11 min read

075 Exchange Invest Weekly Podcast December 12 2020

London Stock Exchange Group has now spent the better part of $2 billion on fees without completing a deal in recent years to get this latest third deal over the line.


This week in the parish of bourses and market structure. Well, let's just say it's been a Diverse week. My name is Patrick L. Young. Welcome to the bourse business weekly digest:  It's the Exchange Invest Weekly Podcast.

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 week’s many events and happenings can be found in the Exchange Invest Daily subscriber newsletter: the unique guide to the bourse business sent daily to your inbox.

More details at ExchangeInvest.com.


Let's begin way back when ...with the myth of innovation, it's in response to news this week, that advisors to the London Stock Exchange Group have racked up 1.1 billion US dollars in fees for the London Stock Exchange Refinitiv deal.

The story told to this day, concerning ingenuity down under may have been embellished, but it remains a pertinent morality tale on the dangers of hubris and exuberance.

In New South Wales many years ago, a man stayed in his shed to build a wondrous new racing car using his own labor. And when the southern hemisphere exited winter, the new machine was proudly shown to his many friends who gathered with a tinny of beer to toast the promise of this splendid new design.

Alas, after all the excitement of those long winter nights, the machine, while looking purposeful did nothing to repay its creator. Testing proved slow and ultimately when raced against its peers, the car delivered no decent results with a trophy cabinet left unfilled.

The car is still with us today in historic racing circles known colloquially as the WOFTAM. It's an acronym inferring that the energy input didn't remotely live up to the end results. London Stock Exchange Group has now spent the better part of $2 billion on fees without completing a deal in recent years to get this latest third deal over the line.

They've sold genuine family silver, and wasted valuable years as the progressive end of the parish ICE, Nasdaq and Hong Kong exchanges have all made palpable progress towards the future while LSEG is still chasing the dream with a flawed concept, even when it was announced. Now, the idea is dated and flawed while clearly overly costly in time spent as well as money expended.

The London Stock Exchange Group management approach simply beggars belief.

WOFTAM will likely prove a generous conclusion.

Elsewhere, one bit of good news for the London Stock Exchange Group; their London clearing house RepoClear subsidiary, welcomed an interesting first clearing member from Luxembourg... None other than ClearStream, a subsidiary of Deutsche Boerse. Of course, obviously Clearstream being a member of LCH RepoClear makes sense on a business level, but it does in and of itself rather demonstrate the vast uphill struggle facing the other DB1 subsidiary in the patch of CCP clearing, EUREX who are trying to of course, take away the Euro CCP business from the LCH itself.

Over in Australia, the competition boss, the ACCC, Rod Sims is threatening to cut the prices of PEXA  - PEXA is a property settlement. And somewhat amusingly enough, it happens to have a near monopoly situation in the Australian economy. The upstart is backed by none other than our friends, the Australian Stock Exchange. They've managed, it seems, to convince the competition blob that a monopoly is a bad thing for markets. We of course, totally completely adopt, really agree.

However, The obvious conclusion to me would be that Australia, the prosperous open liberal democracy is currently enabling an upstart competitor - in this case an ASX proxy - to compete in a monopoly. However, this is Australia, sadly home of it seems cronyism and hypocrisy. Hopefully the ACCC can prove us all wrong and also open Australia's financial center to competition, particularly in the monopoly of antiquated technology, which is CHESS for settlements and depositories of stock trading, pushing, therefore ASX’s agenda in the property space, into the financial markets. Enabling true open competition.

Elsewhere, lots of conversation on NASDAQ's diversity push. Many people are utterly skeptical.

However, it has to be said that the raw statistics give us an encouraging note from the parish: NASDAQ's board of directors is seven: three male: female, therefore breaking their own suggested future tally of at least one female director. The Intercontinental Exchange seminary has a 14 member board with nine men and five women.

Those are indeed encouraging in the week when Aena Friedman finds herself in Fortune's top 20 business persons of the year leading the parish from the front, a vital position because we have precious few Cheerleaders for markets in the public eye, and even a global industry Body, who seem to eschew supporting markets at all.

Nasdaq is one excellent model of many that can be profitably followed in a parish still rich in opportunity. There's been a Welter of feedback over in Exchange invest... much that could be discussed. Concerns about privacy continued to be an issue with the NASDAQ overall proposal. But generally the unanimity is one of support for the concept of more diverse companies, more diverse boards, and indeed overall encouraging the panoply of qualified people who could be so employed in companies, which let's face it the statistics prove: Tend to make more money and tend to be better organized companies from start to finish.

Okay. Elsewhere Euroclear has linked Chinese companies with global capital through the Eulan bond initiative.

Tech Fail of the week from interactive brokers amongst others. Robin hood was afflicted too. It seems a s a raft of retail investors were trying to get into the US stock market before Christmas.

In deals, some aftermath of the S&P IHS Markit deal, Fitch have been rapidly affirming the fact that well, their fellow rating agency S&P Global Will maintain the same stable outlook on their A- rated debt.

Elsewhere to Interactive Brokers, they have as well as that tech outage during the week... They're acquiring Folio investments, a retail brokerage business, formerly owned by Goldman Sachs, a handy batch of 70,000 client accounts.

