12 min read

Exchange Invest Weekly Podcast Ep 019

A big week for NASDAQ excellent results lead the way in the parish this week as well as a huge shake up amongst the vice-chairman. This is the Exchange Invest weekly with Patrick L Young.


A big week for NASDAQ excellent results lead the way in the parish this week as well as a huge shake up amongst the vice-chairman. This is the Exchange Invest weekly with Patrick L Young.

It took until Friday to get our lead story this week but what a humdinger it was! The Financial Times was to the left-right and center or at least bank right and center in eschewing or at least espousing what is, an interesting mantra. Essentially, a series of global banks and global funds have decided they want to see more capital in derivatives clearinghouses. Now, readers, as you will know if you've been an Exchange Invest reader for many’s a year. We have been talking about the Homer Simpson buffet equation for many’s a year. And indeed, there is undoubtedly an issue that if you keep filling up the buffet from one end to the other, there will be a problem with concentration risk within Central Counterparty clearing houses. At the same time, of course, the people who caused this whole problem in the first place where those people who actually couldn't manage to do anything coherently on the OTC Markets, which they indeed fought against being regulated for many’s a year because that allowed the casino capitalism of the OTC trading era. Therefore, we have the incredible rampant hypocrisy, indeed, as one might call it, standard operating procedure for bankers. They want somebody else to pay for their mess. No danger that they're going to be throwing in lots more money, of course, up front Oh, no, that's what the clearing houses have to do, because, well, of course, they are banks, they are funds, and therefore, everybody else is expected to pay for their lunch. There's no doubt whatsoever, we need to look very, very strongly and very closely at the relationship in terms of how well capitalized our clearing houses are. At the same time, the people who need to pay for it are the people who are paying the margins. Therefore, whether you are Allianz, BlackRock Citi, Goldman Sachs, Societe Generale, JP Morgan, State Street, T Rowe Price or Vanguard, we want to see you contributing to the better default buffers and not relying on other third parties to manage to allow for the fact that well, essentially, what we have here, ladies and gentlemen is the road manufacturers, the people who operate the highways, they're being told they have to raise the level of the tolls because the people who are speeding at 180 miles an hour through the autobahn are actually the people who are allowed a completely risk free run.

How absurd.

Overall, this is undoubtedly going to run and run. But I refer you back to the Homer Simpson theory I was explaining a decade ago as it comes home to roost. The fact that the participants see it as somebody else's problem to fix, as opposed to using their own money or paying higher margins is well illuminating. Unsurprising but you know, standard operating procedures for banks and other people who think that the world owes them a living. That's another one of those ultimate problems that come from bailing out entirely feckless, disorganized organizations that should have been allowed to go bust 11 years ago. Anyway, that may strike a lot of people as a cheap backdoor way for certain financial market participants to regain control of market structure through a long drawn out Repo process, where the market participants themselves caused the original problem.

In results this week, NASDAQ led the way. Very, very encouraging numbers all round from them, equally good numbers from Marketaxess and indeed Singapore Exchange reached a 12 year high on a cross asset basis -  114 million dollars was the Singaporean dollar total for the SGX.

Meanwhile, there was a huge increase in Pakistan's PSX. They increased their profit by 16% during the course of the last quarter year on year. Similarly, good encouraging Year on Year quarterly numbers from the New Zealand exchange.

Meanwhile, Tradeweb: they priced 17.29 class A shares in an upsized follow on offering that was priced at $42 per share and represents the classic other trades in the markets where at one time we see many parties on the buy and sell-side trying to regain control of the market structure through a backdoor repo method on the Central Counterparty clearing houses. Of course. Similarly, the banks cannot possibly manage to get out of market structure providers such as Tradeweb fast enough when they see a huge profit. Speaking of ownership, the state is going to hold, well, 100% of the post-merger Stock Exchange when Hanoi and the other Vietnam exchange gets together from Ho Chi Minh to create the Vietnam exchange group, and indeed in the same breath, the Vietnamese stock exchanges were recording somewhat of an IPO slow down in Vietnam in recent times.

Interesting discussions over at LME: apparently XTX, the prop trading firm funded in 2015 by Russian born mathematician Alex Garko, they're looking at taking a stake in EOS precious metals the company that partnered with the LME to create an exchange for trading silver and gold futures in 2017.

Other interesting deal flow this week, IHS Markit and HundSun Technologies: they're creating a joint venture to bring electronic bookbuilding to the Chinese bond market. Absolutely great news. Just think of where we could have been with Hong Kong exchanges and LSE already progressing something like that, had but the LSE been open to doing a deal, which was much more constructive than their Refinitiv deal.

