Exchange Invest Weekly Podcast 029

Transcript

Could it be the new dawn on Refinitiv? Could it be sealed by anti trust in as little as three months? All this and more and this week's Exchange Invest Weekly.

And a very fine Good day to you ladies and gentlemen, my name is Patrick L Young, the founder of Exchange Invest, the daily newsletter of the bourse business. And indeed We lead this week with a very optimistic prognosis from the head of the Borsa Milano, part of the London Stock Exchange group, reaffirming that the borsa Milano is not up for sale for the time being. Raffaele Jerusalmi, has said that he believes that the EU might actually be able to decide on anti trust in the LSE Refinitiv deal within a few months. Strikes me as highly optimistic. On the topic of highly optimistic things, the week began with news via Reuters that, according to a survey by a consultancy, 1000 EU financial firms plan to open UK offices after Brexit. Gosh, that's a wake up call! A wake up memo In fact, to the remoaner flat earthers. Who would have ever thought that folks in the EU 27 might want to service the firm's based in the world's most dynamic cosmopolitan financial center, London and the UK?

Over at Clearstream, they've agreed an interesting deal: they're going to acquire 51% of the UBS fund distribution platform Fondcenter AG. Very interesting. UBS remains the minority shareholder at 49%. But nonetheless, Clearstream, a division of Deutsche Boerse demonstrating commercial acumen where Euroclear is currently even more, becalmed than usual due to shareholder issues.

Sebi ended last week with the exciting news that they were going to exonerate Ravi Narain and eight others in the infamous NSE dark fiber colocation case. Good news all round for the executives and former executives who no longer have a stain on their character. At the same time, the Bank of England was threatening a lot of stains on: Well, the pox on all your houses effectively! They're going to use all manner of “tools” to scrap libel, all those little incentives which are akin to a form of tension torture, rather like the medieval rock for a bank balance sheet.

The curious thing going back to that LSE story...only last weekend and the Sunday Telegraph; Jeremy Warner, their business columnist, had huge concerns that the EU is going to effectively take part in a backlash over the LSEG’s world leading pretensions, arguing that they're going to twist their antitrust policies to make a political Brexit point.

I can't say it would really surprise me but then again if it stops LSEG being anchored to the de facto dead weight of Refinitiv, Margarethe Vestager would ironically be doing London Stock Exchange group and the UK a great favor.

Of course, one of the big stories of the week was also about volume: the NSE, the National Stock Exchange of India, they've turned into the world's largest exchange in futures and options trading by contract. Of course there's a lot of headlines on this topic without much consideration of value of contracts traded. Parishioners may recall the similar discussions when KOFEX was trading massive numbers of contracts over in Korea 20 years ago, overvalued to suit crazed puntingHousewives in Seoul or Busan, amongst others. the NSE are to be applauded for their volume growth, but obituaries for the CME cash generation powerhouse are wildly premature, even if volumes were somewhat static year on year. That said, there are obviously going to be concerns in the United States of America and the big wide advanced world. Because it is clearly true that this is a great sign that Asia is rising, the volumes in small, emerging and indeed large emerging countries to whit, China and India, demonstrate a sensational and interesting view of our world future. And of course, that world view is changed by the fact that this particular British and Irish correspondent happens to be looking and recording with only less than 10 days to go before Brexit occurs at which stage EU 27 will be less than 15% of the world's trade. And 85% plus of the world's trade will be outside of the European Union. Both of those ought to be worrying pointers whether for EU exchanges, or indeed, US exchanges in relation to how volumes have grown exponentially in emerging markets like India, it's certainly going to be a very, very exciting decade as the roaring 20s get going.

News from Africa this week, apparently the Nigerian Stock Exchange demutualization is creeping ever closer. And of course, that's something that's going to be very exciting with the whole concept of Africa rising alongside Asia rising as this century continues.

