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082 Exchange Invest Weekly Podcast February 20th, 2021

New Zealand exchanges annual profits up 20% to emerge from their DDoS disaster which tore the market apart for a week last year..


This Week in the parish of bourses and market structure:

It's been a big week in dealmaking, the Singapore Exchanges seeking M&A while NASDAQ have closed the VeraFin purchase.

National Stock Exchange of India buys a stake in the Indian Gas Exchange...and is a Trans Pacific mining bourse play now on the cards for TMX?

New Zealand Exchange publishes excellent results, and the ASX faces mounting pressure over its regulatory monopoly.

Meanwhile, the City of London finally gets a united front in favor of Brexit and Euronext appoints an Italian banker as chairman, as the power of the Empire shifts east from the Benelux

My name is Patrick L Young. Welcome to the bourse business weekly digest. It's the Exchange Invest Weekly Podcast episode 82.

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 Exchange Invest’s Daily subscriber newsletter. The unique guide to the bourse business, sent daily to your inbox.

More details at Exchange Invest.com.

In Exchange Invest we've been somewhat vociferous of late in noting the abject failure of the Corporation of London to take back control over the Brexit situation, which the Corporation comprehensively lost perspective on with its unprecedented vote to push for a remain vote in 2016 at the great referendum. Putting it politely, the Corporation has remained out of touch ever since. This week, news of the City United project was breaking from London as Exchange Invest rushed to pixel.

Chaired by former life CEO Daniel Hudson with exchange parishioner, Danny Corrigan, as one of the deputy chairman, the organization has a series of stellar Brexit thinkers in its ranks, as well as a political Advisory Committee, including the likes of Lord Hannan and former UK finance minister Lord Lamont.

Finally, the UK financial markets have a coherent voice for the future. The Corporation of London and all those who wish to promote the future of the City would be well advised to embrace the City United project wholeheartedly. PLY has done so without hesitation in the pixels of Exchange Invest Daily this week.

Unity is vital for the City to succeed in the brave new world of Brexit. The City United is the ideal vehicle to achieve that platform for progress and future prosperity in the City of London.

Meanwhile, down under, the ongoing travails of the self styled technology company ASX and its failure to operate its technology stack continue to fester after last year's massive market meltdown. “ASX Outage to trigger market shake up” was the headline in the Australian Financial Review.

And as the AFR notes.

“The stockmarket’s snap trading shutdown last year has forced financial regulators to develop plans to inject more competition against the Australian Securities Exchange and move to compel stockbrokers to connect to its competitor Chi-X.”

The article goes on: “Regulators are understood to be probing the ASX’s highly vertically integrated system as a barrier to entry, the ban on Chi-X competing in areas that ASX has a monopoly on, brokers not investing in the technology to use both the ASX and Chi-X platforms and brokers not switching to Chi-X to trade when the ASX was down.”

...are good points. And indeed, as I might add, a one time leader in exchange advancement - particularly exchange technology advancement from the legacy open outcry era - the ASX memorably talks the IR hype of being a technology company, but has had some serious failures in the breach, culminating in the cluster shambles of last November 16. Afterwards, it took weeks for services to be operating normally across all markets. There is simply no reason apart from naked protectionism for the Australian Financial Center not to embrace proper open competition.

China is doing a much better job of open market structure while retaining the communist party at the head of government open democratic Australia led the world in advancing exchange it and the move to for profit markets, but it has been reduced to a laughing stock after it was forced to stifle order processing last year to save the ASX’s antiquated systems from being overloaded. In the absence of any meaningful contrition on the part of ASX (QV Tokyo, which lost its exchange CEO over their 2020 outage at the same time as ASX).

It is vitally important that intervention injects meaningful competition into Australian markets. If that means cleaving apart ASX then the ASX has only itself to blame for its failure to provide a cohesive service as a technology company  - as it styles itself. Given the ASX’s technology ought to be a core competency of their regulated monopoly.

The time for change in Australia is long overdue.

Speaking of exchanges struggling to cope with their outlook, Rosenblatt Securities, their analyst is sticking to their sell rating for the CME Group. As we discussed last week, the CME Group is somewhat embattled at the moment, unable to grow their core franchises in volume terms, and at the same time, not making remotely as much profit, -  let alone managing profit growth -  compared to their peers. A Sell order is surely the only rating -  The only sign of pragmatism - one can offer unless of course, analysts can append a “run for cover and this could all end in a supernova of management's self immolation” rating.

...It's not as bland as the “sell” rating, but it could be a possibility.

Elsewhere there's been much discussion on how Amsterdam is apparently stealing a march on rivals as a Brexit trading hub. Well, it's not quite a Potemkin village tale of financial centres, but substance remains the unspoken element behind the whole ‘rise of Amsterdam’ story. Indeed, the Dutch did appear to be pushing a bit hard on some proprietary trading companies at first in terms of substance, but with marketplaces,

It has achieved a ‘substantial presence’ balance, which in effect results in not many Amsterdam management ops staff ever seeing the canals as they commute around the M25 Ring Road encircling London to their offices which are mostly still in the city.

