Oct 7, 2023 11 min read Exchange Invest Weekly Podcast

214 Exchange Invest Weekly Podcast October 7th, 2023

This week in the parish of bourses and market structure: FTC Vs Amazon, Cushing Crushed? Another MCX TCS Delay,

Transcript:

This week in the parish of bourses and market structure:

FTC Vs Amazon

Cushing Crushed?

Another MCX TCS Delay

Welcome to the Bourse Business Weekly Digest

It's the Exchange Invest Weekly Podcast Episode 214

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

We also of course publish Bitcarnage our guide on Substack to just the world of market structure as it has been created for the crypto digital asset world.

This week we were looking again at Total Lawfare.

We know SBF is in court as we record but we're not going to rush to judgment albeit in Bitcarnage on Substack and in Exchange Invest, we are covering his trial while giving ourselves a little time to consider what is happening - as is our wont. At the same time what a day Tuesday 3^rd of October was: SBF, Hunter Biden, and Donald Trump all in the US courts admittedly not the same US court room at the same time.

One thing which has been clear from early review by folks in the know is that Michael Lewis may have an issue insofar as he appears to have been the last high profile victim of the SBF cult before the curly haired one stood trial…

As one Yahoo Finance column headline noted: In Michael Lewis, Sam Bankman-Fried Found His Last And Most Willing Victim

Then there was the steady drip drip drip drip drip of news about FTX's excesses, one being the headline from Business Insider explains: FTX Paid Tom Brady $55 Million For 20 Hours Of Work Over 3 Years.

In the sting in the tail sting department, last week saw Silk Road founder Ross Ulbricht Mark 10 Years Into His Double Life Sentence In Prison

SBF may be assured of his innocence in his own mind, but will the US judicial system agree?

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 just Bit carnage, the daily update on happenings in the world of crypto and digital assets, you can find it as a standalone Bitcarnage on Substack.

Back in the legacy world of exchanges this week, the FTC has sued Amazon for illegally maintaining monopoly power.

While her early bouts have mostly involved bruising defeat, the Lina Khan era FTC is now at a point where methinks a considered attack on Amazon could draw a great deal of remediation from the mega-platform of E-commerce. That has ramifications for the parish and requires a lot of consideration on the part of legacy bourses.

It's not a regulated exchange, of course, but there is a lot to unpack here. Lina Khan has lost everything pretty much in her tenure to date but this looks a lot more structured. Equally what parishioners need to peruse is anything where Amazon may lose against the FTC which might pique the attention of SEC/CFTC to apply to markets and market operators. There is a lot in Amazon which is anything but administering a fair and equal playing field. That makes me think La Khan will win more than she loses on this one but the parish would be well advised to brainstorm issues that may arise from this complaint. (Naturally, your host of this podcast PLY is available if you need further assistance / input or workshop moderation on the topic).

Great comment by NASDAQ CEO Adena Friedman this week, she was being interviewed and they were of course as always asking her when she was on the Gogglebox all about AI. As she pointed out very succinctly: NASDAQ use AI algorithms to root out criminal behaviors.

And have done with excellent effect for many years through their trade surveillance systems.

News from the LME, the LME clearing house cut the size of their minimum default fund for the second time in 30 days. That's gone from $1.012 billion at the last cut, it will drop to $1.031 billion from October 2^nd

Over in Texas, they've got their eye on a big prize and the big prize that would seem is CME Group amongst other businesses.

Governor Greg Abbott would that not be the one made of irony of the world's one time largest hydrocarbon exchange were to arrive in a new Texas HQ in a position where it can more comfortably advocate even the UK’s crazed green belligerence of net zero?

The same time the Streetwise Professor Prof. Pirrong puts it very, very succinctly, he of course being a good professor in the great state of Texas. Come On Down! And Will The Last Business In Chicago Turn Off the Lights?

Prof Streetwise who is of course an IPO-Vid alumni. You can catch him from IPO-Vid #093: Craig Pirrong on the Streetwise Professor Speaks tells it like it is in the week everyday futures/options folk have got the chance to done their best carbon fibre body armour and head downtown to Chicago Expo for the FIA Conference. PLY opted on the grounds of personal safety not to attend.

Now there is of course something behind this whole which is that all interesting point about Cushing. Reuters had a fascinating story this week when it comes to Midland versus Cushing versus well just what is the world's greatest oil benchmark? Cushing Oil Hub's Low Levels Spur Quality, Operational, Price Worries went the Reuters headline.

