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164 Exchange Invest Weekly Podcast October 8th, 2022

The CFTC has charged Digitex founder Adam Todd with multiple violations of the Commodity Exchange Act (CEA), bringing down that particular cryptocurrency exchange to boot.

This week in the parish of bourses and market structure:

Nasdaq restructures while awaiting regulation for a crypto exchange decision

New rules at ADGM

CME moves towards a brokerage as Hong Kong looks to embrace Yuan-denominated trading

My name is Patrick L. Young

Welcome to the bourse business weekly digest

It’s the Exchange Invest Weekly Podcast Episode 164

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 many events and happenings from the past seven days can be found in Exchange Invest’s daily subscriber newsletter, the unique guide to the bourse business sent daily to your inbox for only $300 a year.

More details at ExchangeInvest.com.

Let’s start by looking back 40 years towards a LIFFE story. It was curious that there were zero official celebrations in the air this week but 40 years ago last Friday, the then Bank of England Governor Gordon Richardson cut a ribbon hanging in the Royal Exchange in the City of London and ceremonially pre-empted the first bell being rung to start trading.

From there on, the city of London’s presence in derivatives, already on exchange in commodity forms at various venues, had entered the ‘modern’ (what I prefer to call “Sandorian”) era of markets. Across the road, the options traders added some colour to the suits on the London Stock Exchange floor but soon LIFFE had captured the imagination as the dynamic market right in the heart of a building, rebuilt often since being originally constructed by Sir Thomas Gresham and opened by the original Queen Elizabeth in 1571 A.D.

I was not there on day one – relieved to say I was far too young – but it was a fantastic place to learn about markets, make friends, and experience something that digital markets still cannot replicate, the cacophony of thousands of voices seeking to make markets and bring Liquidity, Accessibility, and Transparency to the world.

LIFFE was founded after the IPE,  LFOX, and many other commodities exchanges, including LME within the Square Mile, and it followed the great floors of Chicago and New York as major titans of exchange commerce. It lives on to this day via the ether as a balance sheet powerhouse within the magnificent portfolio of ICE.

Of course, the lesson to take away from this episode is that with the rose-tinted history, it all looked obvious. Futures were a great idea which succeeded on a smooth arc of acceptance to become mainstream. Yet (as the British government has been discovering of late) the force of the reaction is powerful within the establishment, and even when LIFFE traded its 1 millionth contract on August 5th, 1983 and two million by March 9th, 1984, there were still vast swathes of cynicism. Co-founder and twice chairman of LIFFE Sir Brian Williamson used to note that The Economist Magazine no less, took years to the stop dismissing the concept of LIFFE before finally getting on board with the success of exchange-traded derivatives years after the reality was voluminously obvious.

After 4 decades of success, it appears LIFFE is enjoying a somewhat muted anniversary but those who worked on the floor or for the exchange itself retain a remarkable unifying bond and indeed, I’m sure I was not alone in raising a glass to celebrate a great market that did so much to accelerate the world of derivatives trading. It’s a great lesson in vision (thanks to all who persevere and built the original market – even when the Bank of England was itself cynical the whole process might work) it’s a very useful lesson concerning a rather low latency media/public opinion forming process, and the wider blob whose short-termism cum narrow-minded perspectives on the future usually involves a rush to judgment before the facts have been established.

Happy birthday, LIFFE! May you have many many more successful years as part of the Intercontinental Exchange (ICE).

Meanwhile, Tata Consultancy Services (TCS) have been announced as the new title sponsor of the London Marathon. Will this, I wonder build on their recent services in the parish? Perhaps akin to the TCS ‘non-stallation’ at MCX, if you in the marathon hit a wall let’s say it 10 miles on the track. In the world of parish code delivery, you’ll be allowed a few months’ respites before having to finish the marathon? Will that also apply to events on the track across the center of London?

MCX was preparing to fly solo without access to the source code of its thus unsupported (from October 1st) 63 Moons technology at the end of last week. That lasted as long as the weekend at which stage we had ‘peace in our time’ – or at least peace for the next 3 months…when MCX presumably not only blinked under duress but also paid up in a fashion which will have left 63 Moons feeling somewhat vindicated that they were cut out of the replacement tender in the first place.

