13 min read

247 Exchange Invest Weekly Podcast June 1st, 2024

This week in the parish of bourses and market structure: Praise Canada! It’s the T+1 Show!

Transcript:

This week in the parish of bourses and market structure:

Praise Canada!

It’s the T+1 Show!

My name is Patrick L Young 

Welcome to the Bourse Business Weekly Digest

It's The Exchange Invest Weekly Podcast Episode 247 

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 parish notes this week, we pondered the New York Stock Exchange and its fate a decade on from the resignation of Duncan Niederauer who as president earned the epithet “Duncan the Value Destroyer”  as a result of his series   of unfortunate ‘investments’. We passed the event by noting how the New York Stock Exchange today is an almost unrecognizable NYSE thanks to the vast ICE-sponsored reforms under subsequent NYSE Presidents Tom Farley, Stacey Cunningham, and Lynn Martin. 

Meanwhile, plaudits to Canada who led the way in North America alongside Mexico while the US had a Memorial day pause before it too made the great T+1 lurch that meant the US returned to the settlement cycle the NYSE enjoyed previously during the 1920’s until the go-go years of that roaring decade got too much for the paperwork train.

All this and much more analysis was to be found this week in Exchange Invest the watercooler of the bourse business. To join the exchange of information contact us via ExchangeInvest.com and sign up now for a free weekly trial after that, it's only $375 per user year. How can you afford not to if you're trying to stay ahead of what's going on in the bourse business?  

Over in Bitcarnage ‘Realty Meets Reality’ this week or indeed possibly realty met reality this week. 

We had previously told Bitcarnage EI subscribers this snippet of information last year. Anyway, realty and reality collided as we suspected. The headline in Yahoo Finance / Fortune listed Sam Bankman-Fried And His Crew Overpaid For Real Estate, Bahamas Listings Show 

Way back as the US was celebrating Thanksgiving in 2022, Exchange Invest 2515 on November 24th 2022 noted “Bahamas real estate turnover broadly doubled in Q1 2021 to $400 million. That's the entire country, not just Nassau / New Providence. It was a record year but even so without the largesse passed through from the investors to SBF et al. Bahamian GDP shows total real estate activity including rents in New Providence to have been $1.3 billion in 2021, $1.8 billion for the entire country of which FTX / SBF et al amounted to $300 million”.

Therefore, it wasn't the case that SBF / FTX moved the market, they WERE the market in Bahamas property for one relatively brief spell within a year. Thus as I noted in Exchange Invest 2928 some weeks back, we had realtors salivating at the inventory but now comes the reality. The Bahamas market is a bit more subdued post-COVID bounce and dumping what amounts to a quarter's worth of inventory onto the market in one dollop (and everybody knows it's there to be sold…), an illiquid market like real estate this will have issues and it will create ramifications. Total stamp duty is not huge in the Bahamas 2.5% but with legal fees, etc. the frictional cost is what 5% give or take, which amounts to $15 million in its own right. Then of course there are those huge monthly condo fees to be paid for all these gated community properties essentially SBF / FTX seemed to be in a hurry to buy and that helped firm up market prices as they essentially removed a vast swathe of inventory on the market. 

I believe turnover is below 2021 levels currently - some of the Caribbean markets are hotter, but equally this is now hurricane season which marks the slowest and lowest point in the cycle (peak transactions are often in Q1 and Q4. We know the SF penthouse from whence he was arrested was briefly offered at $40 million, but it failed to sell there and was bought for was offered for $40 million sorry, thought again, but failed to sell at that level and was offered for $30 million. It's a fabulous piece of real estate but the stress in the market is that the liquidators are paying the service fees and hence a value oriented bid will probably scoop the property.

It remains unclear if the SBF parents are still hanging on to “their disputed $16.4 million mega Villa incidentally. Given the need to sell fairly urgently, only a massively buoyant property market could save if this sell-off me thinks while it appears everything SBF/FTX bought was in a form of managed building  / gated community and the bean counters liquidating FTX will be eager to stop their fee liability. 

