MARCH 1 2017

Welcome to Issue 943, the type number in Porsche-welt for the 1990 Four-speed Tiptronic automatic gearbox for the 911 Carrera 2. It’s funny looking back, Porsche had this thing with autoboxes, PDK and the like even in the 1970’s and we ‘purists’ thought it all dumb and now the Playstation generation of sports car owners throw their toys out of their Weissach/Maranello pram if it doesn’t have flappy paddles.

In Today’s Exchange Invest

So here we are, in a kind of no man’s land where the DB1-LSE merger still doesn’t love big brother but anticipates the bullet in the back soon. Thanks to the many who have written in to point out that there were not many of us persistently pointing out the flaws in this simply flawed merger concept. That said the really dispiriting thing to note is that, once again, DB1 appears to already be withdrawing into its comfort zone: denial, temper tantrums, mass blamestorming: XavRol / Brexit… anybody & anything apart from accepting their own manifest logical flaws to this deal. It’s a sort of LTCM failure – yip DB1 your engineering genius goes without question but the real world does have some flaws, checks and balances… Instead of denying the realpoltik (another useful English word) and seeking to sue, DB1 needs to get down to the simple dirty work – the house must be rebuilt from the ground up in places. (Oh and don’t look too smug LSE, your underpinnings still look like a frat house party – integration please, proper IT at LCH, etc). For a better parish and a much better shareholder experience, the time is long overdue for DB1 and LSE to look internally to address their flaws rather than making flashy, flawed, deals.

I will from now on condense DB1-LSE reportage as it mostly says nothing new and much that is downright flawed. However there are a couple of must read gems on the topic from Politico and the Evening Standard. Elsewhere, JSE: stronger than it seems but on the defensive, TASE: weaker than it seems and on the defensive, Dalian: going global, Tadawul: allowing expat investors while Singapore is surreally vexed about lunch breaks once again.

In BigWorld

Arthur Andersen went out of business as auditors because the Enron accounts which were in LalaLand. Meanwhile the aftermath of giving a gold painted bust to the producers of LalaLand appears to have created more opprobrium for PwC than even AA managed despite the latter costing the economy a fortune. PwC’s red envelope debacle cost the square root of nothing in pure monetary terms.

Albeit, given Hollywood exec egos bruise even more easily than some exchange bosses…which is saying something… seeing the Motion Picture Academy reduced to such confusion was priceless.

Public Markets

It’s Not Me It’s You

PLY: #Explosive. The last time I heard the word “unprecedented” around EU antitrust circles that must have been, oh let me see now, ah that was it…the behaviour of some renegade NYSE staff during the NYSE-DB1 deal.

Simon English: London Stock Exchange Chaos Proves Bankers Are Best At Screwing It Up
Evening Standard

What’s the point of the investment banking trade, beyond its own enrichment? After the shambolic collapse of the £21 billion merger of the London Stock Exchange and Deutsche Börse, the answer is again near impossible to divine.

The bankers are in the business of giving advice, but there’s plainly no requirement that the advice be good — it’s a line of work with power but no responsibility.

There were 11 banks and 30 named bankers on this deal, with many more in the background. Perhaps the point of having such numbers is that there are too many to name when it goes wrong.

…Of the things that investment bankers are “experts” at measuring, execution risk is supposed to be top. A great deal that’s going to fail isn’t a great deal. Let’s remember…a merger between London and Germany has been on the blocks for 16 years. If you’ve been seeking a marriage for that long and it hasn’t happened, take the hint.

…Outside of the two companies and the investment bankers, no one liked this deal. The objections…were loud, early and persistent.

A child could have seen that, irrespective of the deal’s merits, it was unlikely to happen.

PLY: Quite magnificent in its takedown of the whole sorry farago; a flawed from conception deal pushed by demagogic executive egos bereft of perspective. The takedown of investment bankers is entirely welcome too, albeit the one tiny point to ponder is just how it was the deal slate happened to involve what looked like a majority of Swapclear votes? That always struck me as a remarkable coincidence for spending a few hundred million in fees.

Oh and let us not forget the wanton shareholder value destruction in wasted fees to date, especially on legions of agitprop PRs and delegations to Brussels et al. A year lost when neither DB1 nor LSE could afford to get left behind and a vast cash splash on hot air.

Europe Left Exposed By Demise Of Anglo-German Exchange Merger

PLY: I run against the linear thinking amongst the headlines’ majority opinion from big cities with little appreciation of the breadth of Europe with this last word in Huw’s latest excellent article:

“Patrick Young, an exchanges consultant, said the whole concept of a European market champion was flawed.

“The European markets are multi-faceted and at many different stages of development. Bulking up inside Europe is going to be very difficult as you either hit antitrust issues or are too small to be exciting,” he said.”

…This key point is not visible to many rather myopic eyes in London or New York.

