat footed. This is going to be an interesting development moving on from the Antonio Zoho era because of course, he stepped down several months ago. Other bidders are in the fray potentially Deutsche Boerse, mentioned for this one. It's interesting to see that UBS analysts, Commerzbank analysts and others can't perceive that there's any value to DB1 buying the BME they can't understand how BME; their sale rating could be turned around by the Deutsche Boerse management through restructuring... or perhaps that's a telling insight, how even analysts view the management direction of the DB1 C suite nowadays.

I'm not sure that it makes sense for Hong Kong exchanges to be involved the Hispano-Sino- Hong Kong relations don't strike me as immediately logical, but clearly HKEX could have the money if they want said European operations within one country, but it hardly delivers the sensational transpacific pact, which was the incredible pivot that could have been delivered if the London Stock Exchange had been listening, instead of making eyes only towards Refinitiv. Incidentally, coming up next week: We have the exciting vote on Refinitiv: will the LSE shareholders old jump in and decide to vote for what is going to be the worst restructuring project in the history of the entire parish in the near future? Well, coming back to the SiX and BME issue, very, very interesting deal all together. Any counter offer, as I mentioned at the start of the segment, for Spanish Stock Exchange would have to top the SiX bid, the BME has stated and that's obviously going to mean that a lot of people are going to be spending the weekend with their bankers as they decide how much they're going to be bidding…

Over in Asia amid several stories, congratulations the Hong Kong exchanges group are celebrating five years of stock Connect. Quite interesting article in the South China Morning Post: “How did stock Connect overcome a rocky start to become a success?” Actually, I have to say it was always obvious to me so long as China didn't pull the plug that the through train - as it was once called, later - Connect was always inevitably going to be a huge success. The people who really couldn't see it was the media who continued to cover their lack of foresight in retrospect, having dismissed the project even after it was already blossoming. Here's to five great years of Connect and five more fabulous years as it expands, of course, into the bond markets and beyond. Meanwhile, the Germans they're looking at their own version, there was a conference in Frankfurt this Week and CEINEX the Chinese exchange which is some sort of joint venture with Deutsche Boerse, of which we hear relatively little these days. They had a little puff piece: they're looking for a Shanghai DB1 stock Connect program ultimately presumably through CEINEX itself.

Meanwhile, one big IPO this week and again it was on Hong Kong exchanges: Hong Kong exchanges have voted themselves back into the leading position of IPO markets in the world thanks to Alibaba choosing Hong Kong for the secondary listing. Despite domestic issues and a little local domestic difficulty... Alibaba picked an auspicious digit for their stock code, and ultimately, they have managed a successful $11 billion listing, which has propelled HKEX back into the firmament of leading IPOs spot.

Fascinating research snippet this week, Nasdaq revealed, there was a 50% spike in paid research triggered MIFID II.

Robinhood the organization which sells your order flow and tells you it's giving you a free stock trade... They've moved on to the UK. They're going to be offering essentially all of their US listings so therefore you'll be able to buy various UK and European stocks provided they've got GDRs. Well, of course, the good thing is at least the UK is enlightened enough not to have payment for order flow and other such grotesque operations against the best execution interests of the customer.

One new market this week, a series of top diamond firms and also indeed the Miami International exchange, as well as the Bermuda Stock Exchange are backing a business to do a diamond exchange in Bermuda... says its pioneering... looks to me rather like a carbon copy of the Singapore Diamond Exchange it has to be said.

Meanwhile, the Russian national security depository have concluded the new shareholder agreement, Thomson Reuters they've redeemed approximately US 550 $2 million worth of debt securities early.

An interesting set of results. CMC markets, the massive alternative broker based out of London, they've shrugged off the regulatory crackdown. As you'll recall, the amount of leverage has been severely reduced on all forms of different products. And indeed, there's been a binary option crackdown as well as the CFD leverage reduction. Nonetheless, CMC have shrugged off the regulatory crackdown with a profits boost.