Therefore, it looks as if the FTX property profit portfolio may represent an interesting opportunity for some (highly relative) bargain buys in the Nassau / New Providence property market. At least it looks as if creditors are already going to be made somewhat “whole”.

If you enjoy this excerpt you may be interested to know you can read Bitcarnage every day in Exchange Invest. Alternatively, if you want to follow  Bitcarnage, the daily update on the happenings in the world of crypto and digital assets, you can find Bitcarnage as a standalone 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.

This week in exchanges, ESMA the European securities regulator entered the debate for the future of European Union capital markets. 

There is, it has to be said a laugh out loud funny headline which begins “Improving Regulatory Agility”. The EU has repeatedly proven it as all the regulatory agility of a ballerina in an iron lung. Of course by ‘agility’ ESMA really mean their ability to micromanage everything - which will only further slow down any possible progress, let alone deeply crimp the opportunities of entrepreneurs at the fringes of Europe to create the new solutions in the face of an intransigent motored blob. 

In essence, the usual Euro-drivel. Everybody demands more powers while talking about the burdens of regulation and nobody mentions encouraging a growth mindset (other than a growth mindset in red tape). To be fair, many points are absolutely fine but the difficulty is that this is reform of a system, which is the problem itself, not reforming the systemic problems to create a better system. Given various nods to the agenda of entities representing exchanges, retail investors, et al, surely the EU can make some breakthrough but the problem is that will be at least 4 years from now and by then America will have further galloped into the future following the past 15 year growth experience of European Union 9%, US: 86%. The Blob can't help Europe only hinder it and yet that message has not been readily appreciated by any… oh of the folks in the blob. Maybe I see a reason and their desire to continue the gravy train until their tax free pensions accrue - even if the rest of Europe is impoverished as a result.

It was a busy week for results in the parish, all the details are in Exchange Invest daily, the newsletter no person can afford to be without in capital markets and market structure. For the sake of this podcast let's look at some edited highlight.

Great numbers from Moscow, operating income +46.5%, net profit +35%. 

Sanctions all that cannot stop the MOEX from being significantly above the entry level 20% this quarter to be an impressive exchange by financials. Excellent work, what a pity the ingenuity of MOEX as management is cut off from much of the rest of the world due to the actions of Mr. Putin. 

Not such exciting growth from the Tel Aviv Stock Exchange their Q1 EBITDA of 12%. Not too shabby in a normal quarter but this has been quite an exceptional quarter where you really had to make 20% or more in order to be in the leading group. 

At the same time, one very, very exciting piece of news TASE (Tel Aviv Stock Exchange) may be moving to Monday to Friday trading soon to homogenize with the western world and much of the Middle East. 

Deals news this week, just two quick snippets for you amongst what was going on in the world of deals in the parish of exchanges during the course of the last 7 days. 

BSE and NSE have called off the merger of their IFSC stock exchanges as I had noted in Exchange Invest 2942.   

The truth of the matter was, it was “an interesting deal albeit I can imagine the owner stake negotiations may prove fraught…” The fact that this deal has died just when PM Modi is preoccupied with his re-election battle, maybe instructive? The background to this is of course that the BSE has a subsidiary India INX, first inaugurated on January 9th 2017 in GIFT City the international financial center in Gujarat, the home province of Prime Minister Modi, the National Stock Exchange, a subsidiary NSE IX that was announced on June 8th 2017 and launched, as reported in Exchange Invest 2700 on July 4th 2023 NIFTY futures complex in cooperation with SGX, which had previously been a bugbear for Indian regulators of course, fell into the ambit of the NSE IX and may well have been a cause of some problems in relation to the negotiations they’re in who knows everybody's staying tight lipped in the aftermath of these talks collapsing.

Meanwhile, congratulations TMX (Toronto Montreal Exchange) Group closed their 300 million Canadian dollar private placement debenture offering. 

If you don't work out where the world of finance is going, don't forget 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 is distributed by Ingram worldwide. 

