Apr 19, 2024 11 min read Exchange Invest Weekly Podcast

241 Exchange Invest Weekly Podcast April 20th, 2024

This week in the parish of bourses and market structure: DB1’s MidPoint Mamba, Russian Metals Banned, And A Fond Farewell To Laura Cha

Transcript:

This week in the parish of bourses and market structure:

DB1’s MidPoint Mamba,

Russian Metals Banned,

And A Fond Farewell To Laura Cha

My name is Patrick L Young

Welcome to the Bourse Business Weekly Digest

It's The Exchange Invest Weekly Podcast Episode 241

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.

Over in Bitcarnage:

Way back when data centers became a pivotal force in managing market infrastructure and indeed broader finance as a whole. From here, the move from on-prem to off-prem was in a way fully complete by the time the digital revolution of crypto really gained steam, data centers were all the rage and the natural home for all manner of apps became the cloud.

With that has come some concomitant growing pains for all parties - including those who don't even use the online data in the first place. Thus, where the US stock markets occupy massive city center real estate their transactions are mostly in New Jersey data centers and in the City of London, Essex is really the key place for moving the money…

However, that leaves a quandary, Mahwah, the location nobody has ever heard of in New Jersey, but which is the world's largest hub of stock trading, is facing an acute upcoming energy shortage for the locals who want to run their aircon and heat / light their homes while the data centers grow exponentially sucking the electricity.

This leads to a problem when it comes to Bitcoin…

Which is leading to some quite radical changes to policy as data centers come close to not merely overheating, but sucking up energy reserves the populous would like to maintain their lifestyles with in Scandinavia, Norway has passed data center legislation signaling more scrutiny for Bitcoin miners.

Meanwhile, in an Exchange Invest on Tuesday, April 16th, we noted an MIT study:

The Cloud now has a greater carbon footprint than the airline industry.”

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 standalone on Substack.

In the big world of, one might call legacy exchanges but nonetheless digitally empowered wonder things but perhaps not with as much blockchain or cryptocurrency, the United States and the United Kingdom have taken action to reduce Russian revenue from metals that was the state of the US Department of the Treasury. The UK and US jointly have banned new Russian metal entering the exchange warehouse system. True mastermind of metals trade is still direct B2B (between miner, traders and manufacturers) but this nonetheless impacts LME and CME in the warehouse business and beyond. True, Chinese mainland exchanges may be able to trade some of the stockpiles, but the issue may be where they are in warehousing / queues. And therefore logistics in order to hit the Chinese market in the medium term.

Still in the overall polity of China, it's a real shame we won't have another Laura Cha Chairman term to look forward to but she leaves Hong Kong Exchanges in a fascinating position moving forward. All the best to her during her last fortnight in office.

Laura Cha, has long been a diminutive towering presence in the Hong Kong markets and thereabouts. Her stint as Chairman of HKEX is alas coming to an end, frankly all too soon, as far as Exchange Invest concerned but she has a strong succession plan lined up with new chairman Carlson Tong Ka-shing taking over on April 24th. We salute Laura Cha her brilliance and are delighted at her choice of Bonnie Chan as CEO. Right now a lot of folks remain pessimistic but HKEX, were the 100% contrary to that: the foundations have been built for a new global age for Hong Kong Exchanges, which were greatly aided by the Cha Chairmanship.

Over in Europe, there's a midpoint mamba in what has been, somewhat of a term of volte faces is as DB1 reopen their Xetra MidPoint Match facility which was withdrawn previously in 2017.

Writ large here in my humble opinion is the careerist narrow mindedness of DB1 management. Without a serious continuity of approach, the exchange has a habit of ditching sound initiatives because it needs tweaks / revisions and / or worst of all QV the NeuerMarkt - it has aroused the ire of some investors after a bubble and thus gets close down. The corporate system approach of DB1 management is thus to avoid such hot potatoes and close the platform.

Thus, where Xetra MidPoint was launched in 2008, Deutsche Börse, introducing Xetra MidPoint function and extending it to include a specific Block Facility with Liquidnet. The latter was a sensible move to enable Block trading but brought down by the baying hounds of the sell side whose major aim in life it all struck me revolved around maintaining an expensive oligopoly at the expense of progress with a generous lunch in between two periods of market interaction.

