This week in the parish of bourses and market structure:
Is The DOJ Blinking On Binance Charges?
ICE Black Knight Springs Back To Life
As Tokyo Goes International
My name is Patrick L Young
Welcome to the bourse business weekly digest
It's the Exchange Invest Weekly Podcast Episode 206
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 the Exchange Invest Daily subscriber newsletter, the unique guide to the bourse business sent daily to your inbox.
More details at ExchangeInvest.com
Can We Decentralize Time? went one of the headlines this week in our Bitcarnage section, also available separately via Substack
Is CZ Running Out Of Time? noted the Bankless Times in a headline and it's a good point. As noted previously, CZ’s empire increasingly looks like the crypto equivalent - as I've said many times before - of the Knight in Monty Python's Holy Grail who has lost all his limbs but continues to demand the other party fight on.
The suggestion last week by the Wall Street Journal, that Binance’s biggest business line is in China - AKA a nation where it's illegal to have crypto trading, and that amounts to up to 20% of total Binance volume - would infer, even if remotely true, that CZ’s routes to sustaining his business are diminishing as more and more shackles of bans / withdrawals and legal actions mount up…Even without the US DOJ yet discovering the necessary nerve (or who knows, perhaps they lack evidence…) to go criminal with their investigations a big hot topic this week. The many significant threats to Binance and CZ remain.
That makes it hard to discern how the company can keep running day to day while undergoing so many investigations and so much flack…Time is not on Binance’s side right now, given the extent of accusations and investigations, let alone direct criminal threats perhaps mustering too.
And of course in the background is the DOJ rumored this week to be concerned that they might cause a systemic crash, but ultimately Binance is a miniscule token in the world of finance compared to the legacy financial business. It looks more like it's time to act now. Is time running out for Binance?
If you enjoyed this excerpt you may be interested to know that you can read Bitcarnage every day in Exchange Invest. Alternatively, if you want to follow Bitcarnage as a standalone, the daily updates on the happenings in the world of crypto and digital assets, you can find Bitcarnage on Substack.
LedgerEdge has gone into administration.
One day after we published last week ICE panjandrum Chris Edmonds’ excellent article “The Failed Promise Of Unregulated Crypto”, noting the lack of institutional appetite to invest in crypto markets and the digital asset corporate bond platform LedgerEdge is dead, a blow to David Rutter’s R3 ambitions after raising several gazillion way back when crypto V1.0 was the future..
It's sad for the David Rutter developed corporate bond platform but absolute proof of Chris Edmonds’ timely piece, which of course led Exchange Invest Daily, Exchange Invest Bitcarnage, and indeed also this podcast in the course of the last week.
Meanwhile, better news, Intercontinental Exchange (ICE), Black Knight and the Federal Trade Commission jointly agreed to dismiss federal court case pending settlement negotiations.
We've talked about this whole lot over the course of recent months. What we perceived was potentially a “thaw” having discussed what we termed “The Lina Khan Dilemma” in Parish Notes in Exchange Invest in the middle of July, where I pondered “Could the FTC now be in full retreat mode given its issues elsewhere, particularly during the course of what had been a torrid week for Lina Khan and her agency being sued left right and center”
That announcement in mid-July was followed within hours of Exchange Invest hitting your inbox with news of a second divestiture by Black Knight to Constellation Software, this time the Optimal Blue business. Previously of course ICE and Black Knight had announced that they had an agreement to sell Black Knights Empower loan origin system (LOS) business including its Exchange, LendingSpace, and AIVA solutions also to a division of Constellation Software.
Further action by the FTC had been announced in March. Now we have a court case being dropped.
The case remains what we noted then, that was in April of this year:
“Back to ICE and the broader antitrust case, it's still one where the authorities are myopically chasing old definitions as opposed to look into the future - that's a tragic parable, which could be true of either side of the political aisle, essentially anywhere in the world.
The worry remains in DC, does Joe Brezhnev and his administration know there is a thing called the interweb or some malarkey to that effect?”
It never struck me as unreasonable for the FTC to investigate per se. However, I have been surprised by the viciousness of FTC action, it almost felt political. Anyway, it appears we may have a chance to negotiate a settlement, which I'm sure will be the benefit of all parties involved.
Somewhere without a negotiated settlement but finally, the government's worried. Officials fear for the future of Ireland's stock market as major players leave for the US. The Department of Finance officials there have raised questions over the future of Ireland's stock market.
In one way this is true, in another way the Irish government has long been lax in helping / defending its national monopoly or indeed the creation of wealth through stock markets as a whole. Back to you, Dublin.
Over in central Wellington, there was a brief kerfuffle this week when the New Zealand Exchange's building was evacuated after a fire was discovered in the ceiling. Everything ultimately was fine and it was good to see NZX able to capitalize on their flexibility from having both offices in Wellington and Auckland…then again, they had a lot of practice during New Zealand's strict COVID lockdown regime.