MCX must be feeling humiliated, and one can only guess at what has been said by Sebi behind closed doors. It’s hard to argue that this is anything but a total shambles that has been poorly managed by the exchange, egregiously mismanaged by TCS, and ultimately allowed Jignesh Shah to be in the white hatted and glory of MCX saviour, all the time wheeling a handy trolley of cash away from the process.

Now MCX has a 90-day rollover and TCS is apparently hoping to deliver its new system within 3-4 months. Even without deploying my fingers to calculate here, I see a concerning mismatch (and tenor and I suspect the second 63 Moons SLA renewal would be more eye-poppingly expensive still)

Anyway, however you look at it, the delivery of the new TCS system to MCX is turning into quite a marathon in its own right.

NASDAQ is going to wait for regulation to be established before launching its crypto exchange. Quite a sensible approach really. In another sensible approach, they’ve announced a fascinating new corporate structure to accelerate the strategy of the Adena Friedman era. NASDAQ’s business units are now going to be across 3 divisions: Market Platforms, Capital Access Platforms, and Anti-Financial Crime.

Very interesting to note that therefore there are going to be technology powerhouses in at least 2 of those 3 separate divisions.

The CME grabbed the headlines, albeit only briefly actually all the real insight was in Exchange Invest of all places this week. Futures giant CME considers brokerage taking a cue from crypto rival FTX went the headline in the Wall Street Journal. CME according to the Wall Street Journal story has filed paperwork to create a futures commission merchant. CME Group Inc. criticized crypto exchange FTX’s plan to cut out the middleman in the futures markets. Now, the Chicago exchange giant is taking a step in the same direction.

Thus went the Wall Street Journal story last week, and thereafter the media became actually somewhat of a void for insight because I suppose it goes into the #It’sComplicated box. Rather, the pitch was left entirely open for Exchange Invest. Therein lies our newsletter advantage and why at $300 per user per year, you can have a phenomenal informational advantage by reading the Exchange of Information. All the info and there was a lot of analytical pith, was in the newsletter this week – DM us now to start your free trial as the notion of a CME brokerage is a seismic one and if you work near the market infrastructure, or are a user of it in any way, you need to understand the dynamics surrounding this massive issue.

Another massive issue coming to market soon, Hong Kong is planning to start Yuan stock trading in the first half of 2023.

Over in Africa, the Botswana Stock Exchange (BSE) this week accelerated its push to encourage cross-listings with the Zimbabwe Stock Exchange (ZSE) in order to expand funding options for capital-starved domestic corporations.

Still in Africa, in Nairobi, coffee farmers are making a bid to be able to participate at auctions. They have the licence, but for some reason or another so far, they haven’t actually been allowed to enter the auction room itself.

Just one new market this week, MRHB, the first halal Web3 ecosystem has launched TijarX, the tokenized commodity exchange.

It was a very busy week in deals in the parish, all the deals were in Exchange Invest daily, the newsletter no person can afford to be without in capital markets and market structure. For the sake of this podcast, let’s look at some edited highlights.

Bashundhara’s company, they are going to be allowed to be the strategic partner of the Chittagong Stock Exchange in Bangladesh. Exciting news, a Bashundhara Group may be allowed to buy up to 25% of the shares of the exchange. That came in, of course, just days after the same Bashundhara Group, was not allowed to set up a commodity exchange in Bangladesh.

If you’re trying to understand better what’s going on in the world of financial markets and look towards the future of FinTech, in addition, to Exchange Invest daily, let me suggest my latest book “Victory or Death?”  Blockchain, Cryptocurrency, and the FinTech World 20 years on from the “Capital Market Revolution!” It’s a must-read, published by DV Books and distributed by Ingram worldwide.

While you’re waiting for your copy of “Victory or Death?” to arrive, check out our Livestream, that’s on Tuesdays at 6 pm London, 1 pm New York time – the IPO video live show. Catch the back episodes on LinkedIn and YouTube via IPO-Vid.

In our most recent show, our guest was the electrifying Paul Conn of Computershare, which kicked off season 14 discussing Around the World From Front Office To Back.