IEX an interesting exchange within the parish. Of course, Ronan Ryan was on the IPO-Vid livestream just a few weeks ago. You can catch that on YouTube IPO-VID. ..the CDPQ in Quebec, have become a lead investor in the  group. Very good news all round.

And meanwhile, NASDAQ didn't have to break a sweat. They borrowed 1.9 billion as they required at an interest rate of more or less nothing to buy the financial crime fighting platform. Verafin.

While, I doubt that Janet Yellen is itching to call the Fed and demand a rate rise... It still makes total sense while credit quality is strong and the Fed underpins the market to borrow, for the likes of NASDAQ and other parishioner companies, at these amazing low interest rates.

Don't forget, you've still got a chance to buy my latest book “Victory or Death.” Could be ideal holiday reading, whether you're already embroiled in Hanukkah, - a very happy Hanukkah to one, all - or of course looking forward to the Christmas and New Year festivities.

Victory Or Death, Blockchain Cryptocurrency, And The Fintech World: 20 years on from the original FinTech bestseller “Capital Market Revolution!” I delve back into the world of FinTech, where it is? how it's going? and Indeed, What may be your career future in a digital world?

Victory or Death is published by DV books and is distributed by Ingram worldwide.

Don't forget too, to check into that IPO-VID live stream I mentioned just a couple of seconds ago.

Most recently we had the brilliant Dominic Frisby on the show. One of the world's very few individuals, who's both a standup comedian and a financial markets expert. He was talking about everything from gold, cryptocurrency, taxation, and much, much more: worth catching that one. We also have all of the other back issues in the series with Sharon, Constancon a leading South African business figure in the UK. Who's going to be on the next stream coming next Tuesday.

Over in crypto land: astounding statistic! Binance, the world's largest crypto exchange is expected to make a billion dollars in profits during 2020, according to the CEO. That is simply an astounding amount of money ...and that's before anybody even begins to consider that this is a broadly unregulated entity with no known formal HQ making as it predicts, a billion dollars in profits during calendar year 2020.

Elsewhere, we saw a couple more arrests. a BTC-E founder has been sentenced to five years in prison for laundering ransomware funds while a crypto exchange founder in Hong Kong has been taken amid China's crack down on fraudulent bank accounts. Elsewhere, SiX, the Swiss exchange group and SBI are planning a digital asset exchange based in Singapore.

Product news this week :

Over in the world of oil and gas ICE, the Intercontinental Exchange marked a new milestone in the liberalization of natural gas markets with the launch of West India Marker LNG (Platts) futures. They also became the first venue in the world - Intercontinental exchange - to launch Sonia options during the course of the last week, while the LCH CDs, Clear has gone live with US credit index options clearing.

In other words, ladies and gentlemen, when it comes to interest rates, as the National Law Review noted this week, “libor is fading away but perhaps not as quickly as we thought.”

One of the fascinating pieces of product news, water futures, they finally started trading, amidst growing fears of water scarcity.

Those are futures over at the Chicago Mercantile Exchange, and indeed come 20 years after one P L Y. - Yes, that's me - first predicted water futures as being a major feature of the 2020 environment. When I was writing in an article for the Futures Industry Association’s new year, January the first 2000 AD edition.

Technology news this week, it won't come as a surprise in the wake of the ASX’s comprehensive technology meltdown of recent weeks where indeed various pieces of the technology stock are still out of order a fortnight later: “the Australian bourse is the world's most unpopular with stock analysts.” It's a remarkable headline, but one which belies the existential crisis of the ASX monopoly, which is failing to deliver. And again, opens us up to the question of just when the ACCC will enable proper competition in the Australian financial market infrastructure.

That coming at the same time as various parties are threatening to trigger a class action lawsuit against the hapless ASX.

Over in Japan, further ramifications of the fallout from the Tokyo Stock Exchanges closedown on the Fujitsu president. They were the major tech vendor to the Tokyo Stock Exchange. He received a 50% pay cut over the Tokyo Stock Exchange outage that's going to be removed from his pay packet for four long months as a result of a single day of cancelled trades.

That momentary dislocation in the earth’s majestic orbit during the course of the past week was doubtless, the feeling of IT vendors suffering a simultaneous frisson at such actions as the Japanese government have just demanded happening to them, Should they ever be found wanting in technology delivery.

In regulation, lots and lots and lots of talk about market data looks as if the generally liberal SEC regime, which is now coming to an end with the end of the Trump First term happens to be in favor of supporting all manner of impots against the exchanges as a result of mass lobbying by various of the usual sell side intermediaries.

Elsewhere the UK Financial Conduct Authority, have confirmed that the speculative mini bond mass marketing has been banned. The FCA have had issues with these bonds, but again, like crypto investments for retail, the outright ban is surely a step too far and only driving people towards the worldwide web?

In people news this week, former London Stock Exchange boss Xavier Rolet has joined one of the SPACs: Golden Falcon, Elsewhere. Julia Hogget a banker cum regulator is coming ex FCA to fill the boss of the London Stock Exchange trading seat, which is nowt typically occupied by a former Mandarin of some variety.