Now, DB1 are reanimating Xetra MidPoint as everybody else has adopted a similar facility, and CBOE-BIDS has swept to the forefront of block trading is Liquidnet learned the wrong lesson from the likes of DB1, which was to take a near monopoly for granted. It's good DB1 can change their minds but it's also a shame they can't actually manage a long-term plan nowadays. That's a key challenge for the new CEO. Will he be a reformer or just builder or just looking to milk theTaunus NED circuit while traveling even fewer miles than the legendary Chicago-centric El Tel or indeed his predecessor as DB1 CEO?

Meanwhile, Euronext successfully launched Euronext to mid-point match offering dark, midpoint and sweep functionalities this week, also entering the dark pool game.

Tragic news from Copenhagen, the Denmark Stock Exchange building, the historic building no longer in use right now as the exchange it was a conference center for the Chamber of Commerce. Anyway, the burden building a which has suffered during restoration, a fire that has pretty much destroyed the entire historic building. That might be almost a metaphor for what's been going on in the European Union. The headline in the Brussels Bugle lead EU leaders set to revive Capital Markets Union plan and search for defense funding.

It's almost as if there's some desperate figure in the Commission who reviews every document and says “quick add in a CMU provision…” when they see anything remotely pertinent. As we've seen from recent agitprop via the Bugle, the European Union wants a concentration heavy oligopoly or monopoly on exchanges which is so beyond stupid that it shows how the European project (all the way from the EEC, through the EU) has learnt nothing. Tragically. Anyway, another desperate attempt to make it seems as if there might be any CMU from the word salad of Brussels.

In any case, this is really just a fig leaf of a call for a CMU to make up for the complete mismanagement of EU defense where too many nations relied on the USA and the Trumpy one upset a lot of people last time he was an office by pushing for more EU states to pay their dues to NATO with a decent defense budget. Now we get another flurry of CMU talk just in case that a hat rabbit which can be accessed to save the European Union from its aggressively micromanaged culture of decline.

Going back to the Copenhagen fire, it may be the most apt metaphor for the opportunity which was once Europe alas.

Speaking of the opportunity that was once a Europe, the European T+1 industry taskforce comments on recent UK reports on moving to T+1 and outlines next steps, which are essentially that the USA might manage to move on May 20th but the European Union and the UK won't probably managed to make it there until Gosh 2027. T+1000 days or more pretty disappointing all round given the fact that I don't think there really will be that much need for the European market by the time we get to 2027 if things extrapolate as they are.

In results this week, it was not the busiest week for results in the parish but things are warming up in the quarter. Nonetheless, all the details were in Exchange Invest daily and they will be this week too for every results announcement all about from the newsletter no person can afford to be without in capital markets and market structure. For the sake of this podcast we're going to look at the edited highlights of all two key announcements this week.

The Nairobi Securities Exchange in Kenya declared the full dividend of 0.16 local currency per share.

The GPW the Warsaw Stock Exchange, their sales revenue was +14.3% ($111.8 million), net profit was +7.6% ($39.20 millio) albeit EBITDA dropped 4.3%

In deals this week, couple of interesting things to point is, first of all Kazakhstan to combine AIX and the Kazakhstan Stock Exchange next year. That message coming from the top of the government: “We have to make it clear. In his address to the nation, the President instructed us to combine the potential of the two stock exchanges.”

I have to admit I remain sceptical that a single national market is ever the answer in the developing digital age, but the decision appears to be made from above the realm of capital markets.

Meanwhile, in Central Eastern Europe to the southeast of Europe, Serbia, Hungary and Slovenia have signed a deal to merge their power exchanges.

Then there's the ongoing discussion about PSE and PDS in Manila. PSE (the Philippine Stock Exchange) hopeful on talks for merger with PDS (the Philippine Dealing System), the bond market that was according to Philstar. It's a headline which could have been published pretty much anytime since Exchange Invest was established 11 years ago… #ThisTimeItsDifferent?