In earnings this week, Interactive Brokers Group missed. Earning per share by two cents. Perhaps the issue of zero fee trades are weighing on them as they did indeed on the earnings at TD Ameritrade earlier in the week. Meanwhile, of course, it was the Davos fest where lots of people who don't really mean much to the world, but think that they're wildly important all gathered together, having flown in by private jets and spent a small fortune and left their huge carbon footprint behind so that they can consume lots of imported goods and therefore worry about what the proles should be doing with the world in order to save it from climate change. To that end, there was an interesting story in Quartz, who reported on a panel discussing should the New York Stock Exchange try to slow Climate change? Frankly, Stacey Cunningham, the doyenne of the New York Stock Exchange, its president, hit the nail on the head and I quote,

“Investors should have the right to choose, it’s a really slippery slope if we start to decide for them what opportunities they should have access to.”

if this entirely common sense position, earned Stacy the “Greta Death Stare,” then kudos to Stacey Cunningham. There were many people who were concerned in their day about the introduction of products such as electricity. And indeed, in the case of electricity that didn't stop the New York Stock Exchange, allowing investors to decide on companies led by Edison and Tesla. The NYSE itself was absolutely tacit so long as their accounts and the other related regulations were up to date. Nowadays, it makes total sense to let the market decide as ultimately neither government

Nor some apres ski party, no matter how many billionaires are present, will come up with all the answers.

Nor do we run our exchanges on popular Malthusian constraints, it is fair to say the unregulated broadly rule free coffee shops would have remained the more popular bourses.

In people news this week we lost an SEC Commissioner, Commissioner Jackson is leaving the Democratic mantle to return to law school...his teaching position...that opens an interesting opportunity for perhaps Slightly more conservative tilt to the SEC going forward. We wish him well

As I mentioned previously a group of nine folks amongst others Ravi Narain have been exonerated by Sebi in the case of the algo trading fiasco on the colocation issues, along with Ravi, former execs exonerated Include senior V-P (operations) R Nandakumar, Co-Location head Jagdish Joshi, CTOs N Muralidharan and Ravi Apte while amongst the current officials COO (Trading) Mayur Sindhwad, CTO-Projects Sankarson Banerjee, CTO-Operations G Shenoy and VP-Regulations Suprabhat Lala. All the best to all of them. duly exonerated in what’s gone on, and all the best to Anna Kuznetsova. She's standing down from the executive board of the Moscow exchange, and she's going to be replaced by Igor Marich who will see increased responsibilities and there will be no additional person on the executive board of the Moscow exchange.

Elsewhere. Exciting news, it looks as if at last, we're going to see: arise Lord Spencer! In fact, it may be Baron Spencer, the TP ICAP founder: the man who recently sold NEX and still is the largest individual shareholder of the Chicago Mercantile Exchange group, Michael Spencer. He looks to be in line to be handed a seat in the upper house of the UK Parliament, the House of Lords. As I've often remarked, it remains a travesty that the UK House of Lords has not already embraced the finest City of London entrepreneur of his generation, particularly given Michael’s remarkable reversal of the financial fortunes of the Conservative Party during their Blair era slump. When he was treasurer, he turned an 8 million pound deficit into a surplus of 75 million pounds between 2007 and 2010. And that was against, of course, ladies and gentlemen, the backdrop of the financial crisis! Had the economy kept growing during 2008 and 2009 who knows what that anyway sensational number achieved by Michael Spencer as treasurer might have been!

Given the exoneration of ICAP over LIBOR, there are no impediments to the ennoblement of Michael Spencer, no matter what the “woke” end of the British civil service might think. This is excellent news. I'm delighted for Michael on his richly deserved elevation to the House of Lords where he will be a wise steward on matters of state and particularly our parish and financial markets.

Elsewhere, big retirement news of the week, we had two interesting stepping downs: one after 20 years of unbelievably Distinguished Service. Vice Chairman Charles Vice, the man who was actually part of the Continental Power Exchange that was taken over by a man no one in the parish knew at that point in time, one Jeffrey Sprecher. Charles “Chuck” Vice has played a key role building the remarkable ICE Empire during its two decades in business, and we wish him every success in the future.

Meanwhile, over in Canada, the Ontario Securities Commission chair and CEO Maureen Johnson is stepping down 10 months before her term is scheduled to end. OSC Vice Chair Grant Vingoe will take over as acting chair while a search is undertaken for Jensen's replacement. In 2019. Of course, Jensen stated she wanted a war on red tape and the simplification of regulation. At that time, instead of applauding her common sense, I must apologize to the parish: I ought to have realized she was probably doomed particularly in the land of the Maple Leaf “wokesters.”

Over at the Swiss Stock Exchange, quite interesting, three more executives have left their hundred million dollar blockchain project, quite what's going on on the inside, nobody knows, because it's not of course been on an immutable ledger.

