10 min read

087 Exchange Invest Weekly Podcast March 27th, 2021

CBOE buys Chi-X APAC, making the Australian monopoly ASX only the second-largest exchange group in Sydney.


This Week in the parish of bourses and market structure CBOE buys Chi-X APAC, making the Australian monopoly ASX only the second-largest exchange group in Sydney.

My name is Patrick L. Young.

Welcome to the bourse business weekly digest.

It's the Exchange Invest Weekly Podcast Episode 087.

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 about the exchange of information at ExchangeInvest.com.

There was a story for the Bermuda Triangle of Human Relations Moves this week as LSEG surprised by announcing a new head of the FTSE Russell Index unit.

Some say the most surprised of all by this announcement was the outgoing FTSE Russell boss Waqar Samad.

It's certainly shocking that out of a payroll of 23,500 people amongst the combined London Stock Exchange Group (LSEG) Refinitiv behemoth, LSEG couldn't find anybody in the house to do this job. Thus, they used an expensive consultant to find somebody who has apparently never worked in indexing or an exchange to head the enormous indexing group out a major exchange.

One potential saving grace was seeing dashed AKA: Initial hope it might be a diversity appointment proved an acute accent short of a lady. So Lea Carty is apparently male (as this is LSEG one can never be sure). Exchange invest nowadays check photographic evidence, in the absence of their having any viable communication structure at Paternoster square.

Anyway, with 55,000 share options making for a Circa 3.5 million pound bonus on the route, it's not been a bad brief ride for Waqar Samad during his tenure with LSEG.

Thus, Mr. Carty has no direct experience working in an exchange and apparently no experience working in indexing, but he now leads one of the world's largest index franchises in an exchange group.

PLY: What I find most astonishing is the management message this recruitment sends to the recently (acquired (but never conquered) by the management Refinitiv payroll.

Internal morale at Refinitiv- never exactly soaring since well, now let me see. Let me check back one minute. Well, some say it was high in the 1980s in the dark ages PB (pre-Bloomberg).

So anyway, look, internal morale at Refinitiv never hired the best of times is going to have taken a knock the message that amongst their 18,500 Refinitiv colleagues, the London Stock Exchange Group (LSEG) had to choose somebody who wants to be headed by side Relations at Bloomberg, sends out at best a mixed message to investors, and indeed to staff as well.

       At the same time, the Brussels Bugle has caught up with the significant reservations Exchange Invest has had about the London Stock Exchange Group (LSEG) acquisition of Refinitiv since the day after it was announced on August the 1st 2019:

Investors' doubts rise over the LSE takeover of Refinitiv when the Financial Times headline, with their writers, noting:

“David Schwimmer, Chief Executive and Don Robert the Chair have little experience of merger integration. “

PLY: Reality bites, ladies and gentlemen, let's face it. This merger was a heady mix of fantasy with little application of logic. It's the Merger and Acquisitions equivalent of Kristen Wigg’s latest movie, Barb and Star Go To Vista Del Mar'' - albeit without the jokes, or Jamie Dorman -it’s a heady mix of Floridian beachside fantasy and precious little grinding in reality.

Now that's the movie as opposed to the M&A deal we're talking about, although the same thing could be said of both.

The history of the London Stock Exchange Group (LSEG) looks to now be one of hubris, incompetence, and greed from the current perspective. There's no management only spin, hype, and ludicrous politicking - AKA the London Stock Exchange group trying to outdo Refinitiv at its own (hyper-unproductive) political game. From the snippets emerging about the new LSEG structure, it appears to resemble a management middle foil, albeit with any cream staying stubbornly between the sheets of pastry, never to be shared with stockholders.

“Cheer up, the worst is yet to come” as Philander Chase Johnson famously enjoined readers during a particularly dire article in Mad Magazine many years ago.

In COVID Corner this week:

The Philippine Stock Exchange (PSE) has temporarily shut its trading floor, it's closed from March the 25th to April 4 because of COVID.

And equally, the Jamaica Stock Exchange (JSE), they have announced that there will be market trading only running for two hours on both Friday 26th of March and Thursday the April 1, again because of COVID restrictions.

Over Brexit News this week:

A simple message as reported by Reuters customers decides where to clear Euro swaps, Deutsche Bank tells the EU.

PLY: Of course, the question here is,  is the EU listening?

Meanwhile, the UK is staying with open free markets as its approach which simultaneously advantages Britain and shows up the EU's narrowmindedness goes forward.

It's genuinely a tragedy to see the European Union descending into the gutter of protectionism and abject failure on all fronts as it flails with increasing desperation and malice at the UK for having the temerity to leave the European Union.

