11 min read

184 Exchange Invest Weekly Podcast March 11th, 2023

Have ICE Black Knight got ahead of FTC? Is the Refinitiv deal working?FTX has an $8.9 billion shortfall and NYSE posits a broad coalition for reform.


This week in the parish of bourses and market structure:

Have ICE Black Knight Got Ahead of FTC?

Is The Refinitiv Deal Working?

FTX has an $8.9 billion Shortfall

NYSE Posits A Broad Coalition for Reform

My name is Patrick L. Young

Welcome to the bourse business weekly digest

It’s the Exchange Invest Weekly Podcast Episode 184

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 7 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.

No sooner had the headlines trumpeted that FTC legal action was coming on Thursday of this week than ICE/Black Knight got ahead of the government’s lumbering machine and delivered a significant (albeit previously trumpeted) deal selling considerable assets and injecting further competition into electronic mortgages – which is hopefully the future of what remains a horribly paper-centric business in the vast majority of transactions.

In other litigation-related news, LME received another $96 million wave of papers from a clutch of hedge funds relating to the Nickel nightmare.

While LSEG touted the triumph of the Refinitiv deal…despite data/analytics growing slower than the ‘legacy’ core extend stuff. Then again, adding insult to injury, the FCA promptly announced a review of data pricing.

FTX’s transpires has lost/misappropriated/stolen/delete as appropriate $9 billion of customer assets, Oh, I’m terribly sorry, I exaggerate $8.9 billion worth of customer assets at the last markup. That took them less than five years where it took Madoff 50 to steal 65 billion. Even CFTC regulated FTX.US has a $116 million customer account shortfall.

There’s an interesting joint letter around from the broad church of NYSE, Charles Schwab and Citadel proposing a way forward in SEC’s market structure reform debate.

There’s not many days to go now until the annual FIA shindig at Boca Raton, where it would appear hotel rooms remain indexed to some Zimbabwean inflation rate. Coinbase are the sole crypto sponsor it seems this year after last year’s event was a form of deja vu of the short lived B2B exchange era of 20 years ago. Will anybody miss SBF and his North Korean style oration to the FIA board? Well, I doubt the FIA board will.

On the other hand, the FIA’s almost mellifluous ability to court some degree of sponsor controversy has led to the Boca event app being sponsored by Ion…you know the folks just recovering from being hacked. I have said the app was already downloaded from last year but I wonder how many delegates will be thrilled towards adding something to their mobile device which bears the imprimatur of the firm which caused the near implosion of derivatives allocations and settlement due to their network being infiltrated just weeks ago?

Anyway, see you in the coming week for the FIA event at the Rat Mouth if you’re going.

Meanwhile, in Exchange Invest, onwards and upwards we are in the 27th century of Exchange Invest passing through the 2600 issue market this week. Delving somewhere between science fiction and science fact with a dose of tabloid intermediation, we could note that, in the 2006s a ”Time Traveller Claims AI RULE Over ‘Micro-Chipped’ Humans In Future”  albeit that actually sounds more like about 2025 at this rate if the Davos set get their way with the spurious logic of the hackneyed 4th industrial revolution schlock. It certainly sounds like a borderless world as dreamt up by Klaus Schwab and his perma-wrong cronies when it comes to future prediction.

Meanwhile, Futuretimeline.net informs us that by 2600 AD, “Most of the remaining plastics, tin cans, and other waste products from the 20th-21st centuries will have decomposed by now.” Well, at least that’s something to look forward to during the course of a lot of long winter’s nights.

In the meantime, we’ll be keeping you informed and looking forward to the next 100 issues until the middle of the calendar year when we reach our 20th century.

If you’re not already a subscriber to Exchange Invest, it’s $349 per user per year to ensure direct market access to the “Exchange of Information”.

In Bitcarnage this week – all the news was in Exchange Invest where the crypto kiddies were stomping around on the grounds that regulators they claimed were acting in bad faith.

These complaints were muted somewhat by the liquidators announcing that they had discerned a shortfall in FTX customer accounts vastly higher than media expectations and coming in, as I mentioned earlier, at $8.9 billion.

As FTX CEO and liquidator John J. Ray noted:

“It has taken a huge effort to get this far. The exchange’s assets were highly commingled, and their books and records are incomplete and, in many cases, totally absent. For these reasons, it is important to emphasize that this information is still preliminary and subject to change. We believe it is more important to provide transparency to stakeholders by making this information public now than to wait until we can achieve certainty.”

So there you have it ladies and gentlemen after the property exposés, the billion dollar loans, the PJs on demand, the Nassau executive car fleet at least one incredible Daiquiri bil amounting to nearly enough $60,000 and of course a serious operation aimed by the US government…the numbers are in: FTX has an $8.9 billion customer fund deficit.

So NYSE this week published a comment letter in partnership with two key partners in the equities market ecosystem, Citadel Securities and Charles Schwab seeking to move forward with this joint consensus towards the SEC’s desire for further market structure reform.