In the world of online brokerage, the biggest news of the week, Charles Schwab, dear old Chuck is reportedly in talks to buy his rival TD Ameritrade. Of course that's very interesting because what's happened recently? Well, effectively, he looks to be buying TD Ameritrade for pretty much the stock price that it was about a month ago before Charles Schwab announced that they were going to go down the Robinhood route and effectively offer de facto free - in parentheses not remotely free, your order flow is being sold and you're getting bad execution, close parentheses - approach of Robinhood. And therefore, Schwab, essentially, as it was brilliantly described by the excellent Matt Levine, “Schwab broke ameritrade to buy it” in one of his most recent money stuff columns in Bloomberg. Interesting news though big rationalization for the online brokerage markets.

Elsewhere. XTX markets have overtaken Citadel securities and Tower research as the largest ELP systematic internalisers, in Europe. Fascinating all together.

No CCP worries this week. In fact, a little bit of CCP good news, the European Union has finally managed to extend for at least a year access to UK clearing houses for the rest of Europe. Let's face it, ladies and gentlemen, this is protectionism. it's an example of dire political will within Brussels and nobody who actually believes in progressive free markets can honestly say there is any reason why this should not be extended permanently, except for the fact that, of course, the European Union is behaving like a badly spurned spouse.

in fees and NASDAQ are going to produce a minor incremental fee increase to fund some of the upgrades to Times Square. Cue hysteria, I suspect from all manner of the sell side...but seriously, look at this: NASDAQ charges a maximum $155,000 US for the largest listed companies that's going to rise to, wait for it, $159,000. Let's face it, if the listed companies have so much as the temerity to have a call with their brokers it probably costs them about $5,000. The problem with listed markets here is not at the exchange. Rather the bosses are to be applauded for their incredibly low prices. It is the massive range of intermediary costs which need to be controlled.

Cum-Ex Cum-Ex Cum-Ex, ladies and gentlemen ABN Aro’s Frankfurt offices were raided over Cum-Ex this week, as the ongoing crackdown against this disgusting scandal carries on.

In people news, the former Irish stock exchange boss Deirdre Somers is getting her foothold back in the parish or at least adjacent to the parish. She is going to be joining the boards as a non exec of a series of funds on behalf of BlackRock who've got a significant sized business in the Dublin financial center.

Meanwhile, Girish Chaturvedi is mentioned as being potentially in line for the chairmanship of the National Stock Exchange of India which has been bereft of a chairman for some months due to their recent colocation scandal. Mr. Chaturvedi is a former petroleum secretary in the Indian government. Over at the Bucharest Stock Exchange after it successful years as a chairman Lucien Anghel is standing down. Congratulations to him. He certainly brought in many ways the organization into line after a series of very, very volatile, almost semi constant war for the chairman seat before he arrived. Now, Radu Hanga is going to be taking up the post as chairman. He's been formally advisor to the board of the extremely large domestic bank, Banca Transylvania. All the best to NASDAQ CEO Tim McDermott. He's leaving as there is a massive restructuring from NADEX and also the parent IG group.

In regulation, the SEC Chairman Jay Clinton has indicated he wants to allow retail investors to buy private securities, especially for their Individual Retirement Accounts. That's an interesting move; progress in many ways, although at the same time, is it not blurring the lines between the relatively free private markets and the highly regulated exchanges? We think it certainly doesn't help the equilibrium and it certainly doesn't help the public markets, that strikes me as being bad for investors and bad for the business overall.

In South Korea, they're taking pretty firm legal steps to stamp out on registered crypto exchanges. If you're a crypto exchange boss without a license, you can face prison up to five years on fines of 50,000,000 Won Okay, $45,000 isn't gonna make much difference either way, but five years in an orange jumpsuit I'm sure isn't fun, whether in Korea or elsewhere.

One of those fascinating stories to come out of the regulatory environment this week was about Libor. The regulator is effectively telling the derivatives industry go find a libor consensus. Sounds like a very dubious piece of buck passing to me by a group of regulators who haven't managed to get their act together, somewhat unreasonable in many ways, shapes and forms, nonetheless, hopefully ISDA who've been much more capable of effectively self regulating things such as master agreements in the past can manage to rise, pick up the baton and actually sort out the things that the world's governmental blob has singularly failed to do.

