12 min read

176 Exchange Invest Weekly Podcast January 14th, 2023

the Business Times Online FTX Court Filings Reveal Exchange Burned Through $40M On Luxury Hotels, Flights.


This week in the parish of bourses and market structure:

Is the sun rising back to back for LCH Japan?

LME Chairman Gay Huey Evans has gone as Oliver Wyman reports on the nickel nightmare

Bafin Biff’s DB1: Naughty boy step for EUREX and Clearstream as Germany’s federal regulator attempts a new post-Wirecard credo….

And after a lot of legal debate, the Sheriffs have taken SBF’s stake in Robinhood.

My name is Patrick L. Young.

Welcome to the bourse business weekly digest.

It’s the Exchange Invest Weekly Podcast Episode 176.

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.

More details at ExchangeInvest.com.

Let’s drop back into bitcarnage this week the ongoing crypto winter of nightmare Siberian proportions.

In bitcarnage this week, of course, all the news and analysis was in Exchange Invest, the subscriber daily of the bourse business where there were job losses aplenty, nearly 950 alone at Coinbase. Coinbase stock is now down in (I do believe) something like 92% from the all-time high, while Coinbase also copped a $100 million fine for poor anti-money laundering and know-your-client procedures.

Meanwhile, central bankers demonstrated a definitive dislike of defi and a sense of bearishness is pervading Binance in many quarters, although C (the curiously charismatic boss of Binance) seems to be urgently saying 4444444 to all such fear, uncertainty, and doubt as he tries to detract it.

One definitive score this week, Sheriff 1: HOOD 0 in what amounted to a gauntlet drop of stunning proportions, the US government has willed Sam Bankman-Fried’s counsel to live up to their previous threat to abandon their charge to a public defender. Then again, a public defender, one might argue would be much more in keeping with Sam Bankman-Fried and his parents lobbying for others to that effect. Thus, where every man, his dog, and his counsel appeared to be making a claim to the Robin Hood stake which SBF acquired with funds he garnered directly via FTX, the Department of Justice, the United States of America seized the $465 million stake.

Interestingly, DOJ reckons as there are competing claims to the stake – clearly it’s best the government takes care of it. That would appear to have vexed even the FTX bankruptcy team, who note that apparently, DOJ have seized bank account assets in the FTX case too.

I’m not much in favour of the government (whether it’s the US or elsewhere) owning anything much and generally, government suzerainty of assets tends (I think) to be a bad move over the long term, but at the same time, DOJ ought to have custody of these particular Robinhood assets when the alternative is paying lawyers to defend SBF against what looked like indefensible charges.

Quite how can I feel such arrogant – one might also say it’s almost crypto bro-like – swagger towards damning SBF in this fashion to a public defender in the manner in which his own parents would have been eager lobbyists for others.

Well, let’s try a story that came up this week via the Business Times Online FTX Court Filings Reveal Exchange Burned Through $40M On Luxury Hotels, Flights.

Gosh, we’ve already discussed some of the beach bar excesses before Christmas in Exchange Invest Daily Newsletter, but that $40 million spend in total took place in just 9 months. Put in perspective, no wonder FTX was all over sponsoring and paying for lavish rooms at FIA events the best bokeh bedrooms still look cheap by comparison to the run rate hotel average in the Bahamas for the FTX team. I’m beginning to wonder if the Bahamas is in danger of suffering a recession just due to SBF’s largesse disappearing?

And indeed, what’s even more exciting is this $40 million expenditure took place while FTX’s Bahamas, supposedly operational HQ didn’t actually have any true P&L – well, any income or profit, it had clearly prodigious quantities of L. $40 million just in food and beverage and accommodation and flights alone.

Meanwhile, in bitcarnage, Forbes has noted that (20% shareholder) Binance Is Bleeding Assets, $12 Billion Gone In Less Than 60 Days. The article itself had a curious history. It wasn’t just that it was being dissed by the “4” crowd following CZ propaganda tweets, but actually, it was fully 404’d by the Forbes website for some quite substantial period of time. Fortunately, it miraculously reappeared and it was allegedly a technological faux pas. However, given the fact that at this juncture in time, overall faith and confidence in crypto everywhere is remarkably low and conspiracy theories are running amok. It was, to put it mildly, a very unfortunate moment for the Forbes website to have such a downturn, particularly given Forbes’s 20% shareholder being Binance.

