Jan 11, 2024 13 min read Exchange Invest Weekly Podcast

227 Exchange Invest Weekly Podcast January 13th, 2024

This week in the parish of bourses and market structure: TMX Completed VettaFi Acquisition, LSEG Under Duress With Talk of a Race to the Bottom, As A New ICE Age Commences

Transcript:

This week in the parish of bourses and market structure:

TMX Completed VettaFi Acquisition

LSEG Under Duress With Talk of a Race to the Bottom

As A New ICE Age Commences

My name is Patrick L Young

Welcome to the Bourse Business Weekly Digest

It's the Exchange Invest Weekly Podcast Episode 227

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

It's a very interesting moment in the parish, leadership of Young's Pyramid has changed! You will recall Young's Pyramid measures the size of each market infrastructure operator by the market cap of the operating company. It's a simple, objective metric, albeit leads some exchanges to go demented as they perceive their value as much greater than the market ascribes to them.

Anyway, amongst the most liquid of them all, there has been a change, at the very top of Young's Pyramid and Tier 1. CME Group, which has been more or less the leader for years (aside from brief spurts by Hong Kong Exchanges and I CE) it's now CME, essentially $1.5 billion behind ICE. It's not huge, but it's instructive of a long-term cyclical change. Of course, CME may argue that ICE has now massive mortgage processor, which is not an unreasonable assertion but then again, it's also surely another explicit argument against CME strategy. For CME has followed ASX down the value destructive (or at least non-value additive) route of ‘monopoly milking’. To that end, there ought to be nothing holding back a company with an apparent monopoly on the US yield curve and first mover advantage in the classic US energy markets etc. However, as we know the energy market is in mega transition and post-Cushing crisis, CME-NYMEX-WTI, looks a lot like a contract beloved of indexers and other (often retail focused) products than the folks clearly involved in the extraction - production/refining - usage which seems to be slipping as effortlessly as a Midland barge being moved from one floating mooring to another.

It's a huge event either way. EI Tel didn't have to move into mortgages, but he needed to give CME some growth oomph. Instead, CME seemed to have doubled down on ex-consultants armed with metaphorical clipboards and thus what was always a torrid politicised management structure has ended up inward focused more than looking out - not merely beyond the loop, but the BigWorld thingie we often discuss here.

There's no argument ICE has the best team and the best management overall in the business, albeit there are some worrying signs “big company syndrome” is a moderate issue - then again, it would be a bigger shock if it weren't in a $75 billion company that's grown from start up in a little over 20 years. Notwithstanding that perma-battle to stop mendacious mediocrity affecting the salaried ranks, ICE is deservedly the most highly valued exchange group of the moment. Welcome to the new ICE age.

Over in Bitcarnage:

When SBF was ripping off clients to his exchange, it was the crime of the century. Curiously when it came to prosecuting him for seeking to pervert US democracy by paying off the pollies, there's no need for a trial. Therein may lie a moral for the age, or just more blob bureaucracy, which is definitely a moral for the age.

…The vague reasoning is ‘delays to sentencing because of Bahamas issues with extradition, but it may well suit a lot of politically connected folk in an election year if we don't have a trial where, for example, we would have to watch that excruciating kiss being blown from committee chair Maxine Waters, and she is just one of hundreds of exposed figures. Thus the whole buying of DC gets pushed under the carpet and I'm not alone in thinking it is a murky, squalid mess, which discredits the US political system just as much as their indelicate trousering of SBF stolen cash in the first place.

We'll be recording the ramifications of the SEC on Bitcoin ETFs Jan 10^th deadline in next week's podcast there's going to be obviously a lot of aftermath but there is to finish today's bulletin, a somewhat apt metaphor for the world of crypto V1.0 and specifically Bitcoin on this week's podcast: BitMEX, trumpeted sending Bitcoin to the Moon on January 8^th at 02:18am Eastern Time from Cape Canaveral. Albeit they had to create a 43 gram physical facsimile of a Bitcoin with a wallet address engraved upon it because - #obvs - BTC isn't physical. Thus in this case going astral DeFi involves a nebulous proxy. Is there any limit to the shameless self-promotion of the crypto era? Probably not. However, in an incident which will rate between ‘bad luck’ through two ‘entirely karmic’ depending on your belief in crypto V1.0 a fuel leak has fatally compromised the private mission to mark the Moon. The rocket will instead be doomed to rattle around space until either at falls back to Earth or gets clobbered by some other space junk.

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 digital assets as a standalone, you can find Bitcarnage separately on Substack.

In the UK, the Chancellor of the Exchequer the financial Minister has reportedly met with city grandees all about London's listing crisis.