Coming in our next episode, we’ve got “Olivier Gueris: Building Better Markets All Over The World” from an established builder of exchanges on no fewer than 4 continents so far. Catch that 1pm New York time, that’s coming this coming Tuesday.

In crypto land, Coinbase had a glitch, it blocked trades from US bank accounts, so, therefore, no one was able to withdraw their funds for 6 hours. Slightly embarrassing.

The Binance CEO he certainly on a major damascene conversion: “Regulatory clarity will help crypto adoption” said no one other than CZ, the chief executive of the still remarkably secretive Binance. Where are their headquarters? Well, that’s open to questions. Go Google it and you get a cornucopia of answers.

Lord Spencer, better known as Michael Spencer, of course from his ICAP days before he sold next to the CME Group, some prescient analysis, he said the Bank of England us money printing is to blame for the Bitcoin bubble, complaining about the Bank of England’s QE excesses quite fair too.

Bad news this week in India, Indian crypto exchange WazirX fired 40% of their staff. Some 50-70 employees of the 150 workers of the exchange have been asked to leave the company. That’s of course an update following our publication on July 26th on Medium and LinkedIn, an article gathering together some of the data on job losses across a selection of leading exchanges in the crypto environment.

Product news this week, the government body and think-tank Niti Aayog, they’ve got a draft in the works for water trading on an exchange. At the same time, the author of the report noted: “India will face a lot of resistance, the moment water is made a tradable commodity”.

Nonetheless, I would have to add water futures were a commodity product that no one other than this particular podcaster PLY had suggested would be a major feature of this decade as long ago as January 1st, 2000 AD.

The Euribor pool is in expansion mode for the first time since the rigging scandal itself took place. Euribor of course still holding on to the IBOR methodology at a point in time when everybody else has gone for well, alternative measures.

Speaking earlier as we were about those new products coming into the Hong Kong market, aka Chinese denominated assets ie trading in the Renminbi or Yuan depending on how you prefer to refer to the Chinese currency. Tencent, HKEX, New World, Ping An, in other words, major top-tier names are among the first firms to already explore Hong Kong issuance of Yuan shares under the new scheme being proposed.

London Metals Exchange (LME) is considering issuing a discussion paper on Russian metal amidst a somewhat of controversy and indeed also many lagging issues about sanctions.

The National Commodity Derivatives Exchange (NCDEX) is going to be relaunching robusta coffee futures and Dubai’s DGCX is making it easier for bullion traders to raise short-term funds with new gold contracts.

In blockchain news, this week, rather depressing defeatism from the Bank of England once again, in this case in relation to financial technology. They say that a blockchain rollout across all markets is just too challenging. Perhaps it’s not worth doing but the idea that there’s simply not the capability to do so sounds to me as if it’s rather defeatist and insulting to London’s financial infrastructure.

The Botswana bourse meanwhile, they’ve modernized its tech infrastructure from front to back, and the SEBI is about to issue a circular saying that, in the case of a technical outage, trading hours on Indian bourses will be extended for the period of the previous closure.

Regulation news this week, very exciting news coming out of the UAE this week, as ADGM (Abu Dhabi Global Markets) finalized a fascinating comprehensive set of regulations for a cornucopia of different kinds of market venues. Check it out over at the ADGM website.

Bad news for a couple of SEFs both BGC and also TP ICAPs SEF were caught out this week, mostly in relation to the 15-second gap, which gave them somewhat of 15 minutes of fame this week, because of course, they’ve been trading before they’d shown the entire market what was effectively being systematically internalized between certain classes of user.

The CFTC has charged Digitex founder Adam Todd with multiple violations of the Commodity Exchange Act (CEA), bringing down that particular cryptocurrency exchange to boot.

In career news this week, well, first of all, an obituary, a great name Ian Hay Davidson, originally an accountant, took on the formidable task of reforming Lloyd’s of London, but as well as his work on Lloyds closest to the parish Ian Hay Davidson, who was indeed also at one point in time on the board of the London Stock Exchange, was best known for his report into the Hong Kong securities industry, written in the aftermath of its week-long closure during the crash of 1987.