Back to the world of legacy markets and real exchanges as opposed to their crypto virtual brethren. The LME is making massive board changes. The Chairman has quit in the wake of the nickel nightmare. Gay Huey Evans is stepping down as LME’a chairman and the board has begun a global search for a new chair and we’ll update the market in due course.

That’s quite a surprise that Gay Huey Evans is to serve just a single term following Sir Brian Bender’s retirement in December 2019 although it ought to serve LME as it seeks to place clear water behind it over the whole Nickel nightmare itself. It’s a tough gig chairing LME you need to know a lot about metals in a way that is perhaps more product specific than many other exchange chairing roles.

Two directors are being appointed, Martin Fraenkel (former S&P Global Platts CEO/MD, Global Head of Energy at CME Group) and Pierre Vareille, who was formerly CEO of Constellium.

Interesting that LME has added 2 strong independent commodity practitioners to the board, which makes sense as the exchange moves forward. Also interesting is that Hong Kong Exchanges are talking about its global commodity strategy, which would seem to suggest LME is going to be staying with HKEX under its ownership umbrella for quite some time to come.

Then we got the report after these resignations, the Independent Review events in the nickel market in March 2022 by Oliver Wyman. The nickel nightmare has done and by the looks of it potentially getting dusted on several legal angles for not least. However, with rumblings of discontent and many injured parties, LME now began a major drive to rebuild confidence in the market armed with this Oliver Wyman report. The chairman and head of the clearing house I’ve already gone as part of this process of rejuvenation, Matt Chamberlain, the CEO, has an uphill struggle but with a decent coalition to push forward there remains a bright future for the exchange one some reorganization has been affected. Albeit first, of course, the regulatory powers that be will need to decide what their next moves are. I suspect they will find a means towards relative leniency. But at the same time, LME will need to use that opportunity to make a serious move toward the future and break the frustrating cycle of crises past.

Over in the Land of the Rising Sun, well, the endless back to backing of swap transactions in Japanese yen looks as if it might be coming to some form of a hiatus at least. LCH are looking at a plan to create LCH Japan in a new fight for the global clearing model. That’s going to be very interesting to see how that develops.

Meanwhile, Germany’s BaFin has told the CCP of Deutsche Boerse, Eurex and its CSD Clearstream to clean up organizational deficiencies. This is rather seismic stuff not per se because of the problems that actually found, but at least it suggests BaFin (the German federal regulator) has moved on post Wirecard to being a federal regulator willing to regulate the markets. Albeit It’s still deeply embarrassing for EUREX and Clearstream who failed – as expected – to manage the media narrative at least nonetheless encouraging to see BaFin fighting back after the embarrassment of the Wirecard fiasco.

Plaudits to NASDAQ, they’re celebrating another year as the leading exchange for listings in the EU. At the same time, huge plaudits to TISE (The International Securities Exchange as it’s called which is the Channel Islands Stock Exchange) they’re entering their anniversary year with record numbers of listings on the book. They had 956 newly listed securities last year, which is only slightly below the record 1,111 new listings during 2021.

Combined that over 2000 tally brings the TISE and its anniversary year to a total of 4,020 securities. What an incredibly epic achievement in 25 years of operation, which will be marked formally in October 2023.

As a special purpose listings venue, TISE remain the market leader nobody outside the exchange parish (even many people within the exchange perish) have ever heard of. Congratulations all round to the Channel Islands on this excellent achievement once again.

It was a busy week for new markets in the parish. All the information was 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.

We are a fascinating new exchange, the Shenzen trading exchange for semiconductors and electronics. That looks like a very, very interesting prospect as indeed many in the media are musing on just how deep the crisis may be at the moment for China sourcing their semiconductors and electronics in a time of ongoing COVID now that they’ve abandoned the zero COVID strategy in China,

Elsewhere, competition in the Polish power market. PGE, a massive Polish energy utility, they’re setting up a power trading platform to rival the Warsaw Stock Exchange subsidiary TGE.