13:38

in technology, interestingly, for Ion, they bought the currency software supplier Market Factory. At the same time it wasn't going all under Andrea Pignataro’s way, because we then had news subsequently from Risk magazine that the banks are teaming up for an Ion replacement project: a group of European and UK banks are considering building their own Fixed Income trading software in a move that could ally members to cut ties with Ion, Is that a credit risk push or a concern about Ion’s market domination. Either way it's clearly a threat to Mr. Pignataro’s Empire. Elsewhere Trayport are going to be providing the exchange trading system for the Bulgarian Balkan gas hub organized market.

Brokers are complaining in India the NSE had technical glitches this week. Seems that they've been blaming a boss vendor for what went on. elsewhere.

The London Stock Exchange have leased Primary Bid to give retail investors access to share offerings on the same terms as institutional investors They also said that LSEG are internally building a new algo validation tool

The American Financial Exchange, a brainchild of the genius Dr. Richard Sander have announced that Ameribor is going to be able to trade on the blockchain. Slight concern possibly whether Ethereum is sufficiently scalable but overall for the cash market... it's certainly an interesting way forward to provide some very very useful, immutable data. The UK watchdog meanwhile, the FCA has set a deadline for Libor interest rate swaps to move and of course that end of Libor is creating huge uncertainty as the Wall Street Journal noted for the CME’s giant Eurodollar market.

Russia in I suppose the wake of the Murban announcements the previous week with the announcement of Intercontinental Exchange’s Abu Dhabi Exchange venture, in partnership with ADNOC and a series of other people in the Emirate, meant that there was a story in the FT on Monday; it was talking about Russia making its fresh efforts to take control of its oil prices.

It will be interesting to see whether SPIMEX which still has close relations to the Chicago Mercantile Exchange - SPIMEX being the St. Petersburg International Mercantile Exchange - will therefore be able to revivify its efforts to take control of its oil price alongside the CME which also has problems with its Dubai Mercantile Exchange, which now looks somewhat becalmed. Nevertheless, it will be interesting to see what happens with the new auction strategy for REBCO et all from Russia.

Lots of product news this week I'm only going to pick on a very very few notes Alibaba futures and options will be introduced on Hong Kong Exchanges. As soon as the listing is completed - hurrah! - fascinating to see the Tokyo Stock Exchange is looking at having some sort of a structural change partly driven by the regulators as well looking at a prime market for global blue chips and moreover, China are looking to fully promote reform of the H share market. Now that would be radical. Another radical move, China It is believed, is going to be speeding the launch of rare earth futures contracts according to the Shanghai Futures Exchange. And Ho Chi Minh Stock Exchange have unveiled three new stock indexes during the course of the week. Biggest IPO looming, of course, in the wake of Alibaba, which is happening as I speak, the Saudi Aramco stake: they're going to raise they think not 25.6 billion, a bit of a disappointment there. They were thinking of maybe four times that originally, they were looking at a global offer that got shrunk to effectively a very, very regional offer within little more than the Middle East itself. The value Well, it's been trimmed down to 1.6 to $1.7 trillion, where they were hoping for at least $2 trillion in terms of the overall IPO value of the company, or at least, the overall value of the company post IPO. Aramco is gonna be selling there for just 1.5% of its shares on the local Stock Exchange Tadawul somewhat less than expected. And clearly, a huge sway of the Western brokers are going to be proud fondly disappointed. At the same time, look at it another way: $25.6 billion, that effectively would put you in Young's pyramid of exchanges, somewhere around the market capitalization of the London Stock Exchange group, the fifth largest company in my pyramid of exchanges itself denoting the values of all of the markets in the bourse.

Interesting: earlier in the week, we had news that US brokerage TD Ameritrade were exploring ways to enter the sports betting business. Good to see brokers catching up to something I was discussing when Capital Market Revolution was first published in 1999, the opportunity remains immense... who knows, will Chuck be interested if Charles Schwab buys TD Ameritrade.

MTS have launched an electronic trading platform for Cypriot government bonds and MGX, The Minneapolis Grain exchange, they've launched A spikes futures in collaboration with the Miami exchange and T three index.