At the same time, the London Stock Exchange has been welcoming the thaw in EU relations and sees no ‘cliff’ for clearing despite Euro-clearing threats from the European Commission.

Then again, given the fuss about a peripheral loss of equivalence to India creating headaches for banks on the continent of Europe, the simple realpolitik is the EU just can’t risk its banking system despite their daft demands for currency protectionism, which is actually killing their Euro project.

At the same time, London’s position as a major equity marketplace is in big difficulties, particularly that led by the London Stock Exchange Group.

The FT headline noted last week: ‘There Are No Domestic Equity Investors’: Why Companies Are Fleeing London’s Stock Market

Frankly, there’s just zero risk appetite, the dealmakers are risk off and the whole financial center of London has gone soft, stodgy and corporate following the European model. It’s sad to see when there are good markets including those developing stocks but the perceived market leader LSE is the only one with the ear of the government which is, therefore, a problem if you happen to say CBOE or Aquis to name but two thus, the LSEG being cited as a national champion stock exchange when it has become something of an embarrassment is a huge problem.

Just to recap what’s been going on during the course of last week, Arm a technology company that’s heading to the USA.

CRH is going for a New York listing that’s thanks in part to actually Biden protectionism and big infrastructure spending in the USA helping what used to be known as Cement Roadstones Holdings.

And indeed, there’s much else besides a feverish number of companies that it seems are about to move their listings. All this against the background where the LSE announced a £750 million buyback from Refinitiv investors.

At the same time, the Irish Times puts a little bit of perspective on this, noting the fact that amongst the  listed in London, but also originally were listed in Dublin stocks moving to the US, CRH (Cement Roadstone Holdings) and indeed Flutter (the betting company, which also owns the Betfair Exchange) are two of the big names that are heading across the Atlantic.

There was bad news, too, for LME, which faced a two pronged attack within just a couple of days last week, shortly after announcing a relaunch into Asian trading hours for Nickel. It was announced that the LME is facing a rare UK probe into its conduct during the Nickel nightmare, that is Coyote Ugly ladies and gentlemen.

Beyond that FCA enforcement investigation, there was also news that a series of hedge funds are promulgating a series of new lawsuits over canceled Nickel trades.

AQR Capital Management, DRW Commodities, Flow Traders, Capstone Investment Advisors, and Winton Capital Management are seeking circa £80 million ($96 million) in damages from LME and LME Clear.

Over in Africa, the government is considering handing over the Nairobi Coffee Exchange operations to the Capital Markets Authority (CMA) while there’s a robbering between the CFTC and their claims, as they tried to kill off PredictIt the online political futures exchange, which they say has violated a 2014 no-action letter allowing it to operate.

Thing I have to say, is if only the CFTC ever had this sort of action over genuinely dubious actors like say FTX let alone FTX.US and I’m left to wonder why they didn’t?

Results this week, it was a very busy week for results in the parish, all the details were in Echange 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.

LSEG growth, actually, not bad Total Income +5.5% that puts the Operating Profit just within a whisker of $1.7 billion.

At the same time, given the Data and Analytics business group +4.2% (+5.3% ex Russia/Ukraine), Capital Markets on the other hand grew more than twice as fast +9.8%, Post Trade grew significantly more +7.5% and thus Refinitiv was below the rate of growth in many key areas, which leaves me absolutely struggling to see how this represents a case the data pivot into buying Thomson Reuters Financial has been the success which the LSEG management is trumpeting.

Sure, it’s a higher rate of growth and Thomson Reuters Refinitiv used to manage to achieve but it’s still not as big as the original business. That strikes me as I might curious.

In deals this week, Black Knight and Intercontinental Exchange (ICE) announced an agreement to sell Black Knight’s Empower LOS business to Constellation Software Inc. That led to revise terms of the merger agreement.

In other words, ICE managed to get itself ahead of the curve of the FTC, who were rumored to be suing this week to try and stop the deal. ICE sort of got back ahead of the blob-curve and moved to secure their deal and what amounts to “managing up” the blob. US government is left pondering what some might see as a rather naked political reaction and therefore, I presume they will sue another day. However, it has to be said ICE has cleanly pre-empted the FTC and now leave the bureaucrats on the defensive to find fault with the deal under revised terms, which clearly spins out a possible bone of contention and empowers more competition in the digital world of mortgages.

Trying to understand just how these data pivots work amongst a million other things are, a myriad of issues that are addressed in my most recent book “Victory or Death?” Blockchain, Cryptocurrency, and the FinTech World. It’s published by DV Books and it’s 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 6pm London time, 1 o’clock New York time, it’s the IPO video live show. You can catch the back episodes on LinkedIn and YouTube via “IPO-Vid”.

Our most recent show was an epic by Professor Albert Menkveld discussing Non Standard Errors in Markets. Fabulously wonderful wander around all sorts of mathematical and interesting issues.