A sensible idea has emerged from the flaccid current UK Fin Min, the deeply disappointing Mr. Hunt, he is on sensible ground with his proposal arguing that there could be UK fund investments made which have to be used to deliver a wall of money a better wall of money to invest solely in London listed stocks. That's an excellent idea delivering a better wall of money to UK listed companies, because the worry remains that the buyside itself has become so risk averse. So therefore obviously that's going to have to be somewhat improved at all. Nevertheless, this wall of money approach worked for Poland - the brilliant Balcerowicz, the FinMin who took the job when many others would not, enshrined to deeply sensible law that Polish pension funds must invest half their funds in the Warsaw Stock Exchange. That's a great idea which was curtailed at the altar of the single market by Brussels (understandably, albeit given Brussels CMU aims, albeit disappointing given the drab fiasco CMU has turned out to be). Anyway, the point is a targeted national “wall of money” can be a great thing for encouraging new content to list on stock exchange.

This move came in the same week, Muddy Waters Carson Block warned that London must avoid a ‘race to the bottom’. He meant in listing standards terms as opposed to just being avoided IPOs per se, incidentally.

Nonetheless, a spirit of crazed parsimony is hitting innovation across the UK listed markets where management are expected to indulge in near servitude for the firms they run. Or, as is often the case, you pay peanuts and out of the branches - hey presto, a C-suite swings off a low hanging branch.

Even French CEOs earn 50% more on average than UK counterparts (that's CAC40 versus FTSE100) In the USA, it's at least 3x. The bizarrest thing is that amidst the reluctance to pay for good management and great entrepreneurs, the same folks whinging about management salaries, see nothing wrong and paying millions to watch grown men chase inflated pig’s bladders. It's a funny old world.

And by the way, very, very good luck to all those who can earn any outsize return from entertaining the public whether via chasing pig’s bladders or whatever.

At the same time, there has been a spot on remark by the LSE CEO, she says the public need to “get over” superstar CEO salaries.

Still in London and on its current IPO torpor, there's no need to run the sweepstake on the “dumbest broker idea of 2024” Peel Hunt have scooped the award with the imbecilic notion the UK Government should stop firms listing away from London. I know, the UK is in the eye of the storm with a vile lefty pillock topping the charts to be the next PM but #srsly, is that the best an analyst can suggest?

Meanwhile, in private markets, Carta caused a collapse in its own valuation, which was previously well over $7 billion at the start of last week, certainly, they had a heroic piece of mismanagement where they crossed the Chinese wall, a big no no to call shareholders less they might buy some Carta offered stock in a company which was also unconscious database of share registry share cap management. Carta’s private markets platform has been promptly closed after an outcry across Silicon Valley that triggered all manner of discussions, but the platform nonetheless is dead, which deeply affects the $7.4 billion value that Carta previously had.

In this case, the conflict of interest between doing the cap table ($10,000 per annum and subscription recurring revenue) and running the market in volt (2% per side per commission for a done deal - albeit in this case, actually, it was impossible to trade without alerting the existing investors) so it seemed to be the deal it could never have been offered in the first place. Nevertheless, a $2.5 million deal as opposed was worth $100,000 to current his bottom line. Of course, in a proper CSD, this wouldn't happen, and frankly, Carta looks very exposed right now at its previous $7.4 billion valuation before this clustermess and it's rather Silicon Valley mission critical business, which has 40,000 companies using its services. Now, Carta is merely a glorified database, tricky.

More encouraging news from the Caribbean, the Trinidad and Tobago Stock Exchange reckons it's going to get 18 new SME listings by the end of the year, at the same time as they signed an MOU with the Chamber of Commerce.

In Korea, the government is pushing to scrap capital gains tax for stock trading.

Abaxx are to be applauded in Singapore, the nascent energy market there, they've announced the signing of agreements for strategic financing in Abaxx Singapore.

Finally this week in the big markets area of the world, Euronext have completed a €200 million share repurchase program.

Just one new market this week, EGX are planning to launch a new company for financial derivatives trading. In other words, a derivatives exchange.

In deals news this week, TMX Group completed the acquisition of VettaFi that was acquiring 78% of the common units of VettaFi that it didn't already own.

It's an efficient rapid execution by TMX. Interesting times in Canada, I wonder what's next under new chairman Luc Bertrand.

if you're trying to work out where the future of markets lies, why not consider a copy of my most recent book “Victory or Death?” Blockchain, Cryptocurrency, and the FinTech World. It's published by DV Books and distributed by Ingram worldwide.

Don't forget while you're waiting for your copy of “Victory or Death?” to arrive, check out our LiveStream Tuesdays 5 o'clock London time, mid-day New York time - the IPO Video live show. Catch the back episodes on Linkedin and Youtube via IPO-Vid.

This week, we had an absolutely spectacular first review of last year, all the people talking about how they thought the capital market revolution would move forward.

