Theodor Weimer gets his wish to reach retirement age as DB1 CEO. Impressive headline results from DB1 and NSE India, as former chairman of the SEC David Ruder passes away. Euroclear, considering its future as it unveils record results. Bloomberg de facto for sale in an odd time frame, and more... That kicks off something of a content special merger mania future acquisition updates special, welcome to the Exchange Invest Weekly with me Patrick L Young.
And so to our top line stories this week, Deutsche Boerse produced very impressive numbers: a 52% rise in fourth quarter net profit, earnings per share of one euro 16 cents in the quarter up from 77 cents the quarter before. DB1’s CEO Theodor Weimer wants the Boerse “to grow through good deals.” Hmm. That strikes me as nothing more than a tease for the outbreak of strategy we have been promised in four months time. For some reason, the concept of ‘good deals’ reminded me of ‘good vibrations,’ which I'm sure at some time or another was Werner Seifert’s first record. Meanwhile, DB1 was expecting more Brexit wins from London during the conference call for their latest results. Then again at the moment as the EU circles the wagons, the only answer to “Will you win business from Brexit?” is always:
“Yes,” as to say otherwise is to risk being ridiculed, shamed or sacked. Meanwhile, Deutsche Boerse announced that they're also a potential bidder for the Milan bourse that the London Stock Exchange says it isn't selling. It's a funny old world. It's almost as if some folks - Euronext last week, Deutsche Boerse this - anticipate there might be a competition squeeze on the London Stock Exchange group to sell its Italian assets.
Another good set of results this week: National Stock Exchange of India; their consolidated net profit Rose 16.77% in the quarter to December 2019 Ajay Tyagi, the CEO says Sebi are still examining the NSE’s request for an Initial Public Offering. Watch this space ladies and gentlemen. One place where there is going to be an initial public offering of the exchange is the almost but not quite and just about to be, demutualised, Nigerian Stock Exchange. Initially there will be 423 stockholders of the Nigerian exchange, legacy holders from the demutualised entity.
At the same time, plaudits to the Nigerian Stock Exchange. In an effort to boost financial literacy, they've launched a comic book.
Elsewhere, the Coronavirus has canceled the London Metals Exchange’s flagship Asian event London Metals Exchange Asia Week. And that indeed came amongst a myriad of cancellations during the course of the last week or so, including, of course, most notably the Mobile World Congress in Barcelona in Spain. Interesting to see the ongoing ramifications of the Intercontinental Exchange’s “busted bid for eBay” seen as an opening for investors.
As Newstyle put it: “CEO Jeff Sprecher is a visionary but his latest move was rebuffed by the market, which isn't as farseeing as he is.”
“Investor sentiment soured, as no one understood why a financial exchange would want to own an online marketplace where people trade flotsam and jetsam like Tickle Me Elmo dolls.
The disconnect brought to mind Jonathan Swift’s observation that true genius is recognizable when dunces are all in confederacy against him.
...Sprecher’s play for eBay faltered because he made a rare public mistake: He misjudged how well investors understand the exchange business.”
I must say I find that article rather spot on, albeit I suspect there wasn't a mistake per se, rather a leak let the story get out of control as I discussed, indeed, in last week's podcast. So I think that therefore this article’s recasting of PR IR strategy was a bit harsh, albeit I do believe all parishioners will realize there is more work to be done, as I know indeed only two well from my own regular interactions with buy side and sell side alike. The buy side and sell side indeed lacks a certain next generation vision which is too lazily 'tropefied' as ‘#big_data-AI” without readily appreciating just where the future opportunities lie. interesting article in Cinco Dias, a Spanish financial newspaper segment, the Spanish government are apparently considering imposing a golden share in order to deliver their authorization to the BME, the Spanish Stock Exchange, being taken over by this Swiss exchange SiX.
Elsewhere back to the Intercontinental Exchange, it may be “not eBay but the Intercontinental exchange still needs a deal,” said the Motley Fool.
You know it’s a funny old world when the retail favourite, the Motle’s are realising there was merit to an eBay acquisition by ICE while the institutional end of the framework still cannot see past the spreadsheet 101.
At the same time, I disagree with the statement: “ it's pretty clear ICE is working very hard to find something along these lines. It's just struggling to find the right one.”
Au contraire, ICE have identified the deals. IMHO, it’s a content rich world and the opportunities include, and this is, I have to say, purely my analysis, not any form of material nonpublic information, some elements of Euroclear plus Bloomberg to name but two, both of which are in the same position where timing is an issue but a likely change in ownership is looming.