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While you're waiting for your copy of “Victory or Death?” arrived check out our livestream Tuesdays 5 o'clock London time, midday New York time it's the IPO Video live show. 

Catch the back episodes of IPO-VID by searching for “IPO-VID” on Linkedin and Youtube

Now online was last week's fabulous discussion How Nations Escape Poverty comparing notes on the great dizzying rise to economic power and prosperity from almost nothing of Vietnam and Poland. That was IPO-VID #145 with our guest returning Dr. Rainer Zitelmann discussing his book How Nations Escape Poverty

Next week on Tuesday, we've got IPO-VID #146 with Steve Zwick discussing Developments In Carbon Markets

Product news this week, Egypt is going to be aligned T-bills trading for individuals via brokerage firms. At the same time as the Ghana Stock Exchange is launching commercial paper. A great idea on both parts. 

Technology news this week, NASDAQ and the FIA Tech have partnered to reduce complexity and increase resiliency of post trade infrastructure. What a welcome piece of news. 

In regulation news this week, there was a lot of small talk, one piece of big talk Gary Gensler was extremely upset, congress in max child mode, oh sorry, reelection mode, as one might want to call it, past the financial innovation and technology for the 21st Century Act, which is of course nothing about financial innovation and technology per se for the 21st century, but it's about blockchain technology or at least crypto technology, and therefore panders to a certain group of voters. 

Gary Gensler has commented: “the bill allows issuers of crypto investment contracts to self-certify that their products are a “decentralized” system and then be deemed a special class of “digital commodities” and thus not subject to SEC oversight. Whether something is a ‘digital commodity” would be subject to self-certification by “any person” that files a certification.” 

Frankly, that sounds completely nuts ladies and gentlemen, and the very, very good way to legislate a future bubble crisis and crash. Hopefully the Senate will vote down this bill and if not, hopefully, Joe Brezhnev will do, as he was threatening a while ago to actually veto the whole thing if it's past.

Career news this week and another one bites the dust at ASX following almost 7 years. According to ASX he was a valued member of the Executive Team, ASX Group Executive Technology & Data, Dan Chesterman is departing the group in coming months after resigning. Well, farewell, it has to be said it's very very difficult to justify at this point in time given all the chaos that's been around the retention of any member of the C-suite of the ASX team or indeed the members of the board.

In the miniscule but nonetheless competitor exchange to ASX, the NSX, they have announced the appointment of a new MD & CEO Max Cunningham

Max Cunningham stands out as somebody who left ASX on his own terms and was acknowledged as an excellent head of listings at the monopolist. Having enjoyed a stint focused on private markets with FCX. Max has landed the position of the sleeping potential machine which is the National Stock Exchange of Australia, which has been around for quite some time (rebranded variation of the Newcastle Stock Exchange using at earlier name that had been around I think, in Melbourne during the course of the last century indeed, about a century ago) NSX itself was somewhat reorganized recently by former CEO Ann Bowering, who built a base for the exchange to move forward. She's now with Computershare. 

Other excellent news on the job front, hugely exciting information from a Mexico. José-Oriol Bosch, the CEO of Grupo Bolsa Mexicana de Valores (BMV) is stepping down after nearly a decade in the role. And the really brilliant part is Jorge Alegría is set to succeed him, “though the exact date for the transition yet” but it's fabulous news. The former MEXDer derivatives exchange boss is taking control of the group at a time when his dynamism and his three dimensional derivatives thinking could help further power forward the Mexican bourse which of course this week made headlines by going to T+1 clearing and settlement along with the United States of America and Canada.

It was very sad to hear in career path the news of the death of 86 Rolf-E. Breuer who chaired the Supervisory Board of Deutsche Börse AG, the Stock Exchange Counsil of the Frankfurt Stock Exchange, and was a founding Father and Chairman of DTB (Deutsche Terminbörse), the forerunner of EUREX. A lifelong Deutsche Banker who rose to CEO between 1997 to 2002, where the pinnacle was probably his takeover of Bankers Trust and listing of the Deutsche Bank on the New York Stock Exchange. He certainly showed remarkable ambition even if ultimately the Bankers Trust merger unravelled in the financial crisis of 2007- 2008, long after he had departed. And indeed, Rolf led the financial center of Frankfurt on the front foot out into the world. As DB1 Chairman, Breuer was also a driver of the ill fated attempt by DB1 to buy the LSE in 2005. That colorful management rather contrasts with the rather colorless management that we seem to have these days at Deutsche Börse. 