And finally in new markets this week, Indonesia is looking to launch a national crypto exchange during the course of this year.

In deals, it was a busy week for deals in the parish. All of them were of course reported in Exchange Invest Daily. Let’s just look at 3 that were highlighted in the watercooler of the bourse business:

Thomson Reuters completed its acquisition of SurePrep, LLC.

TMX Group in Canada have announced a strategic investment in VettaFi.

S&P Global have enhanced their KY3P risk management capabilities with the acquisition of TruSight Solutions LLC.

Don’t forget you’ve still got the opportunity to acquire a copy of my most recent book “Victory or Death?” Blockchain, Cryptocurrency and the FinTech World. If you’re looking for some reading, try and explain where markets are and where they’re going next. Very useful, as it does have remarkable perspective even if it was written before the crypto winter which it actually managed to foreshadow. “Victory or Death?” is published by DV Books and is distributed by Ingram worldwide.

Don’t forget while you’re waiting for your copy of “Victory or Death?” to arrive, you can check out our live stream. That’s on Tuesdays at 6pm London, 1 o’clock New York lunchtime, the IPO video live show. Catch the back episodes on LinkedIn, YouTube, and Facebook via IPO-Vid.

Our most recent show kicking off 2023 was an epic ADGM: Building An Island of Excellence with one of the senior figures Simon O’Brien – really a must watch show!

Coming on Tuesday we’re continuing a brief Middle Eastern theme. IPO-Vid #90 is going to be all about Developing Commodity Exchanges With Les Male the former boss of the Dubai Gold and Commodities Exchange.

In product news this week, the Shenzhen Exchange-SGX ETF Connect successfully launched which is an interesting move.

Meanwhile, after Singapore, China is now seeking a piece of Indian markets at least it’s the SAR of Hong Kong with Hong Kong Exchanges relaunching new derivative contracts benchmark MSCI India index on January 16th.

Elsewhere Taiwan Futures Exchange will launch FLEX Options and expand their ‘Kill Switch’ during 2023 and in Africa, Ethiopia’s ECX is going to start trading minerals during the course of the year.

Technology News, very good, strong start for resigns and new business. First, they had the Dhaka renewal. Now, NASDAQ have announced that Bolsa Electrónica de Chile have upgraded to the NASDAQ marketplace services platform.

Elsewhere the Thai Exchange are adjusting their rules before launching their new trading system, which is expected during the course of the first quarter.

Regulation news this week, SEBI clumping down on how stock exchange outages must be handled. They’re demanding an extension of trading hours and all stock exchanges must inform brokers within 15 minutes in the event of an outage.

Equally, SEBI imposed a ₹2 Lakh fine on a Multi Commodity Exchange (MCX) of India for violating the norms and awarding a software deal to a London firm. This, of course, has been ongoing farrago in relation to the little-known vendor of London, PESB. We’ve really no idea who they are are/were, but they managed to sell a system to MCX which it seems didn’t get delivered properly. And in fact, therefore, well, one might say you could compare their delivery in certain senses to Tata Consultancy Services in recent times who also had a bit of a cluster mess about delivering to an Indian exchange

Career path this week, Tradeweb confirmed that they’ve elevated their long standing CEO and President to CEO. Billy Hult takes on the top executive step while Lee Olesky has retired as Tradeweb CEO and will now serve as non-executive chairman of the board.

Interestingly, just streets away their deadly rival, MarketAxess made an announcement this week. They’re promoting Chris Concannon, the long standing CEO and President of MarketAxess to become Chief Executive Officer, founding CEO Rich McVey is going to become Executive Chairman, which is a slight twist to the tail, and somewhat of shocked news from MarketAxess or perhaps predictable given the move that already taken place with their deadly rival Tradeweb completing their long trailed move.

Thomas Zeeb resigned from his position as a member of the Executive Board of SIX Swiss Exchange after 14 years and will depart at the end of January 2023.

One exciting hire this week, BMLL (the masters of the future of market data) have appointed Rob Laible, former Global Head of Equities at Liquidnet as their Head of Americas. That’s a key hire in BMLL’s global and US expansion.

