Exchange Invest Weekly Podcast 026

Transcript

In the Exchange Invest weekly issue 26 we are celebrating a six month milestone in podcast terms but of course it's been seven long years with Exchange Invest newsletter every day.

What we're looking forward to today December the 20th: It's a Friday the last Friday before Christmas indeed the last Friday before Hanukkah as well. And of course for those of you who aren't celebrating either: The new year is looming. Welcome to our last weekly review of the bourse business of this year.

My name is Patrick L. Young, founder of Exchange Invest daily, the newsletter of the bourse business. Thanks for joining this podcast, Episode Number 26. Our weekly review coming up to December 20th. And what a week it's been even as we were approaching the end of year slowdown. No major deals as such, but one major non-deal: Euroclear have delayed their decision on their sale of a stake. As you'll recall, Euroclear is the CSD in Europe that's pretty much a duopoly alongside clear stream. They have been looking for some time at some sort of a market exit, possibly even an IPO strategy. However, it seems that either within the management or within the 62 or there / there abouts, different shareholders they have amongst financial infrastructure players and particularly European based banks. There has been some form of backroom bickering or indecision amongst management perhaps... the seven tiers of Belgian management for which Euroclear is so famous, and a fair amount of rancour one would imagine.

In terms of my argument for the future of Euroclear, I've long said it's going to be a Vienna Congress settlement, which is going to find the future way forward for this business. Looks as if that could be coming up. Certainly this is a story that's going to run and run in 2020. One stake acquisition bourse to bourse this week is Zagreb bourse, of course, they already own the Ljubljana exchange within the Yugosphere, the former Yugoslavia. The Croatian exchange have also now acquired a 5.3% stake in the Macedonian Stock Exchange. Very interesting altogether to see How Ivana Gazic's business has been expanding over the years, as well as of course, being a prime mover in the SEE Connect enterprise, which was part financed by the European Bank for Reconstruction Development, the EBRD. Elsewhere, the options exchange company Miami International, they've signed a letter of intent to acquire a stake in Mid Chains, which is another one of those blockchain cryptocurrency thingies.

Elsewhere, the bourse of Malaysia, they're revising their listing rules to support the national anti corruption agenda. Let's face it, of course, that 1MDB thing: that's been a bit of a fiasco all right for Malaysia in recent years causing a huge change of government and the return of Course of Dr. Mahathir Mohamad, who was in retirement for many ‘s a good year. At least if nothing else, I'm excited because I wrote an article about this time 20 years ago for the FIA monthly magazine talking about how the world would look in 2020. And I actually talked about how Dr. Muhammad would still be the Prime Minister of Malaysia. Well, at least I got something right in that particular look to the future. However, there was also great a headline I had to make a pause for breath when the Wall Street Journal alert blinked on my screen Thursday evening.

“It said Goldman Sachs in talks to admit guilt.” Gosh, I thought, this could take all of the combined hours of Christmas, Hanukkah and any other festivities looming, not just the new year that we're looking towards on the first of January, but in fact, all other New Year's right up to probably the Iranian one in the middle of Q1, if not beyond. If we were to listen to solely these admissions of guilt by Goldman Sachs. It sounded like such a wonderful cleansing process. beyond anything ever considered during a solstice. But at that point in time the next line appeared. And therefore the whole headline ran “Goldman Sachs in talks to admit guilt and pay $2 billion fine to settle the one MDB probe.” Oh, well, at least something I suppose has been sorted. Albeit, of course, presumably Goldman's won't be admitting any guilt or anything. They're just paying the 2 billion to be nice to the Malaysian government for whatever reason it is. Allegedly.

Anyway, in other news this week, we also had a fascinating story from the USA where the New York State Attorney General didn't manage to pin the blame on Exxon, for what the claimant said was climate fraud, ie an oil company. It was a dubious precedent and it has been avoided at least for now when the court threw the entire claim out.

Elsewhere, in progressive Europe Uber was banned in Germany after a court ruling. Having said that it was already a mere booking service for existing taxis anyway in some places such as Berlin, which merely added to the cost of the ride and removed much of the consumer advantage that there is to the Uber process, and let's face it, if there's one process in the entire world where we have to thank our lucky stars for gullible investors spending huge amounts of money in order to manage to make taxi services cheaper for the rest of us, that definitely amounts to those people who've invested in Uber.

Elsewhere in Bigworld, the Congress couldn't decide in the United States of America to hand over their papers to impeach the Trumpy one because well, actually, who cares? The US Congress approaching petulance over politics is not remotely befitting a mature democracy. It wastes government resources, it's a grandstanding nonsense. In fact, it's almost as if the Democrats want to gift POTUS a second term. I wonder who the Russians really are sponsoring in this next election? Actually, frankly, I would have thought the Russians would be able to be more productive if they were sponsoring something. QV a fabulous sketch this week, which was on Comedy Unleashed where they were discussing whether or not the Russians were actually behind Brexit. I'll leave you to find that link in peace. Elsewhere, woof, in Bigworld, peace on earth and goodwill to all. Well, hopefully that's coming soon.