One thing that is different ladies gentlemen is how the world of blockchain, cryptocurrency, and the FinTech world has changed everything that's been going on in our markets in recent times, even if they are not themselves dealing on a blockchain. “Victory or Death?”, my most recent book deals with exactly these topics. It's published by DV Books and distributed by Ingram worldwide. You can catch a copy at bookstores around the world.

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

Our most recent episode online IPO-Vid #139, we were talking to Dr. Bharat Kulkarni in India, discussing Markets - The Winds of Change through India and all the way to his involvement with the Ethiopian Commodity Exchange amongst other markets. Great show that all together.

Coming up on Tuesday we've got Chris Skinner, he's going to be discussing the future of FinTech and related issues. That's a show we're going to be showing on Tuesday 23rd of April at midday Eastern Standard Time.

Our Finance Book of the Week this week, we have got a fascinating tome by our IPO-Vid guest of episode 118. Arjan Capital Ltd MD, Andreas Schweitzer.

“Trade Works: The Trade Finance Investor” is a whistle-stop tour of the history of how finance can go wrong - and how to prevent it from happening again in the trade finance realm - making a tome to keep dipping into whenever you need to interact with trade finance.

Our next book of the week will be unveiled on Saturday, in our free Exchange Invest Weekend Edition. You can sign up for the free weekend edition on a Saturday at the Exchange Invest website without any difficulty.

And while you're there, don't forget the idea of signing up for Exchange Invest the bulletin of the bourse business, the water cooler of the world of exchanges. You can subscribe to that and we're offering a free 7 day trial before you have to pay $375 per user year. It's a small cost to pay when you want to join the exchange of information.

In product news, our New York Stock Exchange executive says a ‘handfu’l of AI startups exploring IPOs. I'm wondering will a suitable large language model write their prospectus as I wonder or will the original LLM in the law firms be hugely upset?

I suspect the answer is probably neither, the LLMs will use an LLM to write the prospectus and charge clients the usual fee - the ultimate digital double dip.

Elsewhere NASDAQ have launched futures on the OMX Sweden Small Cap 30 ESG Responsible Index.

Technology news this week, we've got excitement from the Caribbean, the Trinidad and Tobago Stock Exchange is moving their settlement from T+3 to T+2 in the course of the next few weeks, thus briefly managing to be on the global standard of T+2 just at the point in time when that standard is crumbling and moving to T+1.

Regulation news this week, the SEC have got some final climate disclosure rules, they're simpler but still disputed. I suppose one could call it a success as the only garnered 6 legal challenges to this version, instead of the 10 which fully proposed postponed all of the rules in previous weeks.

At the same time, interesting look ahead, IOSCO have published an updated work plan for the year ahead.

Career paths, remarkably sparse week apart from of course, that winding down of the career as chairman of the Hong Kong Exchanges for Laura Cha. Nonetheless Hope Jarkowski is leaving New York Stock Exchange where she was co-head of Regulatory Affairs and will be joining Broadridge as Chief Legal Officer. All the very, very best Hope.

Meanwhile in BigWorld, two statistics I noted the other day about countries progressing from middle income to ‘rich’ status and the nature of their progress and what underpins them. Interesting to consider:

Point one, no command economy has ever made it into the richest 39 nations on Earth.

Second point to ponder, absolutely no command economies have ever achieved high income status.

And on that mysterious and magnificent note, thank you for listening to this Exchange Invest Weekly Podcast # 241.

Join us daily via ExchangeInvest.com or if you've new exchange you would like built get in touch.

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

LINKS:

United States And United Kingdom Take Action To Reduce Russian Revenue From Metals
U.S. Department of the Treasury

Outgoing HKEX Chairman Laura Cha Stresses Importance Of Raising Exchange's Global Profile
South China Morning Post

Deutsche Börse Closed Its Dark Pool In 2017, Now It's Getting Back Into The Game
Financial News London

Denmark’s Historic Stock Exchange Building Suffers Huge Fire
FT

European T+1 Industry Task Force Comments On Recent UK Report On Moving To T+1 & Outlines Its Next Steps
FESE

Nairobi Securities Exchange Limited (Kenya) Declares A Final Dividend Of 0.16 KES Per Share
AfricanFinancials