12 min read

197 Exchange Invest Weekly Podcast June 10th, 2023

Adam Smith 300 - No, that's not a NASCAR race!, Xavier Rolet skewers London’s market problems, Binance D Day gives way to Coinbase getting sued too and TTF is back, baby! - as Bigworld meets the parish of bourses head on!


This week in the parish of bourses and market structure:    

Adam Smith 300 - No, that's not a NASCAR race!

Xavier Rolet skewers London’s market problems

Binance D Day gives way to Coinbase getting sued too and TTF is back, baby! - as Bigworld meets the parish of bourses head on!

My name is Patrick L Young
Welcome to the bourse business weekly digest
It's the Exchange Invest Weekly Podcast Episode 197

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 daily subscriber newsletter, the unique guide to the bourse business sent daily to your inbox. More details at ExchangeInvest.com

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There was a great event in Budapest this week where I was honored to give a keynote speech alongside the legendary professor Dr. Richard Sandor, the father of financial futures, carbon markets, and much more. It was the AFM 25th celebratory anniversary conference - all the best to the AFM (Association of Futures Markets) on another great quarter century ahead!

In Bitcarnage this week we brought Adam Smith into Exchange Invest headquarters this week to add his unique pith to both Exchange Invest and our Bitcarnage Substack.

Bitcarnage | Exchange Invest Bitcarnage | Substack
“Bitcarnage” by fintech pioneer Patrick L Young, is a spinoff from the daily bourse business bulletin “Exchange Invest.” Subscribe to understand crypto market dynamics from a team which successfully predicted the decline of FTX etc…. Click to read Bitcarnage, by Exchange Invest Bitcarnage, a Substa…

Amongst his erudite analysis that we deployed during the course of our additional pith in last Monday's edition was the great quotation:

‘All money is a matter of belief’ - Adam Smith

It was a week of shaken beliefs for the crypto folks as first Binance then Coinbase were subjected to rather searing SEC indictments. For those of you not reading either Exchange Invest or Bitcarnage, remember months ago, we were happy to point out Binance and Coinbase would be sued soon enough - therefore, anybody expressing surprise this week can be easily identified as not being a reader of either Exchange Invest or Bitcarnage.

So ladies and gentlemen, get ahead of the crowd, join the Exchange of Information and subscribe to Bitcarnage for the digital asset and crypto news alone about the market infrastructure or for the entire gamut of exchanges, there's this 10 year archive within Exchange Invest you can now access for only $349 per user year.

More details at ExchangeInvest.com.

The CBOE has launched a new global listing offering for companies and ETFs of the purpose-driven innovation economy.

Whoo, that sounds very exciting, doesn't it? It's all under the management of Jos Schmitt who's now the head of global listings. How will CBOE compete with their global listing platform alongside NYSE, NASDAQ and a lot of other players in their own regions across Europe and Asia? Time will tell.

Meanwhile, Hong Kong Exchanges are planning GEM listing reforms to help tech startups raise funds. But at the same time, rivals in Shenzhen and Shanghai clearly pose challenges. Bring that competition on we say.

Excellent thought provoking Op-Ed as well in the South China Morning Post this week from former Hong Kong Exchanges exec and IPO-Vid guest James Fok, the author of “Financial Cold War”, who notes how Hong Kong exchanges monopoly legacy “could make Hong Kong's exchange attractive to investors if it expanded post-trade capabilities and promoted direct exchange connectivity”.

Meanwhile, as the dual counter news revs up ahead of that launch on June 19th, spectacular news 40% of Hong Kong's daily turnover from the stock exchange (that's 21 leading companies) are lined up for dual counter trading in yuan and Hong Kong dollars when that dual currency counter opens.

ASX released a new five-year strategy.

Comrades! The Politburo has spoken - the new five year plan is here. How can we fail? Ignore the naysayers who point out if we locked the ASX management in a brewery, or ribald evening would prove probably impossible for them to facilitate. Rather ASX presents high standards for the Australian market even if what goes on in the Duchess of ASX itself may not be so impeccable. Responsibility we will shirk as ASX one could argue while enjoying the privileges of ranking the nomenklatura.