Fabulous news as well, the blessing of IPO-Vid is apparent once again, another promotion amongst the IPO alumnus body. Intercontinental Exchange has named Caterina Caramaschi as head of the combined global interest rates and equity derivatives product portfolio, adding to Caterina’s existing responsibility for equity derivatives worldwide. Fabulous news and hopefully we can hear from Caterina again on IPO-Vid discussing her even broader product remit within the considerable ICE portfolio.

It’s a week for big numbers, Lebanon has slashed the official exchange rate from the end of October. That’s coming up the official exchange rate will thus go from 1507 per dollar (that was a rate adopted 25 years ago) to around number 15,000 Lebanese pounds per dollar.

It’s not clear that that will hold the increasingly anarchic state of affairs on the streets in Beirut but we live in hope, even though it’s obviously going to be a very, very bitter blow to local savers.

Meanwhile, a recent study by Charles Schwab, the broker, and fund manager has found that many Americans believe that you need to have at least $774,000 to feel “financially comfortable” and $2.2 million to feel wealthy. Unfortunately, that comes against the backdrop where the Dow Jones average as I record, is -17% year to date, and the Nasdaq -29%.

At the same time, here’s a fascinating fact that the doomster media don’t want to mention right now: Shanghai – LA benchmark shipping container rates have fallen 74% from their peaks back to 2020 levels.

All this during the worst inflationary environment, the media can apparently recall.

And on that mysterious and magnificent note ladies and gentlemen, my name is Patrick L. Young, creator of markets worldwide.

I wish you all a great week in blockchain, life, and markets. Thanks for listening!


Nasdaq To Wait For Regulation Before Launching Crypto Exchange

Nasdaq Announces New Corporate Structure To Accelerate Strategy

Nasdaq Divides Business Into Three Units To Streamline Operations

Futures Giant CME Considers Brokerage, Taking Cue From Crypto Rival FTX

Hong Kong Plans To Start Yuan Stock Trading In First Half Of 2023: Official
South China Morning Post

BSE, ZSE Rave Up Cross-Listing Plan
The Zimbabwe Independent

Coffee Farmers In Bid To Participate At Auctions
The Standard

MRHB, The First Halal Web3 Ecosystem, Launches Tijarx – The Tokenized Commodity Exchange
EIN News

Bashundhara’s Co Allowed To Be CSE’s Strategic Partner
New Age Business

Coinbase Says It Resolved Glitch That Blocked Trades From U.S. Bank Accounts

Binance CEO: Regulatory Clarity Will Help Crypto Adoption

Yahoo Finance

Bank Of England Money Printing To Blame For Bitcoin Bubble, Claims Ex-Tory Party Treasurer
The Telegraph

Indian Crypto Exchange WazirX Fires 40% Of Staff

Niti Aayog Draft In The Works For Water Trading On Bourses
The Economic Times

Exclusive: Euribor In Expansion Mode For First Time Since Rigging Scandal

Tencent, HKEX, New World, Ping An Among First Firms To Explore Hong Kong Issue Of Yuan Shares Under New Scheme
South China Morning Post

LME Says Considering Issuing Discussion Paper On Russian Meta

LME Says It Is Mulling Consultation On Banning Russian Metal

NCDEX To Relaunch Robusta Coffee Futures

Bank Of England Says Blockchain Roll-Out Across All Markets Too Challenging

Botswana Bourse Modernizes Tech Infrastructure
CAJ News Africa

Trading Hours To Be Extended In Case Of Technical Outage; SEBI To Issue Circular Soon
Zee Business

ADGM FSRA Issues Enhancements To Its Capital Markets Framework Including Environmental Instruments, Spot Commodities And Virtual Assets

CFTC Orders tpSEF To Pay $850,000 For Violation Of 15-Second Delay Rule For Execution Of Cross Transactions On A SEF

CFTC Charges Digitex Founder Adam Todd With Multiple Violations Of Commodity Exchange Act
Globe Echo

Ian Hay Davison, Accountant Who Took On The Formidable Task Of Reforming Lloyd’s Of London – Obituary
The Telegraph

ICE Names Caterina Caramaschi As Head Of Combined Global Interest Rates And Equity Derivatives Product Portfolio

Lebanon To Slash Official Exchange Rate From End Of October, Finance Min Says