Plaudits to interim CEO, Denzil Jenkins, who has kept the ship afloat and will continue to do so until La Hoggart begins work. Elsewhere at the LSE, as part of the Refinitiv buy, LSEG are adding Blackstone, Refinitiv board members to the overall LSEG board, and also the nomination committee, namely Martin Brand, Erin Braun, and Douglas M Steenland

All the very best to Carol Kennedy, chief marketing officer of the CBOE who is retiring after 27 years with the organization. Congratulations to Stacie Fleming on her elevation to CMO, soon after returning to Chicago from having run the CBOE’s communications offices in London.

One fascinating case of a salary breach issue, or at least a salary data breach issue. The MCX are holding back part of the former salary of their managing director, Mrugank Paranjape. That's after he quit the exchange in 2019 and a probe and a forensic audit report was apparently swept under the carpet.

Now, MCX have issued a notice to Paranjape on the matter and have held back his variable pay due to allegations made against him in the report. That investigation recommends this days after Mrugank  was appointed the boss of competitor exchange, NCDEX’s subsidiary, and the NeML.

And finally this week news reaches us from Reuters via S&P global: Global debt is going to hit. $200 trillion, that amounts to 265% of the world's annual economic output by the end of the year 2020. Good news: As long as the world economy gets back on its feet after the pandemic S&P reckon the global debt to GDP ratio should ease back to a mere 256% by 2023.

Call me old fashioned, but 256% leverage sounds, just a trifle high! And on that mysterious and magnificent note, ladies and gentlemen, thank you for listening to me, Patrick L. Young with this the 75th Exchange Invest Weekly Podcast. We'll have all the news coming up in the course of the next week in the Exchange Invest Daily newsletter. More details about subscription art, extended invest.com. Thanks for listening and have a great week in markets.


Advisers Rack Up $1.1Bn In Fees For LSE- Refinitiv Deal

LCH Ltd’s RepoClear Welcomes Clearstream As Its First Clearing Member From Luxembourg

Competition Boss Rod Sims Threatens To Cut PEXA's Prices

Adena Friedman in Fortune’s Top 20 Business Persons Of The Year

Could Nasdaq's Proposed Diversity Mandates Be The Key To Changing Corporate America?

New Promotion Of Two-Way Opening Of China's Bond Market

Euroclear Links Chinese Companies With Global Capital Through 'Yulan Bonds'

Interactive Brokers Says Expects "Prompt Recovery" From Outage

Interactive Brokers System Crash Causes Clients To Be Locked Out And At Huge Risk

Fitch Affirms S&P's 'A-' Idr Following Ihs Markit Merger Announcement; Outlook Stable
Fitch Ratings

Interactive Brokers Acquiring Folio Investments Retail Brokerage Business From Goldman Sachs
Business Wire

CDPQ Becomes A Lead Investor In Iex Group

Nasdaq Borrows $1.9 Billion To Buy Financial Crime-Fighting Platform Verafin

Nasdaq, Inc. Announces Proposed Senior Notes Offering

Nasdaq, Inc. Prices $1.9 Billion Senior Notes Offering

Binance , The World's Largest Exchange, Expected To Make $1 Billion In Profits In 2020, Says CEO

Hong Kong Crypto Exchange Founder Taken Amid China's Crackdown On Fraudulent Bank Accounts

Btc-E Founder Sentenced To Five Years In Prison For Laundering Ransomware Funds

SiX And SBI Planning Digital-Asset Exchange Based In Singapore

ICE Marks A New Milestone In The Liberalization Of Natural Gas Markets With The Launch Of West India Marker LNG (Platts) Futures
Business Wire

Intercontinental Exchange Becomes First Venue To Launch SONIA Options
Business Wire

LCH CDSClear Goes Live With US Credit Index Options Clearing
The Trade

Libor Is Fading Away; But, Perhaps, Not As Quickly As Thought
The National Law Review

Water Futures To Start Trading Amid Growing Fears Of Scarcity

Australian Bourse Is World's Most Unpopular With Stock Analysts

'Plenty Of People Out Of Pocket': ASX Outage Could Trigger Class Action Lawsuit
The Age

Time For ASX To Trade In Its Monopoly And Open Up To Competition
The Australian

'Fee For No Service': ASX Traders Demand Answers After TMC Delay
Sydney Morning Herald

Fujitsu President Given 50% Pay Cut Over Tokyo Stock Exchange Outage
The Japan Times

Fujitsu President To Take 50% Pay Cut For 4 Months Over Tokyo Bourse Outage
Kyodo News Plus

UK Financial Conduct Authority Confirms Speculative Mini-Bond Mass-Marketing Ban

Update 1-Former LSE Boss Rolet Joins Tech Acquisition Vehicle Golden Falcon
Financial Post

LSEG Announces New CEO Of London Stock Exchange Plc
London Stock Exchange Group

CBOE Global Markets Announces Planned Retirement Of Chief Marketing And Communications Officer

MCX Holds Back Former MD’s Salary In Data Breach Case
The Hindu BusinessLine

Global Debt To Hit $200 Trillion - S&P Global