Back in the parish, banks based in London are pushing for a new EU access plan after the UK election,As you will recall, Boris Johnson, the Prime Minister of the United Kingdom of Great Britain and Northern Ireland won an emphatic victory at the general election just a matter of days ago: one week and one day as we record this podcast in fact - t with his 80 plus majority, with in fact, the ability to run Parliament as he sees fit, thanks to the massive majority that he was given by the Brexiteerian people of the United Kingdom. Therefore, suddenly, we had an outbreak of pragmatism. At all those often far too remoaner-whingey centric London banks, as many of them are finally trying to come to terms with having been absolutely useless at predicting the future for the past few years: particularly when it came to, say, referendums.

And even when they've been living what's been going on around them for several years, they still didn't seem to get the gist that Brexit was going to happen. So now what they're doing is actually a very logical process of trying to cut back on the access that they seek. They're not looking at retail access to the European banking market, per se, but the ability to offer wholesale financing. Frankly, that is all but impossible for the European Union to refuse. Of course, they're going to drag their feet, they're going to negotiate, they're going to stomp, they're going to throw their toys out of the pram because that's the way the EU negotiates. But the simple truth is the Euro debt machine masquerading as the European Union's euro currency, (which was 20 years old this year, which was quite an achievement it managed even see its way through its 20th birthday. Perhaps it may not make 21 all the same). Anyway, the truth is the Euro debt machine needs all the help it can get from London's wall of money. That's why this still looks plausible. And indeed, the activity this week of the UK Government where there has been actually genuinely an outbreak of government in the UK for the first time in a decade or more, has been very interesting. They've said full stop drop dead end of December 2020.

That's when we're going to have a Deal or No Deal - as the game show might go - trade agreement with the European Union. Of course, the European Union is apoplectic because that just doesn't suit their timeframe, because their time frame is always about 15 years ahead and then kick it down the road a bit and give it another five years and possibly five years longer. And actually, there was a brilliant speech suddenly reappeared this week, which was from 1992, just after the CRM crisis in the UK, where Mrs. Thatcher was talking about the problems that were coming up for the European Union. It is sensationally prescient. It's the sort of prescient speech that actually, the Euro loving, Eurocentric banks that are based in London simply have proven incapable of seeing when it comes to looking towards the future, even in the course of a timeframe of the last few years or so.

Back in the marketplace Nasdaq have proposed an interesting new stock ticker regime very well worth looking at. And it certainly needs to be tested in the US stock market to see what happens.

Elsewhere. Lee Olesky, the Tradeweb CEO has been saying all digital trading is simply a question of when not if, of course, it's interesting to look at the bond trading business because that's accelerated in terms of it's all electronic access just in the course of the last few years. But at the same time, it has been actually quite incredible how many of the people that were looking to electronify for the bond market were actually doing so 20 years ago. It has been a long, long time coming, but certainly the time for electronic bond markets is now.

Over in New Zealand, some activist or other was complaining that New Zealand Exchange directors should consider repaying the cost of a trip to New York. I'm not sure whether he was jealous because the NZX didn't get the air miles. But at the same time, it does seem to me Well, given the biggest problem I see in exchanges and other parish related bodies is a closed minded attitude with little desire to Learn: methinks sending a wodge of folks from New Zealand to the headquarters of Nasdaq for multiple opportunities to spend quality, time in Times Square, see and learn all about everything, including technology, and how markets work at the pointy end of the field, is no bad thing.

One round of investment completed this week: the Nigerian Commodity Exchange platform affects closed investment from Consonance completing their fundraising program. Elsewhere in Israel, the Tel Aviv Stock Exchange are eyeing measures to boost liquidity. They've had quite a stellar year actually, haven't they? I mean, they looked to be pretty much junk status only a couple of years ago. All of a sudden with the injection of new capital and new ideas and new momentum from overseas, particularly from the Australian pair who used to be directors of the ASX until they had a bit of a kerfuffle with the SEC A number of years ago. It's really been an incredible result for the Tel Aviv exchange, which looks to have amazing momentum going into 2020.

Over at the Bombay Stock Exchange, they have signed a deal with IHS Markit to develop a new bond valuation service.

In Cum-Ex, more bankers are facing trial, more people being accused of lots of messy stuff to come. And still, it seems to be never ending that weird, whacky situation.

In terms of sale of the week that must fall to the Hong Kong exchanges boss Charles Li. He pocketed a handy 21.4 million US dollars. The first sale of his Hong Kong exchanges stock since he joined the company in 2009. All the best to him and congratulations on what's been a quite remarkable period in office running the Hong Kong exchanges group.