Jim Armitage: LSE Whodunit Is A Thriller But Let’s Focus On The Next Tie-Up
Evening Standard

Now the second idea: analysts at Exane today convincingly predict Michael Spencer’s NEX exchange could set the LSE’s newly unattached heart …

PLY: Readers will note this case was made by myself explicitly on various occasions including before the merger of equal desperation began its troubled delusional path when NEX was just a plan… (Plus you could have Michael Spencer in charge of LSEG to replace Xavier and get the house’s many acquisitions in order. NEX Exchange would have to be spun out and so forth but it remains the most compelling deal for LSE by far). Good to see Exane now joining that bandwagon albeit I am not convinced it will happen soon but maybe, just maybe, LSE Chairman Donald Brydon is the many to follow that through. Then again in shareholder value maximisation mode, Michael Spencer will remain the prettiest date at the prom for some time to come and he will make the most of his ability to extract the best return.

However Donald needs to drain the swamp first at LSE.

ICE Talking To Former LME Chief About New Metals Platform

PLY: News that is at once exclusive (well done Pratima Desai) but also unsurprising. Martin Abbott has a possible metals platform to shop, ICE needs large clunky markets to improve. I don’t know if that’s a match made in heaven but there are clearly grounds for a discussion!

Not Quite More Of The Same From The JSE

PLY: True no special dividend as per 2013 – 2015 but then again given that, tragically, the South African economy is in serious developmental difficulties and given a collapse in commodity prices, the JSE actually is doing rather well against the macroeconomic odds. It’s biggest issue in many respects are legacy technology costs…

Trading Hours: The Clock Runs Longest In Singapore, Shortest In China
Business Standard
Singapore Traders Lunching Again ‘Good News’ For Michelin-Starred Chef

“This is good news,” Forlino, a Michelin-starred chef, said in his No Menu restaurant, a five-minute walk from the office of Singapore Exchange Ltd.

PLY: How long did Lee Kwan Yew spend over lunch each day?

FXCM Repays $238 Mln To Lender Leucadia, Has $155 Mln In Outstanding Payments
SMN Weekly (blog)

PLY: I can only imagine Leucadia management had a few sleepless nights when it became clear from the CFTC’s investigation that FXCM was as transparently Snow White as Darth Vader.

BGC Partners Completes Acquisition Of Besso Insurance Group

Private Markets

China Seeks To Hold 20 Percent Of PSX’s Sale Proceeds To Meet Default Claims
The News International

PLY: Interesting kink to the recent deal where a Chinese exchange led consortium acquired 40% of the Pakistan exchange for $85 million – they now want 20% of the proceeds held in escrow to cover against defaulting brokers (qv the recent scandal involving MR Securities amongst others).

Dalian Exchange Going Global
China Daily

Dalian Commodity Exchange is making preparations for the participation of foreign investors in iron ore futures trading,

Regulations To Be Amended To Grant Expats Right To Invest In Saudi Arabia
Arab News

Tel Aviv Exchange Looks To Cross-Listings To Increase Volume

PLY: TASE stressing cross listings as part of its masterplan. Things really must be bad.

Sri Lanka’s: Govt. Role Imperative For Capital Market Development: Stakeholders
Daily Mirror

The Jamaica Stock Exchange Limited Audited Financial Statements For The Year Ended December …
Jamaica Stock Exchange

Sebi Lashes Whip On Brokers In Dark Fibre Case, NSE Redrafts Algo Policies
Dalal Street Investment Journal

Special Section: FTI, NSEL, India at the Crossroads



SETL Opens Paris Office To Support Its Eurozone Operations


Small Companies Yank IPOs In Hong Kong After Official Crackdown

EPEX SPOT And ECC Chosen To Foster Irish Market Integration – Companies Sign Agreement To Support The Development And Operation Of SEMOpx

Career Paths

Finmin Official Ajay Tyagi Takes Helm At India’s Market Regulator

PLY: Good luck to Mr Tyagi taking Sebi forward.

Specialist parish vendor unlocking value in physical commodities, Kynetix, has elevated co founder Matt Dolton to CEO while co founder CEO Paul Smyth moves up to becoming Chairman. Alan Wilson has joined the Kynetix board as CFO.


US Crowdfunding Offers New Capital Source, SEC Finds

Zopa Mulls Move Into Secured Lending
P2P Finance News

Other Stories

Trump Regulation Rollback May Threaten Us Firms’ EU Access

PLY: Well I think it certainly secures the future of CME Europe’s many ventures as a hedge?

Sebi’s New Chairman Ajay Tyagi Has To Tackle Challenges Of The Digital Age

Global Regulators Delve Deeper Into Risks From Insurers

PLY: More excellent reportage from Huw Jones today – parishioners should watch this insurance regulation theme carefully as the opportunity to reduce and transfer risk is considerable.

Onwards and upwards!

Best wishes,


Patrick L Young
Executive Director DV Advisors

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