Vanity Fair, the glamorous magazine of well,l American glamour and American money, old and new:. They hit the headlines this week with frankly, a piece of drivel. “The Fantastically Profitable Mystery Of The Trump Chaos Trades” left us with a great story about just how much money you can get paid for writing for Vanity Fair, and just how little intellectual curiosity or indeed ability to understand anything beyond Trump derangement syndrome there can be. In precis, effectively, ‘some people traded some stuff, Trump announced some stuff other people made some money on some stuff that they traded in relation to the times when Trump said some things and therefore obviously Ladies and gentlemen, there is a colossal  Conspiracy theory.’ I must admit I can appreciate CME’s frustration at this sort of third grade hatchet job.

It is a hatchet job with admirable disregard for those tedious well fact thingies. Old canards are rehashed. For example, we talk about ‘the al Qaeda cashed in before initiating the September 11 attacks’ story being just one of them for which there is absolutely no proof. And indeed, the nature of the markets being such that actually, Al Qaeda wouldn't have been able to get their money out. These are the sorts of simple fact checks that actually if we had journalists who understood or appreciated or can talk to people who understood and appreciated financial markets would not get repeated. Trump derangement syndrome is the only winner from this article. It's bigger than ever and unfortunately seems to have consumed Vanity Fair. Curiously, Vanity Fair made no attempt to examine the documented records of the world's greatest ever futures trader. That is, of course, one, Hillary Rodham Clinton who, even according to - well, look it up, the rather left wing Wikipedia -  made some astounding returns but opted for a career in politics instead.

What can I say? Ultimately, Vox gave us an excellent piece, saying “just because there's smoke doesn't mean there's fire,” discussing “the blow up over Vanity Fair's Trump trading story explained.” #Fake news is the only way to describe this Ladies and gentlemen, but at least it was good to see the liberal investigative Vox coherently impart how Trump derangement syndrome is reducing too much of US opposition politics to crying fire at even the faintest whisp of the vape of Juul.

In data this week, one great story in Traders magazine: “Should there even be a market data debate?”

- Worth reading

Elsewhere unfortunately a spot of protectionism. Italy is set to give an initial okay to powers to protect the stock exchange from being taken over. Seems like a knee jerk reaction at the behest of London Stock Exchange in order to protect the Borsa Milano. What a shame. It's really sad to see the Italian state crumbling into an edifice of desperation. It sits on the abyss. Of course, at this point in time, the banking system is essentially, well, bankrupt. The state is essentially over-indebted, to put it mildly. Protecting Borsa Milano only demonstrates the abject failure of the Italian state for the past number of decades, which has assiduously sought to intrude into every aspect of commercial life and in the process left the nation teetering on the edge of bankruptcy. Free markets are good things. Why are EU nations so afraid of them? Meanwhile, in the EU, “Traders at Emotti’s Unicredit unit recount the Cum-Ex free for all” went one Bloomberg headline this week, while Meanwhile, Bloomberg also said that Societe Generalemay actually win their Helaba Cum-Ex appeal, according to the judge. Interesting to see what goes on in those but meanwhile, a series of people are in the dock, unlike Of course in LIBOR where we've actually reached the logical coherent end of the investigations, according to the UK authorities.

In Bigworld Well, Brexit Brexit, Brexit. It's been Powder Keg brinkmanship stuff for much of the week. The UK Parliament is well, to put it mildly, dramatically out of alignment with the people. It actually seeks to humiliate at least 17.4 million voters. This is well I thought I put it mildly hubristic. Risk of civil unrest is something that really starts to concern. And actually, To that end, there was a magnificent article by Jenny McCartney in Unherd who was discussing precisely the problems because as an Ulsterman, I'm most concerned that the current state of political chicanery laced by a class deeming themselves superior to the electorate.

The numbers moreover are chilling. In addition to the very elegant Unherd article by Miss McCartney that I mentioned a moment ago: Remember, on a population of 1.6 million Northern Ireland was subjected to 20 years of troubles. It only took less than 400 active service terrorists to achieve a vast amount of damage, hardship and chaos over decades.