A vaccine export ban is being proposed which if passed will amount to a perpetual monument of shame demonstrating the loss of morality, efficiency, foresight, and leadership from Brussels. (Right now even the direst predictions of the Brexit campaign look to be eerily correct #scary).

Britain is right to keep its markets globally compliant and demonstrate that the UK is open for business to the world, where tragically the European Union has closed itself to progress as Fraser Myers and spiked online notes this week: “There is no polite way to say this but the EU is behaving like a psychopath.”

PLY: I think that rather tragically sums up this horrible mess in one sentence.

Back in the parish the people hurting from the EU are blinkered intransigence over swaps trading is the Eurozone headquartered banks themselves with branches in London.

Meanwhile, even that bastion of remaining in the European Union the British Opera House, the House of Lords have noted in a report this week that EU financial market access may not be worth the restrictions imposed by the European Union's hyper-precautionary approach to constraining markets.

Apparently, some form of EU pact with the UK may even appear in the course of the next month, according to British government sources. Let's see, watch the space.

One set of Results reported this week:

As we bade farewell to an independent IHS Markit, of course, they're being snaffled up by S&P Global Lance Uggla as CEO reported a final earnings beat.

In Deals, It was a busy week for deals in the parish all the deals were in Exchange Invest the newsletter no person can afford to be without in capital markets and market structure, for the sake of this podcast we only have time for a few edited highlights.

The London Stock Exchange (LSE) is looking to sell its first international bond issue to keep financing the rapacious demands of Refinitiv - expect some 4 to 5 billion pounds worth of new bonds on top of the existing stock of 3.8 billion pounds worth which is in the issue. The new stock is expected to be debt issued in dollars, pounds, and euros.

Presumably, that will also help cover the recruitment consultant fees costs at FTSE Russell.

Meanwhile, in a masterpiece of unfortunate timing, TP ICAP completed their ill-considered overpriced purchase of Liquidnet with news that the value of that acquisition has already been further eroded.

CBOE Global Markets are acquiring the Australian Chi-X and indeed also their Japanese cousin all parts of Chi-X APAC.

Thus, with the acquisition of some serious APAC Asia Pacific interests CBOE Global Markets are now actually truly global or at least much more global than their previous seriously international but Asia-free footing.

JC Flowers has sold their Chi-X APAC assets giving CBOE a vast bourse platform in Japan albeit one which rather bleeds money and a very healthy one in Australia.

The embattled Australian Securities Exchange (ASX) now has a serious monster-sized competitor - Europe's largest stock trading venue (and much else besides) in their own backyard,

PLY: Bring that competition on, I say.

The sluggish Australian monopoly will doubtless be vaulting their toys out of the pram as the reality sets in that their Ozzie monopoly makes them only the second-largest trading group in Australia, thanks to CBOE rather hefty holdings in the rest of the world.

Now we are going to doubtless see BIDS APAC too (as slide 4 of the Siebel IR presentation notes) - that means further market share degradation for Liquidnet.

Thus, in the case of TP ICAP, as one deal closes, another door shuts - having lost market leadership to BIDS with first the USA and then Europe, now their block trading lead of Liquidnet can be expected to dwindle right across the world.

For CBOE, it's an interesting deal, especially if they can extract tangible value from the relatively sickly Japanese franchise while the Philippine IT Development Office is a handy asset in the world of tech staff additions ((see also Nasdaq’s acquisition of Verafin in a similar vein of lower cost and relatively sticky tech staff addition).

Chi-X powered by CBOE gives heft to the need to prise open the Australian monopoly. Hopefully, the politicians in Canberra will open to a free market rather than hanging on to their rather defeatist European Union-style approach.

In New Markets this week, we're still in Sydney:

The focus there, as this podcast was being edited was on welcoming FEX Global to the parish of operating exchanges.

PLY: Good luck to the FEX team with their launch which took place on Friday, March 26th in downtown Sydney at their HQ.

FEX Global has been in a sort of ‘plain sight stealth mode’ for some time and now operates centrally cleared futures and options for the energy, environmental, and commodity product classes with clearing coming from the CME group's CCP.

It was another fabulous discussion - this time about the sustainable city with the Aldermanic Sheriff of the City of London Michael Minnelli this week on IPO-Vid, catch the recording of the Livestream on YouTube search for IPO-Vid.com.

Coming this week, its tech veteran Colin Howard, who has been pioneering digital things since the 1970s. He's going to be discussing “innovation, data, and the sovereign individual”.

IPO-Vid - the LiveStream you can't afford to miss every Tuesday evening at 6 PM, London time.