Of course, we don't have a crystal ball into the Atlanta HQ from Exchange Invest HQ. But the one thing which is clear (and surely the quarter four coal exemplified this, is that Jeff Sprecher retains the clearest brain for understanding the macro of the deal universe and what he can slip into his portfolio. Moreover, it has to be said the concept of ICE having to do a deal appears curious, in, and of, itself, as there are several key growth areas in the portfolio anyway, take mortgages, bonds, and the Bakkt, which is so much more than a mere exchange thing. Those are three plays to name a random trifecta amongst the varied ICE portfolio.
Elsewhere, we have a shareholder alert, Purcell, Julie and Lefkowitz LLP are investing the start again, are investigating the Intercontinental Exchange. Looks like some form of an energy broadside as they had several other press releases in that arena from the offices of this law firm semi simultaneously.
Elsewhere, NASDAQ's options exchanges declared self help briefly against nicely ARCA, which was subsequently revoked in the same afternoon. That kerfuffle where NASDAQ were not able to process trades from NYSE ARCA after signaling problems. Well, I've always had a bit of a problem but this concept of self help...it always sounds to me like something from the Goop lab as opposed to the stock market.
Some cris de coeurs and some good news from the world of commodities: “Revitalize the Nigerian Commodity Exchange Market” was a cri de coeur from the Leadership Newsletter paper. Meanwhile, the Montenegrin power exchange will start operations by the end of 2020. And indeed, there's news that there may even be an Islamabad gas exchange being created.
One huge loss of content this week. $10 billion buyout... Dubai's massive port operator DP World is delisting and returning to private ownership. That's a bit of a killer blow to NASDAQ Dubai, it won't kill it per se when I say a ‘killer blow’ of course, but it is nonetheless a significant piece of content that has been lost from the business.
Some good news on integrations, the CME are on track with their Brokertec and EBS migration to the GLOBEX platform. Meanwhile, the West African Stock Exchange are saying that their integration implementation is likely this year. And thirdly, but by no means least, ICE Bonds have completed their integration with Blackrock’s Aladdin to offer fixed income portfolio option functionality to investment managers. I mentioned earlier Euroclear, and Euroclear had some stunning results this week, record nonetheless 2019 profit of 431 million euros that's getting on for $467 million in 2019, which is up 34% on the prior year. At the same time, Euroclear mentioned the fact that they're going to be holding talks with regulators over the future share structure. The CEO Lieve Mostrey expressed a desire to keep the ownership somewhat the same. The one and only thing that has to be said is almost invariably clear in these sorts of situations is the ownership structure never stays the same at the point in time when someone believes they may be up for sale.
Talking of other assets up for sale. Michael Bloomberg is looking to sell Bloomberg LP if he's elected president.
This was of course, a curious remark as it came almost immediately after Mayor Mike calling for tighter financial industry regulations and the toxic cancer of transaction tax. That seemed like, well, a platform to destroy value in his eponymous firm. Equally. It has to be said Bloomberg is no stranger to egregious, frankly beyond Trumpian conflicts of interest as his news feed is, well ‘Pravda,’ biased in favor of Mayor Mike's campaign and the Democratic Party.
Actually, reading between the lines, this message is surely more nuanced. Bloomberg is for sale if Super Tuesday goes well. In other words, every Democrat delegate for Mayor Mike equates to a Pavlovian effect on New York's finest investment bankers.
Much speculation during the rest of the week as to the value a Bloomberg sale might achieve $60 billion seems to be the number at the moment which would lead us to almost a one for one share swap with the Intercontinental Exchange, if they can manage to get in there. Interesting to see how that develops, but certainly we are a lot closer methinks to the exit door for Mayor Mike Bloomberg, even if his presidential campaign runs aground.
Sadly another bust crypto exchange this week Fcoin, which sounds like a euphemism given the fact that they can't pay back $125 million in user funds.
Elsewhere, no week would be complete in the parish of market infrastructure without mention of Cum-Ex there was an article in the Conversation, which said the 55 billion euro Cum-Ex trading scandal how scary parallels with Enron given that Cum-Ex strikes me as naked immorality. In some senses I feel the comparison maybe slightly harsh on Enron.
One intriguing deal this week, not a full takeover but a significant investment. ISignedThis which is listed on the Australian Stock Exchange (ASX) has actually bought 12.96% as a strategic investment in NSX limited the National Stock Exchange of Australia which is a rather miniscule player, but in an effort to try and create an Australian version of NASDAQ. That's a potentially very exciting piece of news for Australia's small second Stock Exchange.