Now, take a look at the UK and look at any of the Brexit heartlands. There easily 4 million people are around the area of the northeastern England euro parliamentary constituency alone. In no way shape or form can anyone ever sensibly incite violence, Ladies and gentlemen, I'm merely making it an observation:

Unless and until Britain makes a proper Brexit, the risk of civil disturbance is enormous and growing by the day, as the people resent the arrogance of the few who were roundly defeated in open debate and referendum by the largest vote in British history. Moreover, I fear civil disturbance may break out not just in the UK, but indeed it may reach the continent of Europe. Violence never solves anything in civil discourse. But when people have been ridiculed and excluded from the process of the state, some people will become desperate. All parties would be minded to get Brexit done by October the 31st.

In people news this week: very interesting to see that TP ICAP had a little bit of a director shuffle. That's because David Shelders, one of their non-execs, is now going to become the very executive chief integration officer of the London Stock Exchange group. What an exciting title Ladies and gentlemen, what an interesting prospect. Meanwhile, in Turkey interesting appointment, Murat, Cetinkaya became deputy governor of the Central Bank of Turkey last month,

The new CEO is a Turkish banker, Mehmet Hakan Atilla, only say probably problem to his CV is the fact that well he's been convicted In the United States of America for helping around evade economic sanctions get apoplexy from the EBRD who are a significant shareholder within the Turkish bourse opposing his appointment. Somewhat less controversial this week we have two noticeable vice-chairman retirements at NASDAQ.

Bruce Austd, he's stepping down after Good grief 20 something years at NASDAQ in total and Sandy Frucher:. Someone who is a man of many many pithy remarks. Well, Rome wasn't burnt in a day, I suppose, and he will indeed stay on as a strategic advisor. Elsewhere, the Dalian Commodity Exchange CEO has taken on a role at the Shanghai bourse. That's Wang Fenghai who'd become DCE CEO in June 2016, replacing Xi Zhiyong at the Shanghai futures exchange.Over at the China Financial Futures Exchange, they also appointed a new head Huo Ruirong is going to become the CEO filling the vacancy left by the move of Rong Zhiping to become an advisor to the Shanghai futures exchange.

In tech news perhaps the most interesting move in terms of personalities all week: Antoine Shagoury he's departed State Street after four years. Why does it matter to us in the parish market infrastructure? Well, of course, Antoine Shagoury was perhaps best known as the Chief Technology Officer of the London Stock Exchange group. Why did he depart no one quite knows I doubt State Street were suddenly seeking to upgrade the LCH technology stack on behalf of LSEG so I cannot comment on the reasons behind his departure. Over in Nairobi, seven sacked employees have sued the boss for wrongful termination.

At Thomson Reuters. We have news that Jim Smith is going to be standing down Of course Jim Smith had a slight health scare but a year or so ago but he seems to be fine nowadays.

In technology news apart from that news Antoine Shagoury is moving from State Street to a venue unknown so far. It  Itarle AG, they've created a ventures arm for market infrastructure products they're looking up investing in, well similar to what they do: high performance, best execution services and related issues in a special purpose vehicle.

Over at the CFTC Chairman Tarbert announced that lab CFTC is going to be elevated to have its own independent operating office status reporting directly to the chairman of the CFTC himself Heath Tarbert. Commerzbank and Deutsche Boerse completed a blockchain post trade settlement test  - coming soon to you the possibility to collateralize your tokens somehow or other within the DB1 Empire.

In product news. NASDAQ extended their options offerings this week with NASDAQ smart options. It's a product targeting traders retail brokers and asset managers providing real-time data feed source from the options price reporting authority feed.

PNGX the Papua New Guinea exchange announced new market Indexes.

Bakkt in an interesting move in the crypto world they're going to launch options on their Bitcoin futures come December 9th: exciting times, ladies and gentlemen for the crypto economy.

The OMFIF was very excited in their research. to note that African nations are building deeper and more transparent financial markets, while SGX have licensed their global Internet index to Nikko Asset Management. Deutsche Boerse are offering free execution for their ETFs savings plans. And then back to Bitcoin. A Bitcoin ETF product is being developed by a former World gold council executive. The man who's the portfolio manager behind the SPDR gold shares Jason Toussaint developing a Bitcoin ETF with the boutique asset manager, Kryptoin Investment Advisors.

Aramco no news yet, but apparently, the reason for the delay was according to certain sources, they're looking to try and reopen anchor investors ahead of the IPO while the MCX finally in product news this week, became the first boss to offer a one gram gold future with a delivery option in India.

And that Ladies and gentlemen, wraps up Another exciting week in the world market infrastructure with me Patrick l Young. We will be back Monday to Friday with Exchange Invest daily, your subscriber newsletter about all in the bourse business. In the meantime, have a great week and markets. This is Patrick young. joining you today from the EY Attractiveness Summit in Malta.