Coming up this week, we’re going to be coming to you from Boca Raton with Jennifer Ilkiw, who is going to be talking about how she is riding the crest of the ICE wave.

Product news this week, European Union lawmakers have set up a clash with member states over the share trade bomb. European Union battle looms over payment for order flow.

In what may seem rather counterintuitive to others Platts are going to be including US crude oil and its Brent benchmarks from June while Germany’s Commerzbank has made a comeback to the DAX index.

Of course the irony there is Commerzbank was removed to make way for the utterly fraudulent Wirecard.

Technology news this week, “Bloombergski” is the nickname that has been given to an all-new Russian terminal. The Moscow Exchange (MOEX) beset by having traders unable to access their platform and find out suitable news and information, let alone market prices and do analysis et al., have had to effectively produce a variation on the theme of Bloomberg or other terminals, and therefore, they’re creating the Russian variation on a theme, in order to beat sanctions and keep the market going.

Regulation news this week, well, I think the biggest story was certainly where Warren, Whitehouse, they’re leading Democrats in pressing Gensler for strong climate rules despite the fact that the SEC seems to be rather pushing the limit of what it can expect from the corporate world and indeed the world of investors. At the same time it must also be said Elizabeth Warren seems to be pushing on a more open door when she’s been pursuing finance, along with various other senators.

Career paths this week, the Nairobi Stock Exchange’s Geoffrey Odundo has had a CEO contract extended by one year.

OCC Megan Cohen has been promoted to General Counsel, she’ll succeed Janet Angstadt who announced her retirement effective from July 2023.

Overall UK interest rates and seems so long ago, they ended 2021 at 0.1%. They are, as I record this podcast, 4% after 10 hikes by the somewhat blithely incompetent Bank of England who missed the whole concept of inflation creeping up over their shoulder. As noted for the past decade or more, by my various writings, including in Exchange Invest, interest rates over 5% are perceived as staggeringly high by modern borrowers whereas a previous generation such as mine can recall selling STIR options on the LIFFE CannonBridge floor at implied rates of 17% (that’s implied interest rates, I mean, volatility was greater than 30% at the time).

The Telegraph in fact noted recently “This time last year, Halifax was offering the cheapest mortgage ever: fixed at 0.83% for two years. Now the same bank is offering the same mortgage at 4.95%”.

Anyway, fun fact (or not a few 5% down and a stonker of monthly repayments), apparently economists (wedge a salt truck here and pinch to your heart’s content) but nonetheless, economists are reckoning that in the current highly leveraged times UK mortgages at 6% would have the same impact on borrowers as 15% mortgage rates hard when the UK property market nose dived in 1989…

And on that, miss, studying

And on that mysterious and magnificent note, my name is Patrick L. Young creator of marketplaces the world over, a publisher of Exchange Invest “The Exchange of Information.”

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


Proposing An Implementation Path For The SEC’s Market Structure Reforms

Joint Consensus Position Letter to the SEC

Lynn Martin Post

London Stock Exchange Welcomes Thaw In EU Relations, Sees No ‘Cliff’ For Clearing

‘There Are No Domestic Equity Investors’: Why Companies Are Fleeing London’s Stock Market

London’s Investment Appeal Is Unraveling As Arm Heads To The U.S.
The Japan Time

Biden Protectionism Pushing CRH To New York Listing
The Times

LSE Announces £750 Million Buyback From Refinitiv Investors

Who’s Next? Big Apple Takes Bite Out Of Irish Market With CRH And Flutter Moves
The Irish Times

LME Faces Rare UK Probe Into Conduct During Nickel Crisis

Hedge Funds Sue HKEX’s London Metal Exchange For US$96 Million Over 2022 Nickel Trading Fiasco
South China Morning Post

Govt. Considers Handing Over Nairobi Coffee Exchange Operations To CMA

CFTC’s PredictIt Claims Focus On Relationship Between Aristotle And New Zealand University

LSEG: Preliminary Results For The Year Ended 31 December 2022 – Broad-Based Growth And Strong Execution

LSEG Profits Jump As It Hails Refinitiv Deal A Success
City AM

Black Knight And Intercontinental Exchange Announce Agreement To Sell Black Knight’s Empower LOS Business To Constellation Software Inc. And Revised Terms Of Merger Agreement

EU Lawmakers Set Up Clash With Member States Over Share Trade Ban

Platts To Include U.S. Crude Oil In Brent Benchmark From June

Germany’s Commerzbank Makes DAX Comeback

Moscow Exchange To Set Up A “Bloombergski” Terminal Equivalent For Traders
BNE IntelliNews

NSE’s Geoffrey Odundo Contract Extended By One Year
Business Daily

OCC Announces Megan Cohen Promoted To General Counsel – Cohen To Succeed Janet Angstadt, Who Announced Her Retirement Effective In July 2023
Yahoo Finance