13 min read

242 Exchange Invest Weekly Podcast April 27th, 2024

This week in the parish of bourses and market structure: CBOE Flings A Gauntlet, Is Blue Ocean The Tide Towards 24-Hour Trading? And DB1 Posts a Good Q1


This week in the parish of bourses and market structure:

CBOE Flings A Gauntlet,

Is Blue Ocean The Tide Towards 24-Hour Trading? 

And DB1 Posts a Good Q1

My name is Patrick L Young 

Welcome to the Bourse Business Weekly Digest

It's The Exchange Invest Weekly Podcast Episode 242 

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.

Over in Bitcarnage:

I've had somewhat of an epiphany but Stablecoins. Now, buying stablecoins as an investment and thinking they're supremely safe still strikes me as a fool's errand, as various such coins do not seem to be backed by entirely plausible / viable ‘paper’. However, this deals can make sense in one way or another. And most of all, stablecoins as settlement instruments makes a great deal of sense. Anyway, IOSG and Kraken Ventures, they lead a $7 million funding round for a stablecoin developer Usual Labs according to The Block. 

And at the same time, there's a winning app looming (I mean, broadly, no one stablecoin dominating per se) because a bipartisan development has taken place where US Senators Lummis and Gillibrand are taking on stablecoin legislation with a new bill. It's a case of US Senators Cynthia Lummis, a Republican from Wyoming and Kirsten Gillibrand, a Democrat from New York, tailoring a very narrowly focused bill seeking to define how stablecoins - cryptocurrencies that maintain value with some other asset or currency - will operate in the U.S.

However, a crypto advocacy group claim stablecoin bill would ‘violate free speech rights’ according to CoinTelegraph. The issue is in the Gillibrand - Lummis stablecoin bill seeking to outlaw algorithmic stablecoins, which the Coin Center group see as an attack on code, AKA free speech rights (first amendment) and thus unconstitutional. Otherwise, the group seems to support the proposed act. 

I'm not so sure this argument holds water. Here's a definition of the product via The Block and the truth of the matter is, it seems to me the ban here is intentioned not because the algorithmic stablecoins have code and use it, but rather because they tend to operate under collateralized and therefore as they are under collateralized each tech function they use to seek to maintain their value at par with the coin sounds wildly whizzy exciting and not stable at all, which I think is the point of the Gillibrand-Lummis bill?  

In the shownotes, you can get more details and a link to that article in The Block Algorithmic Stablecoins: What Are They And How Do They Try To Hold Their Peg? If you need more definitional insight. 

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, the daily update on happenings in the world of crypto and digital assets. You can find Bitcarnage as a separate standalone product on 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 Substack publication. Launched a year ago.

As to the week in exchanges: 

Heaven forfend, I might pith in other words into your spellchecker but in the world where all they talk about “countercyclical” at the bar during their conferences, the central bankers and related folk ought to consider a new word: “counterlogical”. The FSB, which has a single function, has come up with some fascinating concepts for the “Financial Stability Board” to help make markets, CCP et al safer.

The trouble is we're on the cusp of a baby / bathwater throwing repo here. Perhaps not quite yet, but it's coming soon. In the FSB world, everything that isn’t a bank is a massive risk. I, being a bit old school sometimes in my digital revolutionary fervour, actually think the big risk is letting the banks do what they want, then rewarding them with government bailouts and nary a slap on the wrist. 

Anyway, the FSB sees “non bank financial institutions” everywhere, it sees folk with a balance sheet doing a lot of commerce. To that end, they have moved on to various enterprises, including funds and commodity traders. Now funds ought indeed to stay as liquid as they need to allow redemptions (even if that means adhering to odd rules - as per the EU and application of funds rules even when the fund holds a lot of private equity or other private investments).

Anyway, while all for exchanges, I'm also all for general commerce and frankly, if a big commodity trader is to be restricted from holding illiquid commodities, that is not going to help world trade. A little common sense in risk is welcome but then again, the people with the least common sense in a bubble are traditionally banks. 

Of course, the FSB are concerned with their definition of “FS” as in financial stability, and that means we have to be very careful they don't overstep the mark and harm the broader economy, through their obsession with that other PLY invented word of the moment “superliquidity”. 