Aquis exchange, they announced that they've got a slight delay to the NEX acquisition. They're still trying to get the paperwork signed off by the FCA and the Belgrade Stock Exchange organized a ceremonial event to mark their 120 fifth anniversary. Another round of investment CI Capital: they've contributed to the forthcoming startup Egyptian Commodity Exchange. Meanwhile, the Malawi Stock Exchange was calling on local entrepreneurs to list their companies.

A little bit of shuffling in the world of crypto bourses: Binance has taken a minority stake in the crypto derivatives exchange FTX and Blade crypto derivatives exchange, some headlines by announcing zero trading fees. Very exciting stuff given the fact that cryptocurrency is usually very expensive to deal in. But of course it transpires that actually there's a catch, and it's called a $10 per month subscription model if you actually want to enter orders!

In people news this week, some talk that Jeffrey Sprecher may be scaling back his civic roles as his wife, Kelly Loeffler heads to the Senate. In some ways, I think that can only be even better news for the shareholders of Intercontinental Exchange: Jeff is going to be concentrating absolutely flat out on the ICE business going forward.

Meanwhile, over at the London Stock Exchange, there was some discussion earlier in the week that proved to be slightly wrong. The bit that was correct in the Financial Times was that Chris Corrado was going to be departing the business. And on his retirement, he's going to be replaced by the man who recently came from TP ICAP.. That hire, David Shalders, who was also previously at RBS, and is apparently a technology specialist: he was hired to oversee the integration of Refinitiv, but in fact, he's now going to become Chief Information Officer. I think it's the LSE’s Stalingrad moment, frankly, it's the sort of concentration of powers that doesn't really make sense. No disrespect to the clearly capable Mr. Shalders, but either, group CEO David Schwimmer always wanted Mr. Shalders to replace the departing Chris Corrado. - so therefore the definitive integration job was just a straw man front - or the LSEG. just aren’t taking the upcoming Refinitiv integration nightmare remotely seriously. Time will tell.

One of the smaller exchanges in Australia - of which there are of course many - the Sydney Stock Exchange have announced a new CEO: all the best to Michael Go.

Good news for Terry Duffy. This week the CME has extended his contract and added to his bonus.

In Ghana Ekow Afedzie has been confirmed as the new Managing Director of the Ghana Stock Exchange. He has of course been acting as MD since the first of August 2019 after Kofi Yamoah retired.

The biggest job News of the Week though, was the confirmation of Andrew Bailey, the head of the FCA as the next governor of the Bank of England. Very interesting for the parish given Bailey's previous involvement, understanding of exchanges both at the bank originally and indeed at the FCA as well... And it has to be said good riddance to the ghastly virtue signaling blobster Mark Carney, perhaps the worst nitpicking interventionist political governor in the history of the Bank of England, who disgraced his office with his political interventions and the utterly erroneous scaremongering about Brexit. Andrew Bailey has got the job as governor of the Bank of England because partly, he believes in Brexit. And that's a great start, ladies and gentlemen, driving Britain forward in a brave new world.

In regulation news Kay Swinburne, the former MEP from the UK, sparked some frankly very worrying news. She said Brexit is ultimately going to spark MIFID III. Well, actually, I suppose it's bad news for Europe, couldn't be better news for the likes of the City of London if it's therefore going to be escaping the shackles of the worst of European Union regulation, which of course includes the complete farce, which is MIFID II.

Indeed, what better news could there be for the City of London than another round of regressive regulation from the EU 27. At the same time, European authorities were being urged to rethink FinTech regulation. clear proof once again that the precautionary principle amongst the EU remains a problem. Speaking of the precautionary principle, we did get a little bit of progress towards the end of the week. It seems as if we're finally on the way towards a pan European crowdfunding regulation. Hooray only what several years after pretty much everybody else managed to get their act together with the business of crowdfunding? When you can't manage to organize something that's actually pretty simple, such as crowdfunding regulation...and when you are actually in the middle of a process called Capital Markets Union, it also leaves you to consider just how disorganized the European Union has become of late which really is a tragedy for the decaying economies of Western Europe, and indeed some in Eastern Europe too.

Elsewhere, ESMA have proposed strengthening rules to address undo short termism in securities markets. ESMA are now therefore, opening an arb of Pandora's Box dimensions for the rest of the markets’ players. Over in the SEC in the USA, they're proposing to allow more investors greater access to private companies. Good news for investment all around but I'm not sure that that's the right sign once again to be showing to the public markets. Elsewhere AFME, FIA, ICMA, ISDA and the ISLA have to be applauded, they've published a Master Regulatory Reporting Agreement. Great news, although albeit at the same time, it's quite shocking that the likes of the World Federation of Exchanges demonstrate just how redundant they've become in recent years because they aren't even involved in the process... says a lot about which are the most dynamic of the organizations that exist in the world of the bourse business these days.

