Dec 14, 2023 12 min read Exchange Invest Weekly Podcast

224 Exchange Invest Weekly Podcast December 16th, 2023

This week in the parish of bourses and market structure: New CME FX Markets, EU Bond Tape Breakup, LSEG Under Duress, Yet London Raises More Capital Than Anywhere Else In Europe…

Transcript:

This week in the parish of bourses and market structure:

New CME FX Markets

EU Bond Tape Breakup

LSEG Under Duress

Yet London Raises More Capital Than Anywhere Else In Europe…

My name is Patrick L Young

Welcome to the Bourse Business Weekly Digest

It's the Exchange Invest Weekly Podcast Episode 224

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

Over in Bitcarnage, the pressure is building up once again on Binance as the SEC has held out against becoming part of the DOJ settlement….Indeed, the now released DOJ court documents appear to help the SEC’s push for further sanctions against Binance who have spent the past week once again obfuscating on where their global headquarters might be…

Meanwhile, Canada's famous crypto entrepreneur turned convicted felon, CZ, appears to have tired of life on North American continent with his family now in UAE. Apparently, a partner and three children. That amounts to however, US prosecutors have tightly (and sensibly!) objected to CZ going back to the Middle East where there is no extradition treaty with the UAE. A judge in the US has sensibly agreed.

Meanwhile, The former CEO of the platform Bitzlato has pleaded guilty in court. Anatoly Legkodymov was arrested in Miami on Jan. 17, and has been held in the rather grisly environs of the Metropolitan Detention Center in Brooklyn, New York ever since. No sentencing date has been set and Legkodymov faces up to five years in jail. Probably a fair tariff for his crimes but again this infers Binance managed to get CZ a remarkably light sentence range. Binance by the way was a leading counterparty to Bitzlato…

There remains some talk incidentally that Legkodymov might yet be part of a prisoner swap for the US Wall Street Journal reporter detained in Moscow, Evan Gershkovich.

Meanwhile, according to SBF parental family friend and expert lawyer who advised the ill-fated defence: SBF Earns Dubious Title Of "Worst Witness" Amid High-Stakes Trial that's the Bloomberg headline. Stanford Law School professor David Mills crafted a meticulous defence strategy, which SBF promptly ignored. “He may be at the very top of the list as the worst person I've ever seen, do a cross examination.” says Mills, a Stanford Law School colleague and a close friend of Bankman-Fried’s parents.

If you enjoy 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, the daily update and happenings in the world of crypto and digital assets, you can find Bitcarnage as a standalone on Substack.

Back to the major mainstream of marketplaces, market structures CBOE will focus on internal growth after acquisitions.

There's a lot of upside to CBOE if it can just get its message across, let alone how it organizes what it does and how it grows internally.

Speaking of poor messaging, even their supposedly loyal meeja contacts on whom zillions have been lavished in hospitality over the years are turning on LSEG.

With Marex snubbing the London Stock Exchange this week in favour of a US listing and a third matching engine fall over in his many months, the credibility of the London Stock Exchange Group is, to put it mildly, dim.

London is adrift for several key reasons:

The Corporation took its eye off the ball for multiple years due to perplexing over Brexit (and being perma-wrong on what would happen including that distinctly embarrassing unanimous vote to encourage remain which entirely backfired).
The UK government being market oblivious (allegedly the Conservative party believes in free markets there is essentially zero evidence of this from the time Cameron entered the office 13 years ago apart from brief unrequited messages during the Truss interregnum).
A corporatization of the City has removed / reduced individual risk and the ability to be entrepreneurial in many respects - all due to EU / FCA Bank of England ineptitude or precautionary principles.
And then there's a stubborn reluctance to realize that London's big markets are ICE and CBOE as much as anything operated by the data-obsessed LSEG monopoly, which has biting at its heels a considerable number of their exchanges and trading venues such as Aquis.

On that Marex story:

Why on earth would a globally focused broker even consider LSEG except to be polite in political terms? The US has the investors, the risk appetite, and the market. Right now focusing on UK listing only is a mug's game until the institutions embrace risk and investing once more.

And yet amidst all this doom loop, it's hard to ignore the point that for the past 15 years, the USA has grown 82%, the EU has grown by a mere 6% and yet, we have the notable headline in Financial News London this week: London Stock Exchange Still Tops Europe For Capital Raisings.

Whether you regard this as indicative of London’s strength despite everything else, or the weakness of the EU's capital markets more than a decade after the originally mooted (broadly undelivered) CMU, this statistic is instructive.

Elsewhere, we had the shock closure this week of the Euronext owned Euro swap joint venture between MTS and fintech firm WeMatch which was only launched in February. Quite remarkable.