Global Banks, Funds Call For More Capital From Derivatives Clearinghouses

Banks Are Right To Say That Clearing Houses Are Ripe For Reform
Financial Times

Nasdaq Reports Q3 2019 Results; Delivers Broad-Based Revenue Growth

Nasdaq Inc (Ndaq) Q3 2019 Earnings Call Transcript
Motley Fool

Edited Transcript Of MKTX Earnings Conference Call Or Presentation 23-Oct-19
Yahoo Finance

PLY: And apologies, somehow the results slipped by the other day: MarketAxess Record Q3 Revenues.

Update 1- Singapore Exchange Profit At 12-Yr High On Cross-Asset Push

Pakistan PSX’s Profit Increases 16% To Rs31.46M
The Express Tribune

NZX Q3 2019 Revenues & Shareholder Metrics

Tradeweb Markets (TW) Prices 17.29 Class A Share Upsized Follow-On Offering At $42/Sh

State Should Hold 100 Percent Stake At Post-merger Stock Exchange
Vietnam Plus

LME In Talks Over Sale Of Precious Metals Stake To XTX

IHS Markit And Hundsun Technologies Create Joint Venture To Bring Electronic Bookbuilding To Chinese Bond Market
Yahoo Finance

The Fantastically Profitable Mystery of the Trump Chaos Trades
Vanity Fair

CME Group Statement On Vanity Fair Article

The Blowup Over Vanity Fair's Trump Trading Story, Explained

Should There Even Be A Market Data “Debate?”
Traders Magazine

Italy Set To Give Initial OK To Powers To Protect 5G, Stock Exchange

Traders At Ermotti's Unicredit Unit Recount Cum - Ex Free-For-All

Societe Generale May Win Helaba Cum - Ex Appeal, Judge Says
Bloomberg Tax

Banker Convicted In US Picked To Head Turkish Stock Exchange
The San Diego Union-Tribune

EBRD Opposes Turkey Naming Former Jailed Halkbank Executive CEO Of Bourse

Nasdaq Vice Chairman Bruce E. Aust To Retire
Yahoo Finance

Nasdaq's Sandy Frucher To Retire As Vice Chairman
Yahoo Finance

Dalian Commodity Exchange CEO Takes Role At Shanghai Bourse

Exclusive: China Financial Futures Exchange Appoints New Head
Caixin Global

State Street Tech Chief Departs Amid Strategy Review
The Trade

Seven Sacked Employees Sue NSE For Sh40 Million
Business Daily

Thomson Reuters Statement On CEO Succession Planning

Update 1- Thomson Reuters Searching For CEO Smith'S Successor:

TP ICAP Risk Committee Chairman To Step Down

CFTC Commissioners, Staff Win Reprieve From Contempt Hearing
Wall Street Journal

Sebi Issues Framework For Listing Of Commercial Paper
Economic Times

Risk Management Tips From Tullett Prebon Compliance Failures
Compliance Week

Key Points From The FCA's Disciplinary Action Against Tullett Prebon
Clifford Chance

Swedish Regulator Claims Mifid Ii Decreased Bond Transparency

Hong Kong’s Market Regulator To Come Down Hard On Misconduct, Steps Up Oversight Of Underwriters

British Fraud Office Ends Seven-Year Libor Rigging Probe
Reuters UK

Serious Fraud Office Shut Down Libor Rigging Investigation
City A.M.

Itarle AG Creates Ventures Arm For Markets Infrastructure Investments

CFTC Chairman Tarbert Announces Elevation of LabCFTC - Artificial Intelligence Primer Released by LabCFTC At Annual Fintech Conference

Commerzbank, Deutsche Boerse Complete Blockchain Post-Trade Settlement Test
Ledger Insights

Nasdaq Expands Options Offerings

PNGX Announces New PNG Market Indices

Bakkt To Launch Options On Its Bitcoin Futures Dec. 9

Bakkt Plans First Regulated Options Contracts On Bitcoin Futures

African Nations Are Building Deeper And More Transparent Financial Markets, OMFIF Research Says

SGX Licenses Global Internet Index To Nikko Asset Management
The Business Times

Deutsche Boerse Offers Free Execution For Etf Savings Plans

Former World Gold Council Exec Develops New Bitcoin ETF

Aramco Listing Was Delayed To Rope In Anchor Investors: Sources

MCX The First Bourse To Offer One Gram Gold Futures With Delivery Option

NEO Introduces DealSquare to Disrupt Canadian Private Markets for the Better