Long long ago we compared how Houston had all the storage - and enabled an infinity of barges to fill up across a wealth of piers. Seems like a long time since Cushing was so packed it had one night where they probably tried to leave some DSW in the cooking oil vat behind the local Taco Bell, KFC or somesuchlike.

The hedging however seems to be moving on, and that's surely the start of a cataclysm we have long expected for the CMEs oil ‘benchmark.’ Albeit surely being a benchmark means the industry prefers you?

Carl Larry, sales director at energy consultants Wood McKenzie was quoted in that Reuters story, he notes “If you let the crude (level) drop too low, the crude can get sludgy and you can't get it out. What does come out - you won't be able to use.”

It does indeed look incredibly like the end of an era albeit denial is a big beast in South Wacker - even if it might of course be not so much South Wacker’s South Texas soon for the headquarters of CME Group. Ever since that epic failure of CME to keep up with oil trends was writ large by the Cushing crisis, the story has been one of when, not if, CME’s Cushing WTI would be toppled as the global oil benchmark.

In the OTC business as we've discussed before Houston was where the pricing was at even before the last mega banking crisis. Cushing was a kind of community rest stop compared to Houston for oil apart from the CMEs rather old fashioned settlement affection for the place. It was there when they wrote the NYMEX contract at the height of Dallas TV show mania. Thus CME Group these days NYMEX as was then Montana quaint desire that Cushing is the US oil hub.

Indeed, as noted previously in 1983: “WTI with a central delivery point in Cushing, Oklahoma was quite the thing. So too in 1983 was “Sweet Dreams” by the Eurythmics.

However, the world moved on (and the Eurythmics split up)”).

While it's all in the genre of light sweet, there's a vast chasm between what today is West Texas Intermediate and what is the WTI future on CME which is such a sweet crude, it's like comparing Hershey bars (CME) with Lindt (WTI Houston) which is of course the contract at ICE. Thus nowadays the market (apart from the folks of CME) are differentiating the Cushing stuff as DSW (Domestic Sweet) with “WTI” really only being upended these days to that stuff that actually comes from West Texas, mostly around Midland being a far superior oil for a range of purposes

In new markets this week, MEMX (that's one of those industry organizations that are trying to build something that goes up against the people who are the for profit exchanges) their options exchange successfully launched. They became, I think, the two million US single stock options exchange. No actually was well close enough, the 17th US single stock options venue.

Meanwhile, Vietnam's first voluntary carbon exchange was launched.

Deal news this week, couple of great deals are done. After a successful completion session, Deutsche Börse has initiated the usual squeeze site at SimCorp and applied for delisting.

Meanwhile, the MSCI has completed its acquisition of Burgiss.

If you're looking for some reading at this point in time, something perhaps to get you through the Halloween holidays. Don't forget you can still pick up a copy of “Victory or Death?” Blockchain, Cryptocurrency, and the FinTech World, published by DV Books and written by yours truly Patrick L Young.

Meanwhile, if you're waiting for that to arrive, which is being distributed worldwide by Ingram, why don't you check our live stream Tuesdays at 6 o'clock London time, 1 o'clock New York Time, 7 o'clock CET - the IPO video live show. Catch the back episodes on Linkedin and Youtube by searching IPO-Vid.

Our last show IPO-Vid #119 was an epic Going Global, The Birth Of The CFTC with the absolutely mellifluously, marvelous Andrea Corcoran, the woman who actually set up their Office of International Affairs and thus helped shape a great deal of the global derivatives market as we know it.

Coming this week on Tuesday 6pm London time we're going to have Commodities Markets- On the Road With Rod Blondin and his unique history of how he built the suffix agricultural contracts.

“Finance Book of the Week” this week, of course, don't forget you can get the heads up on our Finance Book of the Week by subscribing to our free weekly weekend newsletter that you can get via ExchangeInvest.com if you don't want to pay up for the whole of the exchange of information just yet, which comes to your inbox Monday to Friday.

The weekend Exchange Invest always starts with our new Book of the Week this week. It is Eamonn Butler himself, an alumni of IPO-Vid. He was guest on IPO-Vid # 111. He's the Co-founder and Director of the Adam Smith Institute and his Book of the Week is the The Best Book on the Market.