In results news this week, the Intercontinental Exchange (ICE) reported a strong Q2 for 2023. Revenues are +4%, operating income +10% and it was the best Q2 in ICE history despite last year being a pretty nifty Q2 in its own right…as Jeff Sprecher noted during the ICE quarterly conference call with analysts, “ICE is an all-weather name that generates growth on top of growth.”
Other interesting news and there were a plethora this week. All of them were in Exchange Invest the newsletter of the bourse business that you really need to be reading if you want to know what's happening in the exchanges themselves. That's why we call ourselves the exchange of information folk.
CBOE global markets reported results for Q2 2023. Net Revenue +10%, Operating Income looking spectacular to $244.8 million, which was almost exactly the opposite of the Operating Loss of $237.4 million that they booked last year.
It's easy to forget this year that CBOE can celebrate jam in the latest quarter after last year being early out of the gates to write off crypto assets. That came of course, at a point when I noted at the time in Exchange Invest 2417 “CBOE moving fast to reprice its crypto-centric leg of ErisX but where that could look virtuous on one level is also subtly putting pressure on the public and private entities alike who are vastly more exposed to Bitcoin and friends whereas for CBOE, it's a rounding error. As an acquisitive entity in recent years, the rapid write down makes sense as it may help produce more and better priced deals in the crypto space…”
Well, ladies and gentlemen, I think that strategy paid off as this write down definitely did not help the likes of FTX survive the year intact.
As to CBOE more globally, it's the world's most global stock trading platform, has some awesome assets and a good cadre of management but it's stuck in a parochial linearity, which it needs to break out of with more pragmatism and dynamism during its 51st year and beyond.
New markets this week, India's new diamond exchange has pipped the Pentagon as the world's largest office block, there's a bit of real estate news for you.
The Taiwan carbon exchange has opened in Kaohsiung.
Deals this week, there were a multiplicity of deals actually some very, very interesting ones. We won't have time for all of them today in this podcast, just to give you three highlights.
Blue Ocean Technologies provide after-hours trading in particular US stocks, they're teaming up with the Tokyo Stock Exchange, they've announced a partnership and also Tokyo Stock Exchange have bought 5% of the company. And that's going to deliver a very, very interesting opportunity to trade US stocks after hours, but during the middle of the Tokyo trading session itself.
Coinbase meanwhile, have commenced a tender offer cashing in up to $150 million. They're making a purchase price on outstanding 3.625% senior notes due 2031.
I'm perplexed here, ladies and gentlemen, why on earth would Coinbase be buying back paper when it would have to spend a lot more money in order to manage to issue it in the future? Seems very, very strange to me.
Meanwhile, spectacular news out of Hong Kong and Macau, Charles Li, his new venture Micro Connect, which has started a platform to trade revenue based obligations formed in 2021 in Hong Kong. Micro Connect also now the licensee of the Macau Stock Exchange, which is scheduled to launch soon. It's a fascinating product set based on revenue funding related to Chinese businesses where cash is de facto anathema within the Chinese economy. Micro Connect is now a unicorn valued at $1.7 billion (RM7.7bil) after its latest funding round after raising $458 million in a series C offering announced this week, organized by Goldman Sachs.
Lesser deal but nonetheless quite interesting, Deutsche Börse’s DB1 ventures are investing in block trading platform OptimX. Alongside that will also be an investment made by Aquis Exchange, which is quite fascinating.
I must admit, I dunno what a new block venue entity can do in the equity market space but it's interesting that OptimX clearly thinks there is an opportunity and has snagged a DB1 led round including some funding from Aquis. Interesting that the pre-money on the first tranche is $10 million, that's the lowest I've seen in the platform for quite some time, but perhaps reflects the great difficulty in truly delivering a new block venue where CBOE have the global market power and a lot of also rans (including one time leader Liquidnet) have perceptions of moat?
Meanwhile, if you're looking for some reading to keep you up to date with the world of blockchain, technology, and financial markets as a whole and where exchanges are going, you'll be considering my latest book “Victory or Death?” Blockchain, Cryptocurrency, and the FinTech World it's an easy read all about the future of financial markets building the capital market revolution tradition. “Victory or Death?” is published by DV Books and it's distributed by Ingram worldwide.