In results this week, it wasn't such a busy week, the CME Group declared an annual variable dividend $5.25 per share payable January 18^th making for an implied yield of 5% according to the CME’s press releases.

Fabulous news in Budapest, the Hungarian stock exchange has seen a profit climb of 51% net in Q1 to Q3 2023.

Over new markets this week, the CME launched two new FX initiatives, in essence, a whole new brace of platforms:

There's a new FX “all2all” market FX Spot+ Is intended to Connect OTC And Futures Liquidity

While CME will combine its two NDF liquidity pools on the EBS Market platform onto a single trading venue in October 2024, subject to regulatory approval.

Hungaria, Slovenia, and Serbia are going to be launching a power exchange by the end of 2024.

And then there is the “Main Street Growth Act” which seeks to create a new form of SME exchange in the USA. Very interesting with the US African American focused Dream Exchange, eager to exploit this license type.

In deal news this week, Persistent Systems is in talks to acquire the IT arm of the National Stock Exchange of India, according to an exclusive in Moneycontrol. That vendor rather has been set on the block following the recommendations of the Sebi-appointed Mahalingam Committee.

If you're trying to understand how technology is affecting life and markets, check out my latest book “Victory or Death?” Blockchain, Cryptocurrency, and the FinTech World. It's a binary world indeed, your career will sustain or collapse in the next stage of the digital world hence the title “Victory or Death?” lest you need reminding of the exciting times for finance in which we are living. “Victory or Death?” is published by DV Books and distributed by Ingram worldwide.

Now we've gone into your Christmas break with the IPO-Vid live show, but you can still catch all our back episodes on Youtube, Linkedin, and Facebook. Just go search “IPO-Vid”. You can watch all the 140 different back episodes of the show.

In “Finance Book Of The Week” and don't forget you can get a preview of the Finance Book Of The Week by signing up for our free weekend newsletter which is available every Saturday. You can do that by going to ExchangeInvest.com and signing up for the free option.

In response to readers' queries, we have this “Book of the Week” feature we're choosing interesting books pertaining to exchanges and markets investment et al.

This book was written by Bryan Burrough and John Helyar.

“Barbarians at the Gate” is a modern classic - a masterpiece of investigatory journalism and a rollicking book of corporate derring-do and financial swordsmanship. Burrough and Helyar take readers behind the scenes of the largest takeover in Wall Street history, at that time, the deal to buy RJR Nabisco.

Our next “Book of the Week” will be unveiled on Saturday in the EI Weekend Edition. Don't forget to sign up for that free if you'd like to be ahead of the pack and indeed if you like being ahead of the pack and all news about financial markets and exchanges, don't forget, if you want all the news on the bourse business sent daily in your inbox, subscribe to Exchange Invest via ExchangeInvest.com it's only $349 per annum to join the exchange of information.

Product news this week, the European Bank for Reconstruction and Development (EBRD) they're supporting capital markets in Kazakhstan as we know well, their latest innovation, they've helped KASE (Kazakhstan Stock Exchange) introduce a new local currency interest rate swap overnight derivative, an overnight index swap, in which the overnight rate is exchanged for a fixed interest rate. It's another excellent product delivered via the 30-year young Kazakhstan Stock Exchange, which publishes the rate and index that it developed with the assistance of the money market working group comprising the National Bank of Kazakhstan, the EBRD, and the country's leading financial institutions.

Over the LME, they're studying a nickel sulphate contract amid rising EV battery demand.

In Warsaw, the US stock segment has launched on their Globalconnect platform, the first chair Tesla has been trading since the 12^th of December while on the 11^th of December Borsa Malaysia derivatives launched their first currency futures, which is Chinese renminbi US dollar.

In technology news this week, the Tata Consulting boss says he's ready to take ASX pressure on CHESS. According to an interview in the AFR (Australian Financial Review):

The Tata boss says he's ready to deliver where the previous vendor to ASX, DAH, failed. AFR is fairly tame on the whole topic, but at least mentions the Finnish and TMX delivery delays by TCS which TCS defend to some extent. The ASX by comparison to AFR is now the definition of active versus passive management.

Previously, management actively walked into DAH’s embrace. And failed. Now they have passively gone for what they perceive as a ‘safe pair of hands’. In neither case do they appear to have a clear vision of what management involves.

It's quite amusing to see TCS note “The ASX project is not large by TCS standards, but it is a very solid space for us”. Not quite sure how the TCS boss defines a solid, but from what I recall in chemistry, it's just a state along with gas and liquid - perhaps a useful surmise of the Australian market structure state of play.

Intercontinental Exchange (ICE) has announced approval of electronic trade document solutions for the delivery of commodities globally.