In other news, tractor production statistics show improvement today ahead of another perfect harvest, rumored Potemkin village turns out to be Adelaide…(and well I think you get the gist..if not, there'll be some Tech news in a minute to discuss further the shameful decline and fall of the one’s great name the Australian Stock Exchange Group.

Xavier Rolet gives a scintillating interview this week in the Sunday Telegraph. For one thing, it showed that he's managed to get over his remainaphilia for the European Union and accepts the status quo of what's happened. The problem is he says London is heading for a Brexit showdown financial reforms won't stop at crashing out. Of course, the problem here is, that essentially Britain needs a great deregulation post-Brexit and the blob simply isn't capable of delivering that. More insights from Xavier’s article. It's a real must-read from last Sunday Telegraph in the UK.

London is heading for a Brexit showdown – financial reforms won’t stop it crashing out
Interview: Former LSE chief Xavier Rolet on where it went wrong for London

Meanwhile, if you're looking for insights on the macro, don't forget to pick up a copy of my book “Victory or Death?” Blockchain, Cryptocurrency, and the FinTech World 20 years on actually almost 25 years on would you believe now from the original FinTech best seller “Capital Market Revolution”.

“Victory or Death?” Blockchain, Cryptocurrency, and the FinTech World is an easy read, explaining the differing and diverging role of banks and exchanges explaining the winning business models of the new world order, and placing in perspective just what Bitcoin, Blockchain, and Cryptocurrency mean for markets. 70,000 words of pure play PLY pith. “Victory or Death?” is published by DV Books and is distributed by Ingram worldwide.

While you're waiting for your copy of “Victory or Death?” to arrive, check out our livestream at Tuesday 6pm London, one o'clock New York time - the IPO video live show. Catch the back episodes on LinkedIn, Facebook, and YouTube via “IPO-Vid”.

Latest issue online IPO-Vid #109 with the excellent Christopher Sturgess who formerly headed up commodities at the Johannesburg Stock Exchange and is now an illustrious consultant right across the continent of Africa and beyond. He was discussing in his position as a former chairman of AFM, Africa & Commodities. It's a must watch ladies and gentlemen, I thoroughly recommend it.

Coming this coming Tuesday IPO-Vid #110 AFM@25, EI@10 Anniversary Spectacular.

Recently we've launched a ‘Book of the week’. This week's book was written by IPO-Vid guest 101 Bob Pisani. Shut Up and Keep Talking is a magnificent compendium of captivating stories that reveal what Bob has learned about life and investing through the most incredible forum of all: a seat in the epicenter of capitalism, the floor of the New York Stock Exchange.

Part investment primer, part stories of meeting the great and the good such as Fidel Castro, Robert Downey Jr., Walter Cronkite, Aretha Franklin, Barry Manilow, and Jack Ma to name but six, Shut Up and Keep Talking also delves into the structure of markets.

Bob elegantly describes how the investment world has changed, the almost total transition of trading from floor to screen, the collapse in fees for many investment products and services most notably via index funds, making “Shut Up and Keep Talking” a unique memoir from CNBC’s voice on the NYSE floor for over 25 years.

Technology news this week, and sadly, we lurch back to the ASX, they're confirming the work program to maintain CHESS. CHESS, which as you may recall has been around for so long that it makes the quarter-century history of both Bob Pisani on the New York Stock Exchange floor or indeed the AFM celebrating their quarter-century looking like mere whippersnappers.

There are some elegant surmises of what's going on here and indeed Patrick McConnell noted on LinkedIn: “This is the classic #ASX document - a huge 157 page report full of repetitive consultant speak, designed to bore rather than enlightened and with many of the important bits (like what are the risks?) blacked out?

He goes on to say, “I've ever one wondered how #ASX managed to burn through 250 million Australian dollars on its latest flop, the report is illuminating”.

I can put it in three words GUBU on steroids.

Meanwhile, the New York Stock Exchange have been building a virtual replica of its trading floor for IPO events. What a fascinating use of the Unity tools for video games and the like.