And finally this week in terms of staffing news within the parish or rounded, Xavier Rolet has lasted barely a year in his role as chief executive of the massive hedge fund CQS. Quite interesting...wonder why he's stepping down. Congratulations at the same time to Serfe Harry, a parishioner who was CFO at CQS at Xavier’s instigation: he is being elevated to deputy chief executive.

In regulation news this week: the Georgian Parliament have passed a derivatives law supported by the EBRD.Hooray! it's a derivatives world and Georgia will soon be another country in the United Nations of derivatives.

Technology news: the highlight of the week was the NASDAQ tech trends survey for 2020.

Another interesting and entirely to be applauded succinct report from NASDAQ outlining some useful tech Nuggets to ponder in the year ahead. It's a tough call to do these reports year in year out especially when your tech vendor business has gone from somewhat niche to major entity, itself within a multi billion dollar entity

Elsewhere in India, the Power Exchange of India have upgraded their trading platform. Sounds like a wonderful piece of technology kit. However, as an Anglophone, I must say, I'm a little bit concerned about the branding: is PratYay, really an appropriate name for trading system? Perhaps it means something in India that we're not understanding in the English speaking world.

Over in product news, ladies and gentlemen, one interesting snippets of product information Curiously, Reuters published some proposed ICE Murban contract specs on Wednesday afternoon of this week. And then all of a sudden overnight, the links seem to have gone dead. Nobody quite knows why. And it doesn't seem to have anything to do with ICE either. So here's an excerpt of what they published. As always, it should of course be subject to every form of regulatory permission proviso. The good folks of the Abu Dhabi global markets will decide what is the best contract in due course. I quote,

“ICE also plans to add price spreads against other Published crude futures contracts such as Murban-Brent and Murban - WTI and also introduce an alternative delivery procedure to facilitate trading, a source with knowledge of the matter said. Buyers and sellers are matched after the contract expires. And if they agree to deliver to an alternative location or deliver an alternative grid, the delivery procedure becomes a bilateral agreement and the exchange exits the process.”

The contract spec itself seems well pretty plain vanilla and logical compared to other similar markets in the world. It's 1000 barrels per lot contract, one cent trading price quotation, one cent settlement price quotation both in US dollars. Last trading day will be the last business day of the second month preceding delivery. Final settlement price: Singapore market price on the last trading day and this Foreign Exchange delivery settlement price which will be the basis for physical delivery. Daily market prices will be published at 4:30pm Singapore time. So that's 0830 GMT and 4:30pm. London time. No London market price on the last trading day each month daily settlement volume weighted average price of trades between 7.28 and 7:30pm. London time looking at 22 hours per day of trading, that's going to be Monday to Friday as proposed 1am to 11pm London time. So it's obviously not going to incorporate quite the exactitude of the Abu Dhabi working week which is usually Sunday to Thursday Inclusive.

Physical delivery, delivery of Morocco and crude oil at the Abu Dhabi National Oil companies terminal at UAE Fujairah. On a free on board basis on to buyers vessel during the delivery month. There will be up to 48 consecutive contract months. Very interesting. We'll see how that develops. And indeed, hopefully at some stage the draft will reappear on Reuters or some other news service. And finally, for this week's Bulletin of the Exchange Invest Weekly, crowdfunding is expected to capitalize the capital market, according to Bhutan's national newspaper. Ladies and gentlemen, at this juncture, the news that the Royal Securities Exchange of Bhutan is going to be able to provide alternative financing via a digital crowdfunding platform must, If nothing else, demonstrate just how global crowdfunding has become in less than a decade. On that note, thank you for listening. Ladies and gentlemen, I'll be back on Monday with the Exchange Invest Daily newsletter for all our subscribers across the world. My name is Patrick L Young, have a great week in markets!

Links

EU Decision On LSE-Refinitiv Deal Expected In A Few Months-LSE Director

Reuters

A Thousand EU Financial Firms Plan To Open UK Offices After Brexit

Reuters

Clearstream And UBS Agree On Long-Term Partnership In Funds Environment - Clearstream To Acquire Majority Stake In UBS’s Fund Distribution Platform Fondcenter AG - UBS To Remain Shareholder In The Future Business Combination

Reuters

SEBI Exonerates Ravi Narain, 8 Others in NSE Dark-fibre Case

The Hindu BusinessLine

Bank Of England Threatens To Use 'Tools' To Scrap Libor

Reuters

Backlash From Europe Over The LSE’s World Leading Pretensions