In people news, I mentioned this at the top of the show in the cold intro, the contract of Chief Executive Officer of Deutsche Boerse, Theodor Weimer has been extended by four years. The word on the street has long been that Theodor Weimer wants to reach retirement age as DB1 CEO. This contract delivers him up to 65 years on 10 days, according to our calendar abacus, therefore, he clearly intends to milk the directorships of his Taunus social set with gusto across Hesse and perhaps beyond. Good for him. Albeit it doesn't inspire me that the new strategy, we still have to wait 10 weeks for, will actually amount to much other than the sort of conservatism which has left the German economy dangling on the precipice of recession. I hope I'm wrong. It would be lovely to see DB1 regain its lost Mojo.
Condolences this week on the passing of two parish titans. RIP Jnanadev Kamath. He was one of the founding members of the Mangalore Stock Exchange and died age just 65. Meanwhile, at the age of 90, farewell to David Ruder, he was the SEC Chairman during the infamous crash of 1987.
Lots of speculation this week that futures traders are getting squeezed and job cuts are expected, while the Moscow exchange has listed its recommended candidates for the supervisory board. Most interesting addition to the slate is Ramon Adaragga. He used to be a leading figure in the BME for many years until he left last year from the Spanish Stock Exchange. He's effectively being swapped into the board for the retiring independent non executive director FESE Secretary General Rainer Riess, who has served a lengthy, successful and indeed entirely full tenure as a member of the board of the Moscow Exchange.
Over in London, Kiri Self has been appointed the new Chief Operating Officer atl London DX. And indeed, in addition to job losses in the futures business, Mike Novogratz’s crypto investment firm has laid off 15% of its workforce. Interesting Of course, because they hold an interesting portion of various high profile companies including Bakkt.
In product news, MSCI expect their ESG indexes to be bigger than traditional benchmarks, while others were discussing in the Financial Times how a MIFIDII review aims to boost euro trading and commodity derivatives. I have to say this story had a certain element of the ‘horse bolted’ element to it me thinks, albeit it demonstrates the EU’s profound incomprehension of free markets and investor free will. Britain's Royal Mint has launched gold backed securities tradable on the London Stock Exchange, it might be an apposite moment given the dizzying peaks in the stock market recently against various economic clouds on the horizon. While on the day the Intercontinental Exchange announced record open interest in multiple global energy markets, there was a further expansion of the S&P Platts relationship in global oil markets with the Intercontinental Exchange.
MCX, meanwhile, they've got their own take on gold. They're looking at adding recycled gold futures to their platform.
And finally in product news this week, policymakers shouldn't fear digital money. So far it's maintaining the dollar status, noted Yahoo Finance, Central Bank, Digital Currency is a hot topic of the moment. It helps legitimize the blockchain while representing the latest attempt by central banks to stunt competition for their currency issuing niche. CBDC risks becoming the fiat money equivalent of ‘lipstick on a pig’ at the time when the great QE experiment maybe, to put it politely, reaching maturity, the original electronic money discussed 20 years ago in “Capital Market Revolution!” was intended to provide competitive asset backed alternatives to the central banker’s fiat. Thus CBDC demonstrates the validity of the digital currency concept but it also represents a worrying trend for government to try to close down private, competitive and dare one say it, less open to manipulation, digital currency initiatives from the private sector.
The SEC offered a slightly seismic announcement on the eve of the President's Day long weekend: they're looking to expand the SIP data processing for equity cash markets in the USA, with depth of book data and a lot more competition. It's a major overhaul. The announcement itself seemed so innocuous, but it clearly presages some radical upheaval and indeed a lot of argument. The fact that was released on a Friday afternoon ahead of a long weekend, only likely, makes it even more controversial still. Competition is generally good, but the legacy SIPs will complain that they have invested at the SEC behest to see the system then opened against them when they have sought to do the SEC’s bidding, despite all manner of Brickbats. Watch this space. There's a big argument looming here.
In Brexit news, the UK finance industry called for a new forum to police EU access. I'm wondering whether this is a coherent approach or merely another wistful attempt by the heavily pro Brussels UK buy and sell side regulatory blob to maintain their Platinum Eurostar frequent traveler status. At the same time, there's been much back and forth, none of which was actually in any way consequential to what may ultimately be an agreement or lack of it between the UK and the EU come the end of December this year. However, one interesting statistic, City of London office leasing has hit an all time high.
In technology, one interesting deal there ION group, the intensely private vendor organization, they've taken a stake in Broadway technology recapitalizing the capital markets solution provider and putting it under the expanding ION Group. And that leaves us with BigWorld Ladies and gentlemen, the Guangzhou branch of China's central bank says it will destroy all banknotes collected by hospitals, wet markets and buses to ensure the safety of cash transactions as the country battles the coronavirus epidemic Kovid-19. Other notes are being quarantined apparently according to the South China Morning Post in what amounts to another move towards cashless transactions in what is already a remarkably digitally transaction centric Chinese economy.