Finally, this week, a resignation of David Augustsson.

All the very very best to David Augustsson who announced his departure as a European Head of Communications at NASDAQ. He’s inviting applications to be his replacement via LinkedIn. And I indeed wish David every success in the future. It’s been a pleasure to work with him.

And that leaves us a ‘Big World’ ladies and gentlemen. Well, many many interesting and rather unfortunate stories this week.

One exciting piece of news, not altogether a shock but nonetheless it’s going to very much change the dynamic of the company concerned. Jack Ma who has given up control of the financial Ant Group restructuring China’s largest FinTech company, which puts it back on the path for an IPO with the Alibaba billionaire now out of FinTech, and it seems also out of China has been moving  predominantly between Japan and Thailand in recent months.

Elsewhere, the Taliban has insisted on girls and women being banned from education, even though it says this is ‘Not Permanent’.

Yes. How many people really believe that, even by the low standards of truth being spoken by governments of the world over it’s a pretty grim statement and a damning indictment of Joe Biden’s presidential legacy.

And then we come to the most worrying of all, amongst the predictions for 2023 from credible analysts, John Hulsman believes the war in Ukraine will continue throughout the year without resolution.

It’s a very strongly educated piece of analysis. Of course, we must all hope that John Hulsman is wrong.

And on that mysterious and magnificent note ladies and gentlemen, my name is Patrick L. Young, builder of marketplaces and exchanges the world over, publisher of Exchange Invest the daily bourse business newsletter.

I wish you all a great week in life, blockchain, and markets


LME Board Changes

LME Chairman Quits In Wake Of Nickel Nightmare
City A.M.

Independent Review Of Events In The Nickel Market In March 2022: Final Report

LME Group Response To Oliver Wyman Independent Review

LME Nickel Review Recommends Tighter Rules On Market Distortions
Yahoo Finance

LCH Japan Plan Signals New Fight For Global Clearing Model

Germany’s BaFin Tells EUREX And Clearstream To Clean Up Organisational Deficiencies

Nasdaq Celebrates Another Year As The Leading Exchange For Listings In The EU

TISE Enters Anniversary Year With Record Number Of Listings

US-China Tech War: Shenzhen Set To Become International Sourcing Hub For Semiconductors, Electronics With New Trading Exchange
South China Morning Post

China: Shenzhen Has A New Trading Exchange For Semiconductors. Here’s What It Does
Tech Wire Asia

PGE Sets Up Polish Power Trading Platform To Rival TGE

Thomson Reuters Completes Acquisition Of SurePrep, LLC

Thomson Reuters Completes Acquisition Of SurePrep, LLC

TMX Group Announces Strategic Investment In VettaFi

S&P Global Enhances KY3P Risk Management Capabilities With Acquisition Of Trusight Solutions LLC

SZSE-SGX ETF Connect Is Successfully Launched More Fruits Are Produced In The Two-Way Opening Up Of The Capital Market

After Singapore, Now China Seeks A Piece Of Indian Markets
The Hindu Business Line

Taiwan Futures Exchange To Launch FLEX Options, Expand ‘Kill Switch’ In 2023
Taiwan News

Ethiopia: ECX To Start Trading Minerals


Bolsa Electrónica de Chile Upgrades To Nasdaq Marketplace Services Platform

Thai Exchanges Adjust Rules Before Launch Of New Trading System

Sebi Puts In Place SOP For Handling Of Stock Exchange Outage, Extension Of Trading Hours

SEBI Imposes ₹2 Lakh On MCX For Violating Norms In Awarding Software Deal To London Firm
Hindu Business Line

Tradeweb Elevates Billy Hult To CEO

MarketAxess Promotes Chris Concannon To Chief Executive Officer; Richard M. McVey To Become Executive Chairman


Thomas Zeeb Resigns From His Position As Member Of The Executive Board Of SIX

BMLL Appoints Rob Laible As Head Of Americas

David Augustsson Resigns From Nasdaq

Taliban Insists Ban On Girls And Women From Education Is ‘Not Permanent’
South China Morning Post