JUNE 23 2017

Good Morning and welcome to Issue 1022 of Exchange Invest Daily.

One year ago history was made when Britain voted to leave the EU. Despite all manner of shenanigans (some ongoing, by anti-democrats), the path is now clearly signposted to Britain leaving the EU, the single market et al. An odd year in retrospect, Britain’s immediate progress was hampered by both the ineptitude of the Cameron government (the materially incompetent PM David Cameron petulantly walked out of Downing Street post referendum having disgracefully made no contingency whatsoever for Brexit). Meanwhile the EU has done simply nothing other than some machinations against Britain and against financial stability – the lack of a clear plan for the EU27 going forward underlines the sheer failings of what was once an interesting project of grand European design.

On the economic front, an eve of Brexit anniversary report noted British manufacturing export orders are at a 29 year high (despite Brexit I feel obliged to note). Meanwhile the EU is in a state of what even Brussels cheerleader Politico derides as European Disunion. The dysfunction of government is not good for the parish or indeed commerce as a whole. Put simply the UK may or may not get its act together but the EU has singularly failed, yet is unable to revise itself. That’s very worrying.

Euro Clearing Essentials

1) Prosperity UK Panel – Brexit, Euro Clearing & Financial Market Structure: panel with Barney Reynolds, Jeff Sprecher, Michael Spencer and one Patrick L Young lurking in the background.

2) My CapX article explaining The EU’s Euro Clearing Plan Is An Act Of Protectionist Self-Harm.

In Today’s Exchange Invest

ECB looks for more clearing powers. French Central Banker demonstrates financial illiteracy in public, FTSE boss reckons MSCI have jumped the shark on A shares. State Street sells Blockcross to Instinet.

And there’s more, happy scrolling:

In BigWorld

Over in travel, Qatar Airlines doubtless has celebrations on hold after being given the laureate of best airline in the world given that various sanctions from the neighbours are rather impeding actually flying with them at all. At the same time Qatar hit the headlines yesterday by saying they intend to acquire up to 10% of American Airlines in the open market. It’s a funny old world when even an airline under sanctions from its middle eastern neighbours looks more palatable than an airline eponymous with the greatest economy on earth (albeit sadly not sharing many of the values or virtues of American customer-centric success).

Public Markets

ECB Seeks Greater Power Over Clearing Supervision

“These powers include a significantly enhanced role for central banks of issue in the supervisory system of central counterparties (CCPs), in particular with regard to the recognition and supervision of systemically important third-country CCPs clearing significant amounts of euro-denominated transactions.”

PLY: Original statement can be found here: ECB recommends amending Article 22 of its Statute.

However it is not the declaration of war the UK’s uncomprehending media are often stating this AM. It’ a salvo across the bows with a note on the end of the missile saying “we want more oversight.”

The devil is in the details here – the ECB has a right to a sound, sensible information sharing regime. It does not have a veto right to set margins or other commercial factors.

French Central Banker Backs EC Proposals On Clearing

PLY: Governor of the Bank of France Francois Villeroy de Galhau actually doesn’t back the ECB remarks, he goes a lot further, reverting to standard issue French protectionist blob ignorance. QV:

“We cannot reasonably expect that these global financial market infrastructures take into account, in their operations and risk management, the financial stability of the euro area, on top of the financial stability of their own jurisdiction…Euro-denominated clearing activities should be located in the European Union when they exceed certain thresholds.”

Ergo, a classic example of the idiotic socialism of “you can’t trust the market” which ignores the basis of human rationality and the desire of businesses to survive and thrive, not merely profiteer in the short term.

To boil this down, it’s the same as saying because a restaurant is for profit it has no incentive to avoid food poisoning its customers…. In the case of CCP clearing the inference that the likes of LCH are so shortsighted as to not understand the symbiosis of currency stability (across 18 currencies!) in one or all of their client’s clearing denominations? What a ludicrous piece of myopic chauvinism which entirely discredits the sensible folks in the EU and ECB apparatus who want a decent information sharing deal which enables everybody to sleep at night.

Elsewhere the BBA’s departing boss Anthony Browne fires a few shots across the bow of the EU…

CSRC Spokesman On MSCI’s Announcement Of China A-shares Inclusion In MSCI Index
London Stock Exchange : FTSE Russell clients not pushing for China inclusion in EM share index – CEO

PLY: Mark Makepeace makes a pithy point which is that in adding what has long been a protectionist construct, China “A shares” to their emerging markets index, it is not inconceivable that MSCI have jumped the shark.

Exclusive-LME To Cut Fees, See If Volumes Can Be Lured Back: Sources
No Decision On London Metal Exchange Fees
The Times (subscription)

PLY: Well at least one of these stories is probably right…

Moscow Exchange And Kazakhstan Stock Exchange Sign MOU

London Stock Exchange Group Plc Transaction In Own Shares

SEC Adds Additional Charges And Fines In ITG Foreign Shares ADRs Case

PLY: Not encouraging for the rejuvenated management team.

Saxo Attributes Its Departure From UK CFD & FX Lobby Group On Disagreement
FinanceFeeds (blog)

PLY: “Trouble at mill” for a trade association I have never even heard of, not even in its previous guise as a spread betters association.

Private Markets

State Street Exits Its Dark Pool , Selling Blockcross To Instinet

NSE Gets Sebi Notice On Preferential Access To Brokers
Business Standard

Special Section: FTI, NSEL, India at the Crossroads

No news today.


No technology news of wild excitement in the parish overnight.


The Alternative Reference Rates Committee Selects A Broad Repo Rate As Its Preferred Alternative Reference Rate

PLY: The end of the “…OR” era?

Career Paths

PLY: Congratulations to HKEx Chairman Chow Chung-Kong who has been reappointed to the HK Executive Council, the region’s highest body the South China Morning Post reports.


ASIC Commences Consultation On Proposed Guidance On Crowdfunding

PLY: The worry is that an ASIC “consultation” could be construed as “listen to the market and ignore any vestiges of free market thinking.”

Other Stories

Statement of J. Christopher Giancarlo Acting Chairman, U.S. Commodity Futures Trading Commission before the U.S. Senate Committee on Agriculture, Nutrition, and Forestry

Remarks To The SEC Investor Advisory Committee, SEC Chairman Jay Clayton, June 22, 2017

FESE Announces The Winner Of The Josseph De La Vega Prize 2017

FIA Launches Third Annual Innovators Pavilion

Procedure leading up to a decision on the relocation of the European Medicines Agency and the European Banking Authority in the context of the UK’s withdrawal from the Union, 22/06/2017

PLY: Bids now open for the European Banking Authority offices which will presumably be demanded by Germany. It will be interesting (albeit tricky to tabulate) to see how many of the staff as of June 23rd 2016 actually ever make it to the new HQ…
It’s the weekend – only 51 more to go until the next Le Mans.

Have fun, after all it’s officially summer in the northern hemisphere…


Patrick L Young
Executive Director DV Advisors

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