APRIL 13 2017

ESMA has already shut today whereas I intend to take a slightly less aggressive Easter schedule but nonetheless, I do not anticipate publishing Exchange Invest on Good Friday (tomorrow) or Easter Monday – catch up again post Lenten calorific indulgence and towards the end of Passover, next Tuesday.

…But first here’s an extra long Easter Special to tide you over the weekend with insights:

In Today’s Exchange Invest

So Farewell then CME Europe CCP & Exchange – unsurprising news covered in more detail in EI Premium. Carcrash Kengeter being primed for the exit from DB1? …Which raises the question, how then does his proposed MOED subordinate XavRol survive at LSE?

Cracking day to end the parish term as the Easter break is upon us – scroll and enjoy, there’s a lot to read today from what has been a busy if abbreviated week for the parish.

In BigWorld

In Bigworld, the problem of having a broadly under capacity utilisation of parliamentary facilities is causing difficulties in Brussels where the MEPs spend less than a half month overall, given holidays, weekends and of course the entirely pointless trek to the duplicated site in Strasbourg.

However, Guido Fawkes reports that as a result of water remaining stagnant in pipes, there is a hot water problem – an outbreak of Legionella virus.

As a service to parishioners who may deal with the EuroParl, I am happy to repeat Guido’s health warning:

“It would be terrible if all those MEPs were struck down by Legionella. One of the early symptoms is “mental confusion”. So be on the look out for MEPs exhibiting this symptom…”

Public Markets

Deutsche Boerse Reluctant To Extend CEO Contract After Failed Merger: Sources
Reuters

PLY: Investors are also making noises that if charged they would like alleged insider dealer “Carcrash” to step down. That the generally spineless board of DB1 is finally showing the backbone only evidenced by a small minority over the years is an encouraging sign for corporate governance. DB1 can rebuild an enterprise from what has been a senior management induced myopic torpor as certain parties preferred to chase windmills from one Don Quixote C-suiter to another. Mr Kengeter clearly has skills – as an investment banker. Regardless of just why he still sits in office even after being investigated for insider dealing (a temporary hiatus was surely a commonsense issue here?), alas CK1 just looks horribly out of his depth trying to run a large exchange group. Moreover that skill he was supposed to bring – dealmaking – has entirely inadequate thanks to his utter incomprehension of the obvious dynamics of antitrust.

There is subtle difference between a rainmaker and somebody who can turn the flattest calm into a stormy sea.

DB1 now needs to endorse the desperately overdue top to bottom cleanse (with the emphasis on the top): multiple senior contracts are coming up in the next 18 months and that means replacing the top tier. The culture of the company must be aforethought to stop the decay of desperate deal driven delusion which has allowed DB1 to lose its longstanding slot in the top tier of exchanges facing self-demotion, embarrassingly, just a little above the LSE which was a one trick pony when DB1 first (and indeed last) looked to be a world leader. Cheerio Carsten, Au Revoir Andreas, Ta Ta Mr Tessler (already indicating he is standing down) and much more besides: New brooms, New era, New DB1. A new management and a new moral fibre is overdue. If Euronext can do it, so can you, Frankfurt. After all you were the future, once.

CME Group Shuts Loss-Making London Derivatives And Clearing Units
Reuters
US Futures Giant CME Group Pulls Back From Europe
Wall Street Journal (subscription)

PLY: Includes quotation from one Patrick L Young just ahead of a CME spokesman remarking that only a “very small single-digit percentage” of jobs would be affected from the London/Belfast headcount of 400. That will shock parishioners, unless it’s a means of deftly ignoring the battalion of consultants who are cannon fodder for cuts? Or is the aim to kill the exchange but maintain the CME London empire (in which case the CME again looks more like a political enterprise with a regulated financial enterprise alongside…).

On a headline basis, CME Europe appears to fall foul of the nexus of a lack of management vision; embraces the affliction of short term fixes to please investors and curry favour with analysts while also delivering a message to Europe that an ongoing blanket of regulation is unwelcome in the new era where America is embracing a step away from cocooning markets in red tape. There is also that ongoing issue where the CME is more political than the Trump cabinet. More insight in the Premium Post “So Farewell then CME Europe CCP & Exchange which considers the issues and options.

One In The Eye For The Exchange Lobby! CME Quits Europe & London Just A Year After Massive FX Drive!
FinanceFeeds (blog)

PLY: Frankly the funniest thing I have read all week (and the NYT had a few hyper-laughable fake news gems)…new highs on the “smugometer” for the bilateralists! The OTC forex industry dances with glee because they just overturned an advance party in an expensive yacht…whereas tactically, it might be better to consider the armada just over the horizon containing hordes of angry regulators and a lot of very hungry exchanges who will eat your lunch without a last look and not worry about making things ‘dinky’ future sized. (Albeit there may be those within CME Europe Clearing House who look back with regret that the Bank of England wasn’t more accommodating of forex risk to begin with but that’s another story, albeit ancient history of a kind, now).

CME Group President Provides Insight On Business Ethics
Chicago Daily Herald

Bank Of England Says No Need For Tougher Fintech Regulation
Reuters

PLY: London has had a festival of the blob trying to look hip with the kids of fintech this week. Some of the speeches have been excruciatingly dire. However for once, the highly dubious Carney is not far from the mark – or at least it suggests there is some thinking going on within the Bank which is much more clearly absent at, say the FCA where playing in sandboxes is a lipstick pig repo play in several dimensions.