Ultimately, Brexit Armageddon has not happened  - did not happen - and is not going to happen. So the EU's dissolute brand of never Brexit partisans within the UK and without regrouping around anything they can possibly snipe at when it comes to attacking London.

Ignore that consistently inaccurate bias: the realpolitik is: London is going to emerge stronger. I'm not trying to rain on the Dutch parade, but the ultimate effect is a fair few licenses, enabling folks in London to access the EU. Thus, the Potemkin village of the modern digital financial center within the EU could be deemed equivalent for the European Union's protectionists... as equivalent to a descent into Dante's Inferno or some other form of purgatory.

The “Brave New Era” trade I suppose, could be discerned by the success of CBOE’s new Amsterdam derivatives market which is coming soon. But then again, we all know these things take time, and that won't appeal to the net ADD of the media, or the increasingly pathetic souls amongst the remoaners who are on the search for any negativity.

Ladies and gentlemen, if you're a remainer: repentance remains the only option. Prodigal offspring rites of passage are still available in the City of London.

In results this week, record trading drove New Zealand exchanges annual profits up 20% to emerge from their DDoS disaster which tore the market apart for a week last year...And indeed helped move the CTO to pastures new.

The NZX has demonstrated a sound jump in profit showing that overall, it's on the right path. Chairman James Miller has installed a business culture from what was previously a slightly Sleepy Hollow of the parish. This is excellent news from New Zealand exchange and - bull market assistance aside - there's plenty of encouraging news here that the business is going well.

Meanwhile, it was a major, busy week in deals for the parish. All of those deals and possible deals were mentioned in Exchange Invest Daily, the newsletter no sane person - possibly no insane person - can afford to be without in capital markets and market structure.

For the sake of this podcast. Let's just pick out a few edited highlights. First up, NASDAQ. They've completed the acquisition of VeraFin. A very swift closure following the acquisition announcement on November the 19th 2020.

There's one big side benefit to this. nobody's been mentioning the location of VeraFin HQ, Now look, not many people, me included can easily find

St. John's, Newfoundland and Labrador on a map without Google prompting.

However, that's the attraction: a sound tech hub (QV Umea  in Sweden, which was acquired with the Cinnober purchase for NASDAQ, offers stable, high quality staff in the sort of town where there is less competition for workers and therefore less mobility.

Indeed, if you like living in St. John's population, 110,000, or Umea, with a population much the same, which is midway on your trajectory towards the Arctic Circle, you probably deem say Stockholm or Toronto, as a sublime heaving mass of municipal excess, nevermind Let's face it, London or New York!

That ought to give NASDAQ, another sticky source of tech talent away from the hyper competitive entrepreneurs of Stockholm, New York and London, etc.

Elsewhere, National Stock Exchange of India, they're making a bold step into the commodity business. They're buying a 26% stake in the Indian Gas Exchange. Elsewhere, an exciting possible deal: a North American owner - could it possibly be the TMXExchange in Toronto and Montreal? - Somebody, anyway in North America is looking at acquiring Australia's Chi-X: that's the upstart stock market, which has been going gangbusters in recent years...Despite all the efforts of the Australian Stock Exchange to strangle it at birth.

The presumption of TMX as a bidder would infer a Trans Pacific mining marketplace. That, of course, has been a long standing theme. My own Capital Market Revolution, the first ever best selling book of FinTech way back in 1999, was suggesting not merely Trans Pacific alliances in the mining business, but possibly even something like Lon-Tor-Syd-Jo, which is of course London, Toronto, Sydney and Johannesburg, a mining market stretching across the globe. That was way back in 1999. Good to see that TMX have still got a dusty copy somewhere on their shelves, and are looking to try and create a bigger mining market between Toronto Montreal and of course, Vancouver all the way to the antipodes.

Elsewhere. The CEO of the Singapore Exchange has set his strategy, “now he's hunting for M&A,” said a Bloomberg headline this week.

So SGX therefore becomes a de facto bourse SPAC complete with some key internal assets already. In rights news, the suicide -  well it's ongoing at UK broker TP ICAP, they've raised $430 million from the rights issue... a swingeing deal, which has a massive discount to the existing price of the stock, they achieved a 98.3% take up on that rights issue, which is of course because of their fallacious concept that they can manage somehow or other to integrate the business of Liquidnet and therefore turn around the fortunes of the flailing failing TP ICAP business, true TP ICAP stock has rallied a bit as we record this podcast from sub two pounds to reach two pounds and 11 Pence, albeit that's down 10% year on year.

New markets was also a bumper week this week. All the news again was in Exchange Invest daily. For the sake of this podcast, I'm going to look at just one tantalizing new market possibility this week:

India could be on track to get a third power exchange, the regulatory generator organization CERC plans to grant registration to a new power exchange

Product news this week, many highlights let's pick a couple: Sebi the Indian regulator they're examining the feasibility of introducing freight derivatives.

Over in New Zealand they've begun the NSU auction registration pyrosis for all the people who want to be participants in New Zealand's emissions unit auction, which is going to begin next month.