Thanks to all of our guests for that segment of the show that took place and is now archived on all of the usual channels Facebook, Linkedin and Youtube just go search for “IPO-Vid”.

Coming on Tuesday, we're Looking Ahead In 2024 with the inestimable financial astrologer Susan Gidel, and the brilliant longtime macro trader and former director of the CME Yra Harris.

Now if you're a subscriber to Exchange Invest weekend, which is absolutely free by the way, you can get that at ExchangeInvest.com for signing up, you will be aware of our “Finance Book of the Week” for this week.

If you're listening to this podcast fresh in, then our “Book of the Week” is “Against the Gods: The Remarkable Story of Risk” by Peter L. Bernstein. It's a comprehensive history of man's efforts to understand the risk and probability, beginning with early gamblers in ancient Greece up to modern chaos theory. Bernstein explains how the notion of bringing risk under control is one of the central ideas that distinguishes modern times from the distant past. He demonstrates that understanding risk underlies everything from game theory to bridge-building to winemaking and beyond.

So once again, anybody can sign up for Exchange Invest Weekend for free at ExchangeInvest.com incidentally, and get the scoop a week ahead of this podcast of what's going to be the “Book of the Week”. Thanks to all those of you who've engaged with us on the platform for our books of the week. Our next book of the week is gonna be revealed Saturday and the EI Weekend.

And don't forget, if you want all the news on the bourse business sent daily to your inbox, subscribe to Exchange Invest via ExchangeInvest.com. Right now it's only $349 per annum to join the ‘exchange of information’ but stay tuned, that price is going up soon. So get in now to secure your subscription rate.

In product news, Chinese regulators have lifted stock net-selling ban for a few mutual funds. If nothing else that makes the pressure on fund redemptions a great deal easier.

At the same time over in India, they have extended and tightened their norms governing short selling although nonetheless market insiders say that actually what they've really done is clarified the rules to some degree.

Elsewhere in product news, Saudi Arabia's Tadawul will have launched an index to track the top 50 companies on the national bourse.

Technology news this week, KRX systems operation have been delayed on VNX, the Vietnam Exchange, that's due to slight delays as their ongoing the onboarding of all of the intermediaries across the platform.

SPIMEX are aiming to develop a new trading system with VK Tech based on Tarantool over the course of the next 12 to 18 months. Presumably to help make them a lot less sanctions concerned over their use of technology.

Meanwhile, the Philippine Stock Exchange had a bit of a hoops nasty on January 3^rd, that was due to a third party front end system provider issue.

Regulation news, there was more of this in our Bitcarnage newsletter during the course of the last week at Christy Goldsmith Romero chaired the CFTC Technology Advisory Commission this week, and they released a Digital Assets and Blockchain Technology Subcommittee Report, all about decentralized finance. What did they say? Well, they didn't kill it stone dead, but they were certainly very, very concerned that decentralized finance seems to be the realm where you can be remarkably anonymous, and remarkably anonymous just doesn't fit with modern standards for AML / KYC.

Career path this week, Sha Yan has been appointed as secretary of the Party Committee of the Shenzhen Stock Exchange.

Xing Guiwei is the new Chairman of Hong Kong Interbank Clearing Limited (HKICL), she’s has been appointed to the Risk Management Committee of the Hong Kong Exchanges Group.

And finally, in jobs news this week, we see that Interactive Brokers have appointed veteran, now retired analyst of the exchanges market structure and brokers section Rich Repetto to its board of directors.

One has left to wonder, does this mean IBKR are looking at M&A by appointing Rich to the board?

One final big thought for this week according to the National Stock Exchange of India CEO Ashish Chauhan, there are now some 75 million Indian individual stock investors and that includes 20 million women.

…And on that mysterious and magnificent note, thank you for listening to this EI Weekly Podcast 227.

Join us daily via ExchangeInvest.com or indeed if you have a new exchange or marketplace you'd like to launch get in touch.

My name is Patrick L Young, builder of markets, publisher of Exchange Invest and I wish you a great week in life and markets.

LINKS:

Chancellor Reportedly Meets With City Grandees On London's Listings Crisis
City AM

Government Should Take ‘Direct Action’ To Block Firms Floating Outside London, City Broker Claims
City A.M.

Chamber, Stock Exchange Sign MOU
Trinidad Guardian

Government Will Push To Scrap Capital Gains Tax For Stock Trading, Yoon Says
Korea JoongAng Daily

Abaxx Announces Signing Of Agreements For Strategic Financing In Abaxx Singapore
EIN News

Euronext Completes €200 Million Share Repurchase Programme
Euronext

EGX Plans To Launch New Company For Financial Derivatives Trading
Daily News Egypt

TMX Group Completes Acquisition Of VettaFi
TMX