Over in Ireland, I have long endeavored to skewer the lazy analysis that Brexit means a united Ireland in short order. Analyzing the facts on the ground, I have long reckoned an Ulster referendum would struggle to get above 45% in favor of Irish unity.
Turns out Ladies and gentlemen, I was quite wrong.
According to a major study this week, just 29% of the people in Northern Ireland would vote for Irish unity. Moreover, 52% that Brexit number again, our pro union, a factor perhaps not unrelated to the 11 billion pound annual subsidy Northern Ireland receives from UK central government coffers, voters in the Irish Republic would face paying 2000 euros per head per annum to cover this Northern Ireland subsidy in the event of the United Ireland somehow being agreed.
So this week's handy podcast time saving tip: you can park all those articles discussing Irish unity for a good few years to come. Perhaps that was a coincidentally apt message emerging from Exchange Invest Issue 1690. Elsewhere in sport this week in football, I mean soccer news after recent events with UEFA, culminating in a two year bomb from something called the Champions League. Rumor has it Manchester City are looking to change strategy. Indeed, a UK pundit Gary Neville expects Manchester City to win on appeal. That means a move to a 4-3-3 formation cannot be ruled out with the defensive four likely boasting an all British QC lineup up front. Their attack will potentially be led by some of those who have recently made swift aggressive, impactful defenses for the more odious New York criminals around #metoo given the Swiss HQ of UEFA in Nyon, adding more cantonal heft to the midfield is plausible. Securing the services of the legendary Johnnie Cochran within the next counsel transfer window is proving more challenging, largely because he apparently died in 2005. If that triggered you I'm sorry, this is satire at this end of the parish news.
Elsewhere in BigWorld, the concept of an $80 billion hit to global tourism didn't strike me as a big number until I realized the headline is only referring to the impact of Chinese tourists not going abroad. Clearly the impact is a huge multiple of this from Kovid-19. Back to Brexit for one final remark the French Foreign Minister Jean-Yves Le Drian has warned that we're going to rip each other apart in Brexit trade talks. Well, presumably Vince McMahon will be eager to get the TV rights to add to his WWE franchise of Worldwide Wrestling Entertainment. Indeed, I suppose that means he can even team up again with his former guest star Donald Trump for a few cameo appearances.
Back to Bloomberg, what a week for him possibly selling the family shop. Indeed, his presidential run has already scored some 70,000 new Facebook followers for Bloomberg News, the largest jump, according to Neiman lab, the Bloomberg News page has seen in such a short time.
Elsewhere. I know the Drudge Report suggested Mike Bloomberg may be considering Hillary Clinton as his VP running mate. Wow, why change a winning combination?
Oh, hold on a second.
Meanwhile, this week's democratic nomination debate showed again that Mayor Mike is the perfect candidate, well, so long as you're reading the entirely unbiased coverage from Bloomberg News.
This Ladies and gentlemen, has been the entirely arguably biased coverage of the week in exchanges, the parish bulletin, the Exchange Invest Weekly podcast with me, Patrick L Young. Thanks for listening and have a great week in markets.
Deutsche Boerse Expects More Brexit Wins From London
Nigerians To Own Shares As Stock Exchange Goes Public
The Nation Newspaper
Shareholder Alert: Purcell Julie & Lefkowitz LLP Is Investigating Intercontinental Exchange
PRNewswire (press release)
Revitalise The Nigerian Commodities Exchange Market
With Less Govt Role, Islamabad Gas Exchange May Be Set Up
The Express Tribune
Euroclear Delivers Another Record Year
PRNewswire (press release)
Michael Bloomberg Will Sell Bloomberg LP If Elected President
Wall Street Journal
55 Billion Euro Cum - Ex Trading Scandal Has Scary Parallels With Enron
The Conversation UK
PLY: Given that Cum-Ex strikes me as naked immorality, in some senses I feel this comparison may be harsh on Enron.
Former President Of Mangaluru Stock Exchange Passes Away
United News of India
MCX Plans To Launch Futures Contract On Recycled Gold
The Hindu Business Line
SEC Proposes To Modernize Key Market Infrastructure Responsible For Collecting, Consolidating, And Disseminating Securities Market Data - Seeks To Introduce Competitive Forces To Core Components Of The System For The First Time
Ion Group Takes Stake In Broadway Technology
The TRADE News