And that Ladies and gentlemen, brings us to the end of a really rapid gala run through what was a very exciting week for markets. My name is Patrick L. Young. You can join me on Monday in newsletter form for theExchange Invest Daily, or I'll be back here podcasting once again with Exchange Invest Weekly next week. Thanks for listening and have a great week and markets.

Links

Battle For The Bourse: Two Stock Exchange Operators In Race To Buy BME

City AM

SIX Announces All-Cash Tender Offer For BME To Create A Top-3 European Financial Markets Infrastructure Group

SIX

Euronext's Statement Regarding Recent Press Speculation Regarding BME

GlobeNewsWire

Euronext, Six Battle For Spain's Bourse

Seeking Alpha

Spanish Bourse BME At Centre Of Bidding Battle

Swiss Exchange Operator Six Believes Offer For BME Is Fair For Now

Euronews

Deutsche Boerse May Bid For BME -La Informacion

Morningstar.com

War For Madrid Exchange To Widen As Deutsche Boerse Considers Bid

Yahoo Finance

UBS Analysts Cast Doubt On Deutsche Boerse Bid For BME

Financial News

Any Counter Offer For Spanish Stock Exchange Would Have To Top SiX Bid: Bme CEO

Reuters

Are Cozy Swiss, BME Ties Enough To Seal The Deal?

finews.com

HKEX: Celebrating 5 Years Of Stock Connect

HKEX

How Did Stock Connect Overcome Rocky Start To Become A Success?

South China Morning Post

Shanghai -Deutsche Stock Connect Program Advances

Caixin Global

Analysis: Why Alibaba Chose Hong Kong As Home For Its Second IPO

South China Morning Post

Alibaba Picks Auspicious Digits For Stock Code, Hong Kong Share Price

South China Morning Post

Alibaba's US$11B Listing To Propel Hong Kong To Regain Top IPO Spot

BNNBloomberg.ca

Nasdaq Reveals 50% Spike In Paid Research Triggered By Mifid II

Bloomberg

Trading Giant Robinhood Makes Its UK Debut In Revolut Challenge

City AM

How Robinhood Plans To Make Money On Us Stock Trading In The UK

Quartz

Top Diamond Firms Back Pioneering Exchange

Royal Gazette

Russia National Settlement Depository Shareholders Conclude New Shareholder Agreement

MarketScreener

Thomson Reuters Announces Early Redemption Of Approximately Us$552 Million Of Debt Securities

PRNewswire (press release)

CMC Markets Shrugs Off Regulatory Crackdown With Profits Boost

Financial Times

Charles Schwab Is Reportedly In Talks To Buy Td Ameritrade

CNN

Charles Schwab In Talks To Buy Td Ameritrade, Deal Could Be Announced As Early As Today, Source ...

CNBC

Schwab Broke Ameritrade to Buy It - Bloomberg

Bloomberg

XTX Markets Overtakes Citadel Securities And Tower Research As Largest ELP SI In Europe

The TRADE News

EU To Extend Temporary Access To Uk Clearing Houses

EU To Extend Temporary Access To Uk Clearing Houses Beyond March

City A.M.

Nasdaq Fees Increase To Fund Times Square Upgrades

PLY: Cue hysteria methinks but seriously Nasdaq charges a maximum 155,000 dollars for the largest listed companies and that will rise to 159,000. If the listed companies have a call with their brokers it probably costs 4000 dollars. The problem with listed markets here is not at the exchange end - rather the bourses are to be applauded for their incredibly low prices. Rather it is the massive range of intermediary costs which need to be controlled.

ABN AMRO's Frankfurt Office Raided Over Cum-Ex Tax Scandal

Bloomberg

German Authorities Continue Raids In Cum - Ex Tax Fraud Scandal

Xinhua

Banks Lacked 'Integrity' To Police Cum - Ex Trades, Official Says

Bloomberg Tax

Inside Track: Irish Stock Exchange's Former Boss Deirdre Somers Gets Blackrock Foothold

The Times

Former Petroleum Secretary Girish Chaturvedi In Line For NSE Top Job

Business Standard

Nasdaq CEO Adena Friedman : Gender Doesn't Define My Potential

Forbes