Markets are everywhere. But how many of us understand how they work, and why? What does a ‘free market’ really mean? Do free markets actually exist? Should we have more or less of them? Most of all - do we really need to know all of this? Answer: Yes, we do.

Get the book as soon as possible.

Our next Book of the Week will of course be unveiled on Saturday at the EI Weekend Edition.

Product news this week, very very unfortunate news, the Spikes futures owner MIAX may have to shut down their VIX rival after their petition was denied.

It's very disappointing news, MIAX and indeed the market as a whole must do whatever it takes to prevent this obscene monopoly play by CBOE.

Elsewhere, the Singapore Exchange launched their first ammonia futures contracts.

NASDAQ in Europe, quite fascinating some very, very interesting custom, forwards custom basket forwards that they're calling them have just been launched. A very very nifty way to get yourself all sorts of exposure to the alpha you desire in the equity market.

Technology news, we come back to one of our headlines of the day, SEBI has asked MCX to put on hold the launch of their new electronic TCS platform. Quite epic altogether, there's a law case brewing, and that legal action is demanding that the 63 moons system is run in parallel for one year with the new TCS system to ensure a smooth switchover. Given previously we saw a $30 million 6 month renewal. Does that mean that 63 moons technology might make 60 million if this lawsuit succeeds? For the time being, they're still raking in the cash because SEBI is refusing to let MCX turned on their new system.

On a happier digital note, ICE completed its first delivery of London cocoa using fully electronic warehouse warrants.

That was a remarkable contrast and a tale of two commodities this week. ICE Futures reminded us - as if we ever needed that - that digital transition is their bag.

In Nairobi, Kenya, a more analog system has resulted in a colossal bag problem. 100,000 coffee sacks have gone missing.

Career paths this week, Hong Kong Exchanges appointed Group Chief People Officer. Miss Sharon Cheng has joined HKEX.

The BSE (Bombay Stock Exchange) Chief Onformation Security Officer and Chief of Special Projects has tendered their resignations. That was Shivkumar Pandey, the Chief Information Security Officer and the Chief of Special Projects Nayan Mehta.

Deutsche Börse meanwhile has started the search for their new CEO. That word came from their chairman.

Let's hope it is somebody with a bit more of an international bent who can make Deutsche Börse great again.

Finally this week, a great piece of career path news, Michael Mainelli, our dear old friend and IPO-VID #025:The Sustainable City & Beyond. Professor Dr. Alderman Michael Minnelli. I don't think I got those in the right order but nevermind. My dear friend has been elected as the 695th Lord Mayor of the City of London. Going to be a spectacular year in the square mile and I'm sure Michael is going to be an absolutely marvelous Lord Mayor.

Meanwhile, something which I'm sure the Lord Mayor won't be concerning himself with, but a remarkable statistic for a nation where crime is not quite unheard of, but traditionally is very much a tiny minority pursuit.

The leap to 30% of Japanese supermarket checkouts being automated in 2022 (partly to minimize P2P contact during COVID) has coincided with an up to 30% increase in shoplifting…

No statistics yet on whether the light fingered ‘shoppers’ of Japan are including Fukushima sourced fish amongst their pilfered goods.

But of course, then again, when you think about the West in the UK, where shoplifting has always been much more common. Apparently, they've added security guards in a way of behind the tills, akin to the only Home Depot I ever visited in the USA where indeed there was no one to help you at the checkout but there were plenty of people to examine your bags when you tried to take anything out the door.

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

I wish you a great week in life and markets.

LINKS:

FTC Sues Amazon For Illegally Maintaining Monopoly Power
FTC

Nasdaq CEO Adena Friedman: We Use AI Algorithms To Root Out Criminal Behaviors
YouTube

LME Clearing House Cuts Size Of Minimum Default Fund For Second Time In 30 Days
Nasdaq

Watch Texas Governor Is Eyeing the CME, Other Businesses
Bloomberg

Greg Abbott Trying To Lure CME Out Of Chicago
Crain's Chicago Business

Come On Down! And Will The Last Business In Chicago Turn Off the Lights?
Streetwise Professor

Cushing Oil Hub's Low Levels Spur Quality, Operational, Price Worries
Reuters

MEMX's Options Exchange Successfully Launches
Business Wire

Vietnam's First Voluntary Carbon Exchange Launched
Vietnam Plus