Elsewhere CBOE is in elbow sharpening mode as it seeks to force its listing franchise in between the US Country club duopoly while the parish has been paying farewell and tribute to the MGEX CEO Mark Bagan, who has passed away. 

A big change theme reverberates throughout the parish during the course of the last week with acute impacts in Hong Kong, underneath also South Africa. 

NYSE are thinking about 24 hour trading which suggests the hot ticket in the bourse business right now is Blue Ocean which has inverted some elements of the ATS model to deliver a very fast moving new kid (not) on the block, but rather offering a lot of lovely niche of mellifluous trades in many names at any size. Exciting times and lots to consider… 

Income up 16% in Q1 2024 for DB1 is encouraging with 10% from SimCorp being integrated and 6% from generic growth, albeit erstwhile powerhouse EUREX disappoints in fixed income and equity derivatives. 

The good news is Denmark's treasured stock exchange will be rebuilt after the devastating fire, but a long and expensive journey of restoration lies ahead. 

The FT Architecture correspondent Edwin Heathcote, meanwhile, delivered a beautiful article about exchange buildings against the background of the Copenhagen fire farewell to stock exchanges - fire is not their only enemy. 

Again on the Exchange Invest website you can manage to find the show notes for this with the link. 

In the broader EU, the FT once again states a majority of EU states object to capital markets reform push. Then again, EU stances is better than a top down catastrophe as proposed. Currently, Europe needs a lot more markets not fewer in every way but then again, EU needs to wholeheartedly embrace the notion of markets at the expense of corporate socialism and the precautionary principle.

Former Italian PM Enrico Letta has recommended the creation of an EU deep tech stock exchange. 

Which appears to contradict the apparently EU thinking in terms of monopoly marketplace or at worst an oligopoly in the latest ill-considered version of Capital Markets Union. 

Let a thousand markets bloom is a great rallying cry which I entirely believe in and Letta is spot on but the EU is a post capitalist structure for the aspirational so long as aspirational means you wish to be an apparatchik amongst the bureaucrats of future decline. 

There's some good news on fees minimum brokerage commission has been abolished by the SEC of the Philippines. 

China's market regulator has launched 5 measures to help rescue Hong Kong's battered stock market, reports the South China Morning Post which ought to facilitate IPOs in Hong Kong Stock Connect in both directions. South Africa's JSE also announced a significant listings shake-up plan

The FT also headlined a fascinating article New York Stock Exchange test for US and around-the-clock trading, and then began to obsess about the formative and not yet regulated 24 Exchange whereas the real story is the Blue Ocean tide driving US stock trading in Asia - there was a lot more insight about that this week in Exchange Invest available to all our subscribers via ExchangeInvest.com

In results, one big headline set of results this week Q1 2024 for Deutsche Börse Group. A 16% income leap with 10% coming from the newly integrated Simcorp balance sheet and 6% from generic growth. Given the outperforming trading segments were Commodities (18%) and power (39%) one is left to wonder why EEX boss Peter Reitz is not the incoming DB1 Group CEO. Although to be fair, gas price income was actually down 6% year on year for Q1. 

Meanwhile, financial derivatives income dropped 8%, fixed income ETD was flat and equity derivatives were down 21%. Clearly the European Union's efforts to, how one might put it politely, prefer Eurex need a lot more work. 

In new markets this week, the Ethiopian bourse ESX is targeting an equity and debt trading listing from September. 

This week so the new market is a dumb idea which won't work - if you don't understand why it has a lot to do with differential pricing centered in the USA, as well as a transport oligopoly. Anyway, Russia has submitted a proposal to the BRICS countries to create a grain exchange which has zero chance of being a success.  

Two snippets for deals news this week, the merger of stock exchanges at GIFT City as an advanced stage.

It's fascinating prospect as BSE and NSE would stay independent in India but their respective GIFT City overseas facing entities would become one market (valuation/share split currently clear on the negotiation). Thus BSE subsidiary India INX, which was first inaugurated in January 9th, 2017 in GIFT City could merge with the wholly owned National Stock Exchange subsidiary, NSE IX. NSE IX having been announced a few months later on June 5th, 2017 and launched on July 4th, 2023. They of course, launched the NIFTY futures complex in cooperation with SGX, which had previously been a bugbear for Indian regulators. This is an interesting deal, albeit I can imagine the owner stake negotiations may prove fraught…

In other deal news this week, it's on the IPO block. The roadshow has begun, Marex Group and shareholders are seeking to raise up to $323 million in a US IPO. 