Video: About Nasdaq Private Market (Npm)
Vimeo

Credit Suisse: A Merger Between 2 Stock Market Behemoths Makes A Lot Of Sense
Business Insider

PLY: They got this headline mixed up clearly: What Credit Suisse meant to say was “A merger between 2 stock market behemoths makes a lot of FEES.” Are the investment banks the new desperate players in the parish? They are unable to scale down to the exciting future of markets but from their lofty expectations and sense of entitlement they want big deals, big fees, big bonuses and I am concerned that I can’t say I see much more than big disappointment in their future…

Private Markets

Chinese Backers Planning Singapore’s Third Derivatives Exchange
Bloomberg

PLY: Story suggests Asia Investment Pte, “majority-owned by former China Financial Futures Exchange and Dalian Commodity Exchange chief Eugene Zhu Yuchen, with a minor stake held by the firm of hedge fund manager Ge Weidong,” is looking to establish a new exchange in Singapore alongside SGX and ICE. Very interesting.

Sri Lanka Stock Exchange Invites Public Comments On New Rules
EconomyNext

Indiana Companies Uncertain About TransVix Trucking Futures Exchange
Inside Indiana Business

Special Section: FTI, NSEL, India at the Crossroads

Bombay High Court Pulls Up Committee Linked To NSEL Probe
PressReader

Technology

Blockchain Pioneer nChain Acquired Ny High Tech Private Equity Fund SICAV plc
MondoVisione

PLY: That’s the remarkable thing about how distributed, distributed ledger technology has become, so quickly. Four years ago it was viewed with broad disbelief at my Young Markets conference. Now here is the self-proclaimed world leader being acquired and I have never even heard of the company. Amazing.*

*Perhaps there is a “World leader” DL which distributes what us old analogue (turned somewhat digital) fogeys think of as being a singular title into something actually shared between hundreds of entities?

A Boston Fintech Startup Is Powering Thomson Reuters ‘ New Investment Tool
Boston Business Journal

Products

Russell 2000® Index Futures And Options To Return To CME Group July 10 – Six Contracts Based On The Russell 2000® Index As Well As BTIC Functionality Will Be Available For Trade
MondoVisione

Securities Commission Malaysia To Allow Regulated Short Selling Of Corporate Bonds To Boost Bond Market Liquidity
MondoVisione

Career Paths

CFTC Announces N. Charles Thornton III As Director Of The Office Of Legislative Affairs
MondoVisione

Former Barclays Banker To Lead Panmure Gordon
Financial Times

PLY: The return of former LCH boss Ian Axe…

Crowdfunding

Why Kickstarter Decided To Radically Transform Its Business Model
Fast Company

Other Stories

Brexit Prompts Transferwise To Move Europe HQ From UK To Continent
Nasdaq

PLY: A group of Estonian founder will move their European HQ inside the Eurozone because they do money transfer and don’t want to risk losing the advantages of PSD compliance while maintaining their overall global HQ in London. Not a blow to Britain, just a sign of things to come in this low cost sector, surely?

Build Industrial Capital Integration Platform To Aid Electronic Information Industry Development – Ministry Of Industry And Information Technology Of China And Shenzhen Stock Exchange Hold “Summit Forum On Capital Connection Of China Information Technology Industry”
MondoVisione

FIA Launches Interactive FCM Tracker
MondoVisione

FINRA Requests Comment On Rules Impacting Capital Formation – Additional Proposals Include Updates To Rules On Underwriting Arrangements And Desk Commentary
MondoVisione

World Federation Of Exchanges Publishes Cyber Resilience Standards
MondoVisione

PLY: Whereas the Pope will send out an Easter message to rally the faithful and billions of eyes will be on St Peter’s Square, rather the WFE sends out this pre-Easter message in an attempt to remind the world that they are still relevant. With member apathy at an all-time high there are very few faithful to rally. Maybe we need a new top level club which actually reaches the world and not less than a quarter thereof?

Building The Infrastructure To Realise FinTech’s Promise – Speech By Mark Carney
Bank of England

PLY: The title describes the current misunderstanding – the fintech is building the new infrastructure sometimes ignoring the regulatory framework entirely, the blob is trying to strangle it and the happy medium is being avoided by a dose of denialism on all sides. However it is worth a read as the Bank is advocating “soft infrastructure” which is about as close as a central bank can come to appreciating that revolutions have a stage of anarchy. The problem right now is the control freakery of many – qv the idiocy of the FCA was writ large this week when they advocated a global framework of rules…the usual ‘this is how we fought with cavalry so why doesn’t it work with tanks” rule applies here.

Rare T-Plate From The Chicago Stock Exchange Sold By Wright, Chicago, On Thursday, April 13, 2017
Artvalue

PLY: Going, Going… just time to bid today for various artefacts from the old Chicago Stock Exchange building being sold at auction in Chicago this morning.

Happy Easter to one and all, thank you for reading Exchange Invest.

Catch up at latest, Tuesday for issue 976.

Patrick

Patrick L Young
Executive Director DV Advisors

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