That's an excellent extension from the news early in October, where we noted how ICE Completes First Delivery Of London Cocoa Using Fully Electronic Warehouse Warrants

Then there was the shock bond consolidated tape proposal dying in the EU. It came as a statement from Bloomberg, MarketAxess, and Tradeweb. The joint venture agreement is dead. Will Euro CTP endeavor to go cross asset from its equity consolidated tape proposal? Presumably, the bond consortia partner Finbourne is very disappointed by this too.

As Etrading Software has instantly announced they would like to make a CTP bid for the European bond consolidated tape in addition to its existing bid for the UK bond consolidated tape.

In regulation news, the SEC had warned against ‘AI washing’ the high-tech version of ‘greenwashing’.

A welcome warning where lots of people have at best a little limited machine learning (for example us) in their systems and many proclaim it as a huge AI process. (not us, I hasten to add).

ASIC has intervened to protect retail investors from high-risk offers and business practices.

Does high-risk business practices include hugely mismanaged technology stacks where hundreds of millions are spent only for the solution to be then rebased upon an Indian import, which has no great reputation for being cutting edge but has frequently been delivered late and over budget?

#AskingForAFriend

ESMA publish their annual peer review of EU CCP supervision. The reason this EU CCP supervision report is so encouraging is because the net result is its “overall positive”. Good to see.

Career path this week, Terry Duffy received a contract extension: another 2 years as Chairman and CEO to maintain the CME ‘monopoly milker’ strategy.

Meanwhile, Hong Kong Exchanges is considering extending CEO Aguzin’s contract for one year according to Bloomberg.

NASDAQ has confirmed Roland Chai supreme commander of their market services in Europe.

On the Consolidated tape theme once again, Former Euronext Market Services And Digital Head Eglantine Desautel has been appointed to head up a EuroCTP, that is the joint venture between multiple exchanges to deliver a joint consolidated tape for the European Union equity markets.

S&P Global has announced the departure of CFO Ewout Steenbergen.

There's a welcome new Chief Strategy Officer at Aquis Exchange, Adrian IP who's been heading up the commercial tech arm in recent times.

Then there is the news via The Trade that the Millennium arm of LSEG has hired a new head of sales for EMEA.

“Marion Juric has been named head of EMEA sales at Millennium, following five years with the business working across Europe, Middle East, Africa and APAC.

So it seems Millennium is seeking to sell exchange matching engines once again, just when their own LSEG installations aren't working as well as they ought. It's a very puzzling state of affairs given how LSEG-Millennium was forced to withdraw from the process for what is now Nuam Exchange on the shortlist just a few months ago.

Over in BigWorld, a quick update on some inflation rates around the world you might have missed as we approach year-end.

Afghanistan is a surprise with deflation of 8.1% as political risk led to recession and the economy tipping into deflation mode in April.

Argentina sits at pretty much world-leading 143% which helps explain the 55% vote for the new president, the libertarian Xavier Milei, who was inaugurated into office just last week.

That contrasts with neighboring Brazil, where despite the latest leftist, Lulu government, inflation is - by historic Brazilian standards - a very meek 4.82%

Clearly, Chinese deflation at -0.2% is a worry inferring risks ahead as the economy and China tries to avoid too much collateral damage as the likes of Evergrande lead the former property bubble into liquidation.

Perhaps most shockingly, while out of 5 month high in Zimbabwe's inflation rate is a mere 21.6% - a bagatelle compared to past stratospheric hyper inflationary values.

Hong Kong Exchanges CEO Nicolas Aguzin delivered an interesting manifesto this week, noting IMF estimates 70% of global growth in 2024 will come from Asia, the Middle East, Africa, and South America. Ally that with the statistic I threw in the other day, about the past 15 years where Europe has grown 6% and the USA 82% over the past 15 years…

…And on that mysterious and magnificent note ladies and gentlemen, my name is Patrick L Young. I build marketplaces around the world, I am the principle of Exchange Invest “the exchange of information” the Daily Bulletin of the bourse business.

I wish you all a great week in life and markets.

Thanks for listening to the Exchange Invest weekly podcast!

LINKS:

Cboe To Focus On Internal Growth After Acquisitions
Crain's Chicago Business

London Stock Exchange's Terrible Week Risks Sending It Into a Doom Loop
Yahoo Finance

(London-Based Marex Files For New York IPO In Huge Blow To The City
(City A.M.)

London Metal Exchange Studies Nickel Sulphate Contract Amid Rising EV Battery Demand
MarketScreener

US Stock Segment Launches On Globalconnect. First Stock, Tesla, Traded As Of 12 December
GPW

Bursa Malaysia Derivatives To Launch Its First Currency Futures Hedging RMB/USD On Dec 11
The Star

MTS Shuts Euro Swap Venue
Risk

CME Group Declares Annual Variable Dividend
CME

Budapest Stock Exchange Profit Climbs 51% In Q1-Q3
Budapest Business Journal