Stephanie Eckermann, congratulations to her, she's appointed a member of the Executive Board of Deutsche Börse AG. She seems to be replacing a lot of the functions previously given up by Stephan Leithner, who was still not sure who he is, who's going to become the CEO in the near future. We announced this becoming CEO in EI 2911 on March 11th 2024. 

So, one McKinsey partner Leithner has been elevated as a top boss and another - former McKinsey partner, Stephanie Eckermann, who has been with Deutsche Börse since 2021, is simply being elevated to fill the new boss's former position. Bain alumnus Theodor Weimer is switching back to the old guard of consultancy ie Werner Seifert’s old haunt McKinsey seem to be dominating what is going to be the managing DB1. Expect the only future non monochrome element to DB1 management to be the PowerPoint presentations, I suppose? I certainly feel we can rest easy on the assumption there is dynamism to come from DB1 but I find that inherently disappointing. 

Last piece of career news this week, IOSCO’s board of elected Jean-Paul Servais. They reelected him for a further term as Chairman and CFTC Chairman Rostin Behnam has been re-elected as deputy chairman. Although I'll be very skeptical of Rostin Behnam survives as chairman of the CFTC into next year. So, I suspect there will be a vacancy for Deputy Chairman of IOSCO in the near future. 

Meanwhile, there was a fascinating swing state opinion poll recently commissioned by Digital Currency Group, executed by Harris Group of 1,201 voters in those vital 6 ‘swing states’ where the next US Presidential election will be won by one gerontocrat or another in November. 

Over 90% of those polled planned to vote 70% believed the current financial system is outdated and 74% would like to see the status quo overhauled.

So far so exciting for the crypto kiddies until the reaction to Bitcoin et al turned out pretty lukewarm… Only 41% of swing voters reckoned crypto represents a new way forward towards financial security and prosperity, while only slightly more than a third - 35% - believe crypto is the future of transacting.

And on that mysterious and magnificent note ladies and gentlemen, thank you for listening to this Exchange Invest Weekly Podcast #247. Join us daily via ExchangeInvest.com or if you are new exchange or market you'd like built, get in touch. We build marketplaces all the time. 

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

LINKS:

ESMA Makes Recommendations For More Effective And Attractive Capital Markets In The EU
ESMA

Moscow Exchange Announces Results For The Q1 Of 2024
MOEX

The Tel-Aviv Stock Exchange Reports The Results Of The Financial Statements For Q1 Of 2024
TASE

BSE And NSE Call Off Merger Of IFSC Stock Exchanges
NDTV Profit

TMX Group Closes C$300 Million Private Placement Debenture Offering
TMX

Egypt To Allow T-Bills Trading For Individuals Via Brokerage Firms
African markets

GSE Launches New Product To Help Companies Raise Capital
Ghanaian Times

Nasdaq And FIA Tech Partner To Reduce Complexity And Increase Resiliency Of Post Trade Infrastructure
Nasdaq

Gary Gensler Statement On The Financial Innovation And Technology For The 21st Century Act
SEC

ASX Group Executive, Technology & Data Announces Intention To Depart
ASX

NSX Appointment Of MD & CEO Max Cunningham
NSX

Bolsa Mexicana de Valores Replaces CEO
Markets Media

Former Deutsche Bank Chief Executive Rolf Breuer Has Passed Away
Deutsche Bank

Stephanie Eckermann Appointed As Member Of The Executive Board Of Deutsche Börse AG
DB1

IOSCO Board Elects Jean-Paul Servais As Chair For A Further Term
IOSCO