Technology news this week:

CBOE are enabling an electronic auction mechanism for S&P 500 index option products.

Two headlines amongst many in regulation news this week. They're both about ‘hot air’ in a manner of speaking, as if that could ever be applied to regulation as a term as a whole?

“Global regulators back a plan for a climate risk disclosures body,” I must admit I would be cynical over the whole issue of greenwashing - certainly needs to be dealt with. However, is adding more layers of regulatory bodies which will inevitably expand in an environmentally unfriendly fashion, truly sustainable?

We need to organize a simple global code, we don't need another overarching regulatory body.

And indeed on that note... into the rescue of the same opinion, come EuropeanIssuers, the people who represent the listed companies in the European Union. They favor a recommendation and deny the need of an EU legislation for a sustainable corporate governance framework.

Career news this week, very exciting announcement from Euronext, the UBS investment bank co-chief Piero Novelli, he's going to be joining Euronext as chairman, that's quite an evolution of governance. He's been a leading figure within UBS for many years and indeed a member of the UBS group executive board since 2018, and co president of the investment bank. Dick Sluimers, the current chairman will thus - methinks -  be the last Dutch incumbent as the original Belgo Dutch French alliance of Euronext becomes a Mediterranean alliance of Franco Italian power...plus others. The long popcorn moment in this particular instance, is going to be watching France battle to retain its control of the Empire against the many other disparate nations now within the Euronext - and of course, in particular - the larger marketplace in Italy.

One interesting aside, Morgan Stanley, they've created a bot that does the work of junior analysts faster. That could be an exciting moment, as we see perhaps the automation of a huge amount of analytical function.

And so ladies, gentlemen, what else can we say about a very exciting week in markets?

Well, here it is, again, the Nikkei Dow has topped 30,000 for the first time in 31 years! Gosh, only another 9000 points to go to get into all time new highs. But remember of course for those of you who've been dollar cost averaging and probably lost your hope since then, that high was on 29th of December 1989. Intraday it reached 38,957.44...before closing at 38,915.87. We've managed to see single digit 1000s of points since then, Now, finally in this weird wacky, wonderful COVID QE age, the Nikkei is on a return, but will it reach its all time high before the music stops this time round?

Well, on that mysterious and magnificent note, ladies and gentlemen, my name is Patrick L. Young. Thank you very much for listening to this 82nd Weekly Podcast. Catch up Tuesday for the LiveStream: we've got a great guest from the Foundation Of Study Of Cycles.

If you want to learn more about Brexit catch up with our back issues.

This week's LiveStream was a magnificent discussion with the legal genius - the legal Eagle behind enhanced equivalence and an advisor to the UK Government - Barnabas Reynolds.

You can catch all of our live streams live on Youtube, LinkedIn and Facebook at 7pm on a Tuesday evening, European time. Meanwhile, if you're looking for the back issues drop by YouTube: youtube.com search for IPO -VID and you'll be able to catch up with Barnabas Reynolds and all those other excellent interviews discussing markets, finance and much more. As I say my name is Patrick L Young. Thank you very much for listening and have a great week in markets!


Britain's New CityUnited Financial Think Tank Attacks 'Protectionist' EU

Politicians And Ex-Trading Bosses Launch New City Lobby Group To Tackle Brexit
Financial News

Eurosceptic Politicians Form New Post-Brexit City Lobby Group
City AM

ASX Outage To Trigger Market Shake-Up

Rosenblatt Securities Stick to Their Sell Rating for CME Group

How Amsterdam Is Stealing A March On Rivals As Brexit Trading Hub

Record Trading Drives NZX Annual Net Profit Up 20%
New Zealand Herald

Nasdaq Completes Acquisition Of Verafin

NSE To Buy 26% Stake In Indian Gas Exchange
The Hindu BusinessLine

Exclusive: NSE To Pick Up 26% Stake In Indian Gas Exchange

TMX Group Closes Private Placement Offering Of C$250 Million 2.016% Senior Unsecured Debentures Due 2031

North American Exchange Owner Calls For Australia's Chi-X
The Australian Financial Review

SGX Has Set Its Strategy. Now The CEO Is Hunting M&A.

UK Broker TP ICAP Raises $430 Mln From Rights Issue

TP ICAP Achieves 98.3% Take-Up On Rights Issue

India Likely To Get Third Power Exchange ; CERC Plans To Grant Registration To Pranurja Solution Limited
Free Press Journal

Sebi Examines Feasibility To Introduce Freight Derivatives

NZX Begins NZU Auction Registration Process
Carbon Pulse

CBOE To Enable Electronic Auction Mechanism For S&P 500 Index Options Products

Global Regulators Back Plan For Climate Risk Disclosures Body

Europeanissuers Favours A Recommendation And Denies The Need Of An EU Legislation For A Sustainable Corporate Governance Framework
European Issuers

UBS Investment Bank Co-chief Novelli To Join Euronext As Chairman

Euronext Statement On Governance Evolution

Morgan Stanley Creates Bot That Does Junior Analysts' Work Faster
American Banker

FACTBOX-Japan's Nikkei back above 30000 after more than three decades