Meanwhile, if you're looking for some reading in the world of finance and fintech, don't forget to pick up a copy of my most recent book “Victory or Death?” Blockchain, Cryptocurrency, and the FinTech World that's published by DV Books and distributed by Ingram worldwide. 

Victory or Death?: Blockchain, Cryptocurrency & the FinTech World: Young, Patrick L, Sprecher, Jeffrey: 9788362627059: Amazon.com: Books
Victory or Death?: Blockchain, Cryptocurrency & the FinTech World [Young, Patrick L, Sprecher, Jeffrey] on Amazon.com. *FREE* shipping on qualifying offers. Victory or Death?: Blockchain, Cryptocurrency & the FinTech World

While you're waiting for your copy of “Victory or Death?” to arrive, check out our live stream Tuesdays at 5 o'clock London time, midday New York time - it's the IPO video live show. Catch the back episodes on Linkedin and Youtube via “IPO-Vid”.

Now online is IPO-Vid #140 with FinTech guru Chris Skinner on Why We Need Intermediaries?.

Coming up this week, we're going to have Roland Bellegarde the Special Adviser to the boss of the Saudi Stock Exchange. He is going to be talking about Modernising Saudi Markets / Modernising Tadawul

Our “Finance Book of the Week” this week. Well, that dovetails neatly with our Exchange Invest weekends. We're currently on a space fetish one down, one to go. The second one will be coming out on Saturday. 

That is all about the space economy and indeed, hey presto, what better book could we pick for this week than The Space Economy by  Chad Anderson.

From global positioning, geospatial intelligence, and satellite communications to commercial human spaceflight and interplanetary transportation, “The Space Economy: Capitalize on the Greatest Business Opportunity of Our Lifetime” explains how and why the space economy is…well, I think the title is quite self-explanatory, the opportunity of our lifetime. 

In product news this week, Nigeria is planning to trade crude oil on the Lagos Commodity Exchange, eyeing 50 million barrels in volume yearly. 

A Nigerian crude benchmark is a fascinating prospect in a multi benchmark energy world and clearly folks in Abuja/Lagos have an eye on the precocious success of Murban futures, albeit they were blessed with the best derivatives management team. QV ICE Announces Record Trading Activity In Murban Crude As ICE Futures Abu Dhabi Marks Third Anniversary.

Meanwhile, as merger talks are ongoing in GIFT City as I mentioned, NSE IX has gained SEC class relief that permits US clients to trade on their equity index options contracts. 

Technology news this week, the SEC has targeted its own staff’s texting and nixing WhatsApp on work phones.

The SEC is banning WhatsApp for staff although it might be worth considering how this will work in emerging markets are off the beaten track locales where legacy technology even cellular is rubbish and the likes of WhatsApp is much more reliable. 

Hong Kong Exchanges is going to be developing the Orion Derivatives Platform (ODP), providing best-in-class trading, clearing and risk management solutions for global clients. 

And finally, in technology news, MSCI they've completed the acquisition of Foxberry

In regulation, I headlined at the start of the show, the FSB moves this week, and it was the big Regulation story of the week, the consultation report being Liquidity Preparedness For Margin And Collateral Calls

The Brussels bugle AKA the FT pinpoints a key concern with the headline “Hedge Funds And Commodities Traders Urged To Hold More Liquid Assets”, which is the drive for what I'm calling ‘superliquidity’. Seeking superliquidity and all fund held assets is thus driving greater illiquidity in certain instruments, which might make sense from a pure financial stability standpoint. At the same time, it isn't going to help the entire economy, nor emerging markets and that's a big problem here. We're at the classic Bert Fegg juncture - to enhance risk management in aviation hang a weight off the back of the airliner to prevent it moving, thus it can't fly and no accidents can happen…risk solved. 