In regulation news this week, the CFTC (Commodity Futures Trading Commission) has approved Cboe Clear Digital to clear margins digital asset futures, another new arm to the CBOE business.

In career paths, Fiona Bassett is joining LSEG as CEO, FTSE Russell. Once again despite employing 752 million, billion, trillion people across the entire Reuters, I mean Refinitiv, I mean LSEG Group Empire, the LSEG needs to find its new management from outside whether this actual farce.

Having been embroiled in a conspiracy to water down the gold, only of course to its four nines, but nonetheless minting somewhat less than the perfectly pure West Australian gold. The Perth Mint boss has bid farewell to the company. Gold Corporation CEO Jason Waters resigning following a review pertaining to gold being tampered with before delivery to the Shanghai Gold Exchange.

Vale this week, two sad RIPs: the former SEC chair Harvey Pitt is dead at 78. He oversaw the SEC during a tumultuous 15-month period in office, which took place as markets were in the dark following the collapse of Enron and many other major scandals.

Likewise, RIP to Hong Kong Exchanges former CEO Paul Chow, who was the man who brought mainland Chinese shares to Hong Kong. Most notably with that incredible listing of the Tsingtao Brewery many decades ago. Farewell to him, both of them taken far too soon at Pitt 78 and Cow 76, respectively.

Now in “Big World” this week, it was a meeting of “Big World” and the parish.

That idiocracy passing as a superpower (well, of course, that ‘superpower’ in the same way, I passed for an ‘F1 champion’ as a child by having lots of racing posters on my bedroom walls) I speak of course of the European Union, and it has once again spectacularly missed the point.

Years ago, Brussels was eager to halt what was to them and egregious overreliance on the US dollar as the currency of energy pricing several years ago. Some folks tried to talk to the European Union about free markets, but in the Canutian corporate socialism of the European Union, they retain a chip on their shoulder about economics as theorized by a Scotsmen like Adam Smith, and so forth, even if a lot of European Union nations had a decent stab at the topic over the course of the past century or so such as Austria.

Anyway, of course, there was actually a success right under the European Union's nose even if they don't want to pay attention to it. TTF, that elegant balancing mechanism which amounts to the world's benchmark for gas. Note, it's not the US benchmark that Henry Hub on a jolly decent chap is Henry and all that…no, rather TTF is the big kahuna, the global benchmark for gas right across planet Earth. However, the European Union for some reason, which is known only to itself stubbornly refuses to pay attention to TTF or indeed acknowledge its position, despite it being surely a great beacon of the use of the euro currency.

Quite the opposite in fact. The European Union last year spent some considerable time dissing TTF with gusto. Their misguided briefings (“misguided” here as a synonym for ‘well beyond porcine levels of ignorance’) and were parroted out by their usual over-educated, under-brained, shills in the meeja who demonstrated an embarrassing ignorance of TTF’s status.

As we discussed in, for example, Exchange Invest 2452 - 12th of September last year, where the Brussels Bugle, delivered “A column of genteel muckraking” as we described it calling into question the CCP model and stated with the remark that has aged about as well as Johnny Depp: “the so-called TTF benchmark has been driven to be a flawed gas price metric for electricity markets — manipulated in effect by Putin.” The FT demeaned itself that day, despite some fine souls, such as Philip Stafford, offering pragmatic defence of TTF markets via Twitter.

The European Union's grouse was essentially the standard issue Canutian pricing model of the European Union. Whatever the market decides, the EU perceives conspiracy and price gouging. It's like engaging with several thousand Elizabeth Warren simultaneously. This hectoring contempt from Brussels became more acute during the Ukraine invasion as the EU led the whole crisis.

Well, crisis leadership that led, well, apart from not providing arms, not having anything worthwhile to say to Vladimir Putin other than whimsical desires to buy more Russian gas and indeed being as useless as ever, albeit with lovely dinner services in their expensive ‘embassies’ (by the way, the European Union still fails to have an agreed Russian foreign policy to this day, more than a year into the Russian invasion of Ukraine).