In technology the New Zealand Stock Exchange halted all trading activity for a day or so this week, as did Malaysia - both of them having some at the time of going to pith, unclear technological problems that meant the markets simply didn't work.

Elsewhere, the Bank of England was actually involved in quite an interesting scandal. It appears that a vendor was running parallel to its video feed an audio feed and that audio feed was being allowed to run just absolutely live, a few seconds ahead of the video feed thus enabling some customers to manage to get a slight heads up on what the Bank of England was doing. The vendor remains unnamed, but we expect they're going to be on the naughty boy step very, very soon. And clearly, despite the fact that presumably this involved the FCA ultimately, as well, that has not precluded the FCA head being promoted to become the Governor of the Bank. England. That's a story that's probably going to run and run into next year as we unravel the tale of just who was offering slightly too low latency data to the market.

Of course, this weekly bulletin would not exist if we didn't have Libor to talk about. Apart from all sorts of manifestations of discussions of worry, of concern, of drama, and everybody getting terribly stressed as they tried to work out just what is actually going to be taking place in the future of the business of interest rate benchmarks itself... We had the global regulator IOSCO ratcheting up pressure on banks and markets to ditch libor. At the same time the Wall Street Journal reported the Fed’s libor replacement would shackle small banks. Equally the CFTC they are trying to help. They're providing some relief to market participants transitioning away from Libor.

Curve Global, the London competitor platform part of the London Stock Exchange group: they've actually gone out and asked the members: they're seeking to know what the market thinks in a consultation on the future of libor. No bad idea.

At that juncture, ladies and gentlemen after some 251 issues of the daily Bulletin of the bourse business - Exchange Invest - this year and well getting on for circa half a million words. It's feeling festive around the offices of Exchange Invest ...or perhaps we're just feeling exhausted. News flow is certainly drying up and as is our wont, I intend to suspend - please Euronext, no sneaky bids - unless force majeure hits us: (again please Euronext no sneaky bids) the regular daily news missives. Normal service - the usual optimization factors on what can ever be deemed normal - will apply. And this will resume with a service called the update issues on Tuesday the seventh of January as Exchange Invest is not alone in having, well, an Epiphany on Monday, the sixth of January. At least that's the plan. Meanwhile, don't ignore the daily Exchange Invest feed. If you happen to be a paid up subscriber to Exchange Invest, there will be a few missives through the holiday season. Fortunately, we have managed to subcontract some elves who have defected from the apparently poor elf and safety - sorry! - conditions of Mr. Santa Claus’s, Northern workshops. Some say they're a horrible sweatshop, but who am I to judge?

Whether you're celebrating everything or nothing over the next few weeks, ladies and gentlemen, on behalf of myself and the team that brought you 251 issues of Exchange Invest this year already, plus 26 podcasts including this one, we wish you a very Merry Christmas, a Happy Hanukkah, or indeed Happy Holidays if you are very PC, American, or just plain dumb about the nexus of history and mythology.

Fortunately, the thought police don't restrict the next salutation, albeit some folks with diverging calendars may deem it premature as a wish. But in that case, at least it will soon be pertinent enough. Ladies and gentlemen, to you all. I wish you a Very Happy, Healthy, Peaceful And Prosperous New Year.

And let's take one final snippet of a story. Not right in the bourse business, but very interesting. Over in Montreal, the SPVM has created a safe space for online traders to meet. So in other words, ladies and gentlemen, in this electronic marketplace that is eBay, that is Craigslist and hundreds and thousands of different ways in which people transact electronic commerce; far removed. but nonetheless, the country cousins of our bourse business, it's interesting to see how people are working towards trust conditions in electronic markets. In this case, in the center of Montreal, right outside a 24/7 police station, you'll be able to exchange money and goods at any hour of the day and night. And on that note, ladies and gentlemen, on the basis of trust, once again, a very happy, peaceful and prosperous new year to you all, wishing you great health and indeed a great week and next year a great year in markets.

Thank you for listening. My name is Patrick l Young.

We'll catch up in the near future with the next edition of the Exchange, Invest Weekly.

Links

Euroclear Delays Decision On Sale

Zagreb Bourse Acquires 5.3% Stake In Macedonian Stock Exchange

SeeNews

Options Exchange Company Miami International Signs LOI To Acquire Stake In Midchains

Sovereign Wealth Fund Institute (press release) (blog)

Bursa Malaysia To Revise Listing Rules To Support National Anti-Corruption Agenda

The Sun Daily

Banks To Push For New EU Access Plan After UK Election

Reuters