Meanwhile, there's a highly troubling development as a who's who of the leftist financial literates in the US Parliament sign up to a Rep Ro Khanna /Fauxcahontas bill, which would preclude water markets in the USA, just as (a mere T+24 - years - after PLY trumpeted water as a mega market by this decade). Years ago, I noted CME were leading with water markets, but they were - and remain - utterly abysmal about explaining why water markets work and are better than the alternative of opacity. And, er, how can I put this in any other way illiquidity planned by the squad  Comintern and their oddball hard left allies in Congress/Senate. 

Finally, in regulation, the New Civil Liberties Alliance (NCLA) has filed a suit against the SEC claiming that the agency, through its “Consolidated Audit Trail,” or “CAT’ program, is collecting mass amounts of personally identifiable data by forcing brokers, exchanges, clearing agencies, and alternative trading systems to capture and send detailed information on every investor’s trades in U.S. markets to a centralized database. 

In career news this week, it was dominated by the untimely passing of MGEX CEO, Mark Bagan. Very, very sad news indeed, coming so soon after they had made an announcement on April 10, 2024 (reported in EI 2935) that Citadel’s Troy Kane was going to be joining Miami International Holdings as the overall MIAX Futures boss and Mark was going to be transitioning to become Executive Vice Chairman of MGEX from his CEO role.

Ms Lilian Cheng will join Hong Kong Exchanges Group on May 1st, 2024 succeeding Adam Singer who's leaving Hong Kong Exchanges so that Miss Cheng can become the Group Chief Compliance Officer of HKEX. 

And then there was a black bowl for the MCX nominees for the MD post from Sebi, the regulator. 

With Padala Subbi Reddy, stepping down May 10th, the speculation suggests Sebi seeks a more tech savvy CEO. Given the train crash which was the dismal installation by TCS of a replacement for the original FTIL/63 Moons software, it might not be the most ludicrous Sebi intervention on a C-suite appointment…

Over in BigWorld, still in India, the Indian General Elections began last week with phase 1 of 7! 

The process involves electing 543 members for the 18th Lok Sabha and will conclude on June 1st with results on June 4th.

PM Narendra Modi of the BJP is seeking a third consecutive term from an electorate of 968 million individuals out of a population of 1.4 billion in the world's most populous nation, India (having overtaken China earlier this year).

If you'd like more fun facts about the Indian elections, check out the IPO-Vid and Exchange Invest video feeds. We're doing lots of short videos these days on YouTube, Tiktok, and Instagram

 And on that mysterious on magnificent note, thank you for listening to this Exchange Investor Weekly Podcast 242.

join us daily via ExchangeInvest.com or if you have a new exchange you'd like built get in touch. 

My name is Patrick L Young and I wish you a great week in life and markets.


Crypto Advocacy Group Claims Stablecoin Bill Would ‘Violate Free Speech Rights’

IOSG And Kraken Ventures Lead $7 Million Funding Round For Stablecoin Developer Usual Labs 
The Block

U.S. Senators Lummis, Gillibrand Take On Stablecoin Legislation With New Bill 

Q1/2024: Deutsche Börse Group starts the financial year 2024 as planned with further considerable growth

Q1/2024: DB1 Presentation

Ethiopian Bourse ESX Targets Equities, Debt Trading From September

Merger Of Stock Exchanges At GIFT City At Advanced Stage, To Approach NCLT This Month
The Hindu BusinessLine

Marex Group, Shareholders Seek Up to $323 Million in US IPO

Nigeria Plans To Trade Crude Oil On Lagos Commodities Exchange
The Nation Newspaper

NSE IX Gets SEC Class Relief; Permitting US Clients To Trade On Equity Index Option Contract
The Economic Times

SEC Targets Its Own Staff’s Texting, Nixes WhatsApp On Work Phones
Yahoo Finance

HKEX To Develop Orion Derivatives Platform, Providing Best-In-Class Trading, Clearing And Risk Management Solutions For Global Clients

MSCI Completes Acquisition Of Foxberry
Yahoo Finance

SEC Illegally Tracking Americans Who Invest In The Stock Market, Lawsuit Claims
New York Post

Miami International Holdings Announces Untimely Passing Of MGEX CEO Mark Bagan
PR Newswire

HKEX Appoints Group Chief Compliance Officer

MCX Nominees For MD Post Fail To Get Sebi Nod