The idiocrats of the Brussels blob went further and decided there would have to be a price cap on TTF because that would stop gas being too expensive for EU citizens. This was against the background that the great Soviet sleeper agent masquerading as German Chancellor, Angela Merkel had materially damaged her nation and the broader EU with a craven embrace of Russian gas verging on hapless addiction - it was 40% before the Russians began their Ukrainian invasion (7% and falling by late 2022 under duress). That left the European Union only inches from a big winter crisis fortunately, it was a mild one last year and Europe survived entirely despite its political masters.

As the EU’s price cap led to ICE sensibly providing a spar to Brexit Britain with a Netherlands price cap market and a free market across the North Sea. London TTF sans cap was made available to trade on the market prepared in case the EU's arbitrary 180 euro (per MW/H) cap was met. Fortunately, prices didn't get back up there as Adam Smith's invisible hand waved its magic once again. Thus the European Union continues to have its global gas benchmark trading through Amsterdam.

Previously, the Germans, in a move of breathtaking financial illiteracy, had hit the panic button, publicizsed their wallet was de facto without limit to secure supplies ahead of winter, and thus TTF peaked at 342 Euros last August.

This week, despite wholesale failures across the European Union to understand markets (plus ca change!) the TTF price is around 27-28 Euros and Volume is off the charts!

A record 5.7 million TTF futures and options traded during May, that's equivalent to a record 4,158 Terawatt hours. I have no idea how much that amounts to but I think a sporting guess is ‘enough power to enable an infinite number of monkeys playing Call of Duty until the end of time on thir consoles of their choosing’ but I may be slightly exaggerating. Slightly. TTF options trading has grown 179% so far this year. (Fun fact: the European Union only applied their cap to futures, not options - I know three-dimensional thinkers, Pavlovian salivation and a mega opportunity in there, plus another damning indictment of the idiocracy…)

Anyway, not that the EU has yet understood  / acknowledged / appreciated but they have ‘never had it so good!’ with their global gas benchmark growing Open Interest +37% year on year with options Open Interest +68% suggesting TTF is poised for Lake Baikal levels of depth.

The European Union finally got lucky when it stopped stupidly intervening with all the frenzied demeanor of a coke-addled billionaire playboy in a St. Tropez nightclub on a busy night, firework flaming Krug bottles et al. It dodged a $33 billion margin call risk (as we reported in Exchange Invest last December 1st, 2022) ICE stayed cool and provided an orderly market - against all odds…and further enhanced their growing portfolio of energy benchmarks across the world.

That's an exchange story worthy of the unique bourse business digest Exchange Invest but the macro of the tale is pivotal for understanding ’BigWorld’, the future of energy et al.

And on that mysterious and magnificent note ladies and gentlemen, my name is Patrick L. Young, publisher of Exchange Invest the ‘Exchange of Information’, builder of bourses marketplaces, and exchanges of the world over. I wish you all a great week in life and markets.


Cboe Launches New Global Listing Offering For Companies And ETFs Of The Purpose-Driven Innovation Economy

HKEX Plans GEM Listing Reforms To Help Tech Start-Ups Raise Funds, But Rivals Shenzhen And Shanghai Pose Challenges
South China Morning Post

How The Monopolistic Hong Kong Stock Market Can Turn Its Achilles’ Heel Into An Advantage
South China Morning Post

ASX Releases New Five Year Strategy And Updates Financial Guidance At First Investor Day

Xavier Rolet Interview: London Is Heading For A Brexit Showdown – Financial Reforms Won’t Stop It Crashing Out
Sunday Telegraph

ASX Confirms Work Program To Maintain CHESS

Why The NYSE Built A Virtual Replica Of Its Trading Floor For IPO Events
Emerging Tech Brew

CFTC Approves Cboe Clear Digital, LLC To Clear Margined Digital Asset Futures

Fiona Bassett Joins LSEG As CEO, FTSE Russell
FTSE Russell

Perth Mint Boss Bids Farewell Amid Controversy
Jeweller Magazine

Former SEC Chair Harvey Pitt Dead At 78
Bloomberg Law

Former HKEX CEO Paul Chow, Who Brought Mainland Chinese Shares To Hong Kong, Has Died
South China Morning Post