In Crypto Land this week:

One delay deal Coinbase has paid $6.5 million to settle American false reporting charges that are caused them to delay their listing. Will a month of delay be enough for the market to forget their recent transgressions? (Well, we'll see during the month of April I suppose)

In Product News this week:

While they ended the week with the announcement that they are only the second biggest exchange group with offices in Sydney. The ASX started with total shambles.

ASX blames human error for Airtasker listing botch, with the headline in the Sydney Morning Herald come Monday morning. The IPO of Airtasker was delayed due to some elementary errors by the ASX itself.

The measured response of Airtasker CEO Tim Fung ought to have brought a vigorous regulatory and management response as this ASX  competence surely encroached on bucket shop levels. The tragedy - and the bit, which discredits the parish - is that ASX has hardly had a flawless run in their core operations for some years now. Rather, Australia's monopoly provider of exchanges has become so incapable of core processes that it's forgetting to bring its needles for the day’s knitting.

The ASX response was risible telling the Australian Financial Review: “ASX has an accountability culture”.

Subsequently, Airtasker came to market days late and the shares soared. Rumors abound that the stock was taking upon an influx of ads from the Australian Securities Exchange seeking people to help their exchange run more efficiently.

Technology News this week:

China has announced a venture with SWIFT - the banking, one might call it a technology entity but that's a rather loose definition of the word technology, I suppose these days, it's a rather defensive move, giving China optionality as hostilities on the trade front continue to boil over with the United States of America, despite there being a Biden presidency.

PLY: Rumour has it the Chinese Institute of Archaeology is providing some programmers from their runic technology division so the Chinese banks can get to grips with the archaic Swift system. “Remind me what is the Mandarin for “punchcard?” - being the order of the day for integration conversations.

Crowdfunding News this week:

As the Bahamas enter the Crowdfunding market, the UK has reached an antitrust decision. The Commission has said NO to the tie-up of Crowdcube and Seeders. This is a sensible decision. The notion, the market leaders needed to merge to create an overwhelming monopoly to make a profit, was undermined by their charges being 500 to 700 basis points. On those numbers inability to profit is remarkable where conventional exchanges are often pilloried for being deemed to profit here by some on gross charges of circa 1000 of the prevailing crowdfunding rates of crowd funders Crowdcube and Seeders.

In People News this week:

Just the one headline we're gonna pick out, RIP G.V Ramakrishna, his legacy as the original chairman of SEBI from 1992, including, of course, the epic moment where they created the National Stock Exchange of India.

Now, let's take a couple of saultory Macro Numbers to finish this week:

For those who think money printing has no consequence, Venezuela has issued a 1 million Bolivar note, which is equivalent to 50 US cents.

Second of all, in a week where firing the Central Bank chief only caused an acceleration of the run on the Turkish Lira.

We saw a peak of Turkish Lira overnight swaps at 1160%.

And on that mysterious and magnificent note.

Ladies and gentlemen, my name is Patrick L. Young.

Thanks for listening to this IPO-Vid Weekly Podcast.

Don't forget to catch the LiveStream on Tuesdays at 6 PM London time.

Ladies and gentlemen, I wish you a great week in life in the markets.


New Head Of FTSE Russell Appointed

Investors' Doubts Rise Over LSE Takeover Of Refinitiv

Philippine Stock Exchange Temporarily Shuts Trading Floor On March 25 To April 4

JSE Adjusts Trading Hours In Response To Tightened COVID Restrictions
Loop News Jamaica

Customers Decide Where To Clear Euro Swaps, Deutsche Bank Tells EU

UK Sticks By Open Derivatives Trading Stance Despite EU Ban
City A.M.

UK Stands Pat On Brexit Swaps Trading As EU Banks Hurt

British Lawmakers Say EU Financial Market Access May Not Be Worth It 'No Rush' On City Of London Access To EU, Says EU Official

Britain Says Expects Financial Services Pact With EU This Month

TP ICAP Completes Liquidnet Acquisition

CBOE Buys Chi-X Asia Pacific Supplemental Information

JC Flowers Announces Sale Of Chi-X Asia Pacific To CBOE

Coinbase Pays $6.5 Million To Settle US False Reporting Charges

ASX Dominance To Be Tested As US Giant Buys Rival Chi-X
The Sydney Morning Herald

China’s SWIFT Joint Venture A ‘Defensive Move’ In US Financial War
South China Morning Post

'Great Game Changer' For SME Fund Raising
Bahamas Tribune

CMA Finds Competition Concerns In Crowdcube And Seedrs Merger

Competition Watchdog Set To Block UK Crowdfunding Merger
Financial Times

Former SEBI Chairman Ramakrishna Passes Away
The Hindu

London Turkish Lira Overnight Swap Rate Spikes To 1160% -Refinitiv