Don't forget while you're waiting for your copy of “Victory or Death?” to arrive, check out our LiveStream Tuesdays 6 o'clock London time, 1 o'clock New York time. It's the IPO Video live show. You can get to the back episodes on Linkedin and Youtube via “IPO-Vid”. We're currently on a summer break for lives but we are repeating some of the classic shows during the course of the year on Tuesdays at 1 o'clock London, 6 o'clock Eastern. Coming up in the next live show is going to be after Labor Day and that's going to be Rainer Zitelmann and he’s making a return, he's gonna be talking about the “The Wealth Elite”
“Finance Book of the Week”, this week we're looking at Gregory Zuckerman’s “The Frackers” He's a three-time winner of the Gerald Loeb award whatever that stands for, but presumably good books because I have to say this is a cracker ladies and gentlemen, I find it absolutely fabulous from start to finish, it’s a few years old, but “The Frackers: The Outrageous Inside Story Of The New Billionaire Wildcatters” is a truly dramatic narrative tracking the brutal competition amongst headstrong drillers known as “Wildcatters,” who solved America's dependence on imported energy in the process making and losing astonishing fortunes. “The Frackers” is absolutely a must-read, and once again, you can get it via all the usual sources, including Amazon. We'll be unveiling our next “Book of the Week” in the next Exchange Invest weekend edition on Saturday.
Don't forget, if you want to read Exchange Invest macro view of the world in the weekend, it's absolutely free, you can sign up at ExchangeInvest.com but while you're there, consider a free trial to the exchange of information, Exchange Invest - the newsletter of the bourse business, the unique newsletter of the bourse business, and that is only $349 per annum to join the exchange of information. Let's face it, when it comes to that, how much is your career worth? Because, believe me, it's certainly a massive opportunity to profit within the exchange industry.
Product news this week, CBOE has introduced new options contracts on corporate bonds.
China and Saudi Arabia are in talks to deepen stock exchange cooperation, including the possibility of ETF cross-listings.
Technology this week, very, very interesting, Edaa, the capital market regulator, has announced that they're going to be introducing a cut in settlement time in Qatar exchange from T+3 to T+2 starting from January 2024.
Tel Aviv Stock Exchange (TASE) have signed an agreement with Fireblocks to provide technological infrastructure for a comprehensive range of digital asset products and services.
I must admit I'm a bit concerned here. TASE seems to be diving into digital assets just when at least 2 folks with a modicum of track record are saying the whole institutional crypto thing just isn't happening…
If you don't know who those 2 blokes are, you obviously haven't been reading Exchange Invest Daily, that's all I can say.
Finally this week in technologies and acquisition MarketAxess is acquiring the algorithmic trading provider Pragma.
Regulation news this week SEC Chairman Gary Gensler predicts A.I. ‘will be the center of future crises, future financial crises’. That's fascinating all together in a week when of course, what I have to say strikes me as a little bit of overreach in the world of messaging netted a cool half billion dollars across a series of banks for cancellers SEC.
In career paths, the ASX has appointed Diona Rae as COO she's already in situ, and therefore running down the clock until she departs. That leaves us with of course two key questions two open the book and wonder: who's next to leave the ASX C-suite? And how long will the new COO last? At the same time ASX appointed Alan Cameron as independent chair for the new clearing and settlement advisory group.
ASIC welcomed the establishment of a new ASX advisory group and the appointment of Alan Cameron AO as independent chair.
The pressure needs to be maintained on ASX as its shameless Chairman has broadly sought to “Howard Davies” the whole process of taking responsibility for the shameful CHESS debacle.
I appreciate that those who endeavor to steal what was at one time several billion dollars worth of merchandise probably don't immediately sound like a ‘feel good’ story but nonetheless, we did cover it in BigWorld this week where we're having a month of good news for August. The tale of “Razzlekhan,” a truly mellifluously untalented rapper. Heather Morgan, who adopted her rap alias as she was referencing Genghis Khan “but with more pizzazz.” in her own words, is quite a startling tale indeed, if you can manage a video excerpt it ought to add a smile to your day. Go check out something like Versace Bedouin.
Anyway, Heather Morgan and her husband Ilya Lichtenstein who were arrested in February 2022. And they finally appeared in court pleading guilty to various issues pertaining to the hack on Bitfinex in 2016.
Fascinating numbers, Bitcoin was worth $71 million at the time in 2016 when the hack took place, but it appreciated to more than $4.5 billion at the time of their arrest. Nowadays the Feds have adjusted their prosecutorial claim to circa $3 billion of restitution in keeping with the collapse in the crypto market.
Today’s sting in the tail? The memsstock poster child GameStop Will Stop Support For Its Crypto Wallets, Citing ‘Regulatory Uncertainty’ .
When even Gamestop is abandoning the cryptosphere…
…and on that mysterious and magnificent note ladies and gentlemen, my name is Patrick L. Young developer of marketplaces the world over, publisher of Exchange Invest, and of course the author originally of Capital Market Revolution.
I wish you a great week in life and markets and perhaps even the bits which are still thinking blockchain is the future.
Taiwan Carbon Exchange Opens In Kaohsiung