Nov 14, 2020 10 min read Exchange Invest Weekly Podcast

071 Exchange Invest Weekly Podcast November 14th

Australian stock exchange to finally replace their antiquated CHESS settlement system with the blockchain solution that is already several years overdue.

While the “coalition to prevent the taxation of retirement savings” meets Texas Governor Abbott, Hong Kong Exchange delivers impressive results for Charles Li's quarterly swansong and ICE Futures Abu Dhabi are go: on March 29th, 2021.

Transcript

Are we in a death rattle for mega-deals in the parish? Hong Kong Exchange delivers impressive results for Charles Li's quarterly swansong and ICE Futures Abu Dhabi are go on March 29th, 2021. My name is Patrick L. Young. Welcome to the bourse business weekly digest. It's the Exchange Invest Weekly Podcast.

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 week’s, many events and happenings can be found in Exchange Invest’s daily subscriber newsletter. The unique guide to the bourse business sent daily to your inbox.

More details at ExchangeInvest.com.

In Brexit: Brexit Brexit Britain is pursuing a Brexit finance plan. Its door is open to EU firms. Essentially as fast as the European Union is trying to shut up store to the UK’s financial firms - a pretty serious imbalance. Given the fact that the UK is at least 35% of the European wholesale finance market, Europe may yet Rue that move.

Speaking of people, ruing moves. Hopefully the legislature in New Jersey have finally got the message NASDAQ and other trading exchanges have met with the Texas governor, Abbott. As Texas governor Greg Abbott himself tweeted “Texas may become the financial nerve center of America, of the world.”

He asserts, “I will meet with NASDAQ and other trading exchanges about a potential move. Like so many businesses they want to flee high taxes in Texas. We made an income tax unconstitutional.”

Memo to team Biden, whatever you're planning, you can't afford it.

The “coalition to prevent the taxation of retirement savings” includes NASDAQ, the ICE CBOE, Citadel Securities, Equinix, IEX, TD Ameritrade, Virtu financial and UBS. Could the last person in New York city, please switch off the lights? is the plausible order of the day after another gruesome tri-state taxation, miscalculation.

In results this week, Hong Kong Stock Exchange spectacular results for what will probably be the final time they're presented by the outgoing CEO, Charles Li. Q3 profit jumped 52 per cent on increased trading revenue, increased trading listings. In fact, pretty much increased everything. Despite the lack of an Ant IPO Charles Li was hugely upbeat and delivered some very sanguine and sensible remarks about the future of the exchange, which is in excellently rude health and bears huge Testament to his very successful period as chief executive.

Elsewhere, Good numbers came in from Euronext, amongst others. While the Warsaw stock exchange, wasn't looking too bad either, but the National Stock Exchange of India beat both: their revenues were up 40% in the first half of the year. Tragically TP ICAP managed to pour, worse news upon worse news. Their revenue growth is at best flat “as trading dried up,” according to a Financial Times, headline.

The sad news in the parish was that TP ICAP are flatlining terrible results altogether. They're now eyeing up cost savings, but then again, ‘never executing’ remains the stuck record of the analog TP ICAP, which is now becalmed through its own management’s incapacity to grasp the future. A paucity of execution has prevailed ever since TP and ICAP first swiped, right to create what amounts to a merger seemingly as well integrated towards a long-term stable relationship as an impulsive late night, one fingered shuffle on Tinder after some drinking and dialing. Making savings immediately is not hard: boot the C suite now. Remove the strategy department - itself, surely an oxymoron for an unreformed inter-dealer broker.

After that a board clearout can start working the company back to basics on one big shrink, the big shrink, which we've been promised through two generations of management with zero execution, frankly, TP ICAP is methinks closer to an epitaph as a public company. More so than ever before, it has manifestly failed to execute.

It's a simple to enunciate, strategy. The notion of a successful Liquidnet acquisition is now nothing more than a pipe dream unless the shareholders relish further extensive dilution for no good reason. If the shareholders do opt for that masochistic dilution where even the plan is incoherent. Let alone the long standing and ability of management to execute the original cost cutting plan, frankly, it strikes me that rebranding TPI carpus “BDSM IDB” may be a sensible move.

Looking at it either way, it is incredibly difficult to see how in any reasonable shape, the TP ICAP stock, which is currently at two Pounds, can be suitably diluted to meet the overall ambitions of the stockholders for capital appreciation. Given the fact that right now, even at a 20% discount to the current stock price, which would amount to one pound 60, that's going to be a swingeing dilution of existing stockholders in order to manage, to afford the $425 million, which is required to make the lunatic fringe acquisition of Liquidnet.

Meanwhile over at the London Stock Exchange Group, as I described it this week in Exchange Invest, it was like a story from outside Montevideo in 1939. It's the life and times of another ill-conceived LSE deal. Since the last podcast, no sooner did London stock exchange group offer all manner of olive branches, some rather substantive pieces of timber, no less.

In addition to the sale of Borsa Italiana, the competitors have gathered together and in a rather unified voice all said, NO!

I'm quite pleased my scenario has turned out precisely as predicted and August, 2019 when the latest LSEG dumb deals first announced readers may recall. We were at that time on the cusp of peak data as an obsession in the parish, which has since subsided to a more logical plateau.

However, the London Stock Exchange Group’s, big cruiser steams on, oblivious to macro changes. And thus as I said at the time, the whole deal is causing LSEG to lose momentum against the rest of the parish. Now, it is evident. As I previously pointed out that the London stock exchange has moved effortlessly into the trap, which was obvious from the beginning of what is not merely a bad deal, acquiring Refinitiv, but a dismal strategy.

And that's coming from a company which stubbornly refuses to acknowledge its past failings, wasting hundreds of millions in shareholder funds, tilting at windmills masquerading as an M&A strategy. I've often likened the LSE’s self-inflicted positioning failure to the pursuit and sinking of the Admiral Graf Spee, a veritable jewel of the third Reich's Navy early after the start of the Second World War in September, 1939.

The denouement of the Battle Of The River Plate involved the now stricken heavy cruiser Graf Spee, having been surrounded by more nimble, but less weighty British ships who eventually crippled her fuel system in a fascinating battle upon the high seas. Damaged and forced to seek refuge, the German cruiser entered the neutral port of Montevideo to affect emergency repairs - or to use the current metaphor: sell Borsa Italiana. However, with Uruguay neutral: after only 72 hours, the Graf Spee was forced to leave port... I.E.cue remedy responses from competitors after the Borsa Italiana and other remedies are proposed. The Graf Spee was ultimately scuttled as it was readily apparent the Royal Navy had regrouped in international waters ready to let loose with a vast array of ordinance.

The LSEG’s management, evidently bereft of strategy or coherent thinking at any stage of this process have allowed themselves to sail straight into a barrage of flack from every exchange within the European Union. This was entirely avoidable and just like the DB1- LSE fiasco, which I made fundamentally clear was never going to happen within minutes of the first announcement, so too the LSE’s year long pursuit of Refinitiv remains a folly. That a London Stock Exchange Group, deal scenario is once again, moving in precisely the way I shaped out all those months ago in Exchange Invest, as subscribers will readily know, is as much frustrating as it is good to report another accurate analysis as our publication - Exchange Invest’s - resources.amount to less than the London Stock Exchange Group’s M&A stationary budget.

Don't forget if you're enjoying this, please do consider subscribing to Exchange Invest the daily newsletter of the business of bourses. If you'd like some slightly longer reading, perhaps for the Thanksgiving weekend that's coming soon. Don't forget to pick up your copy of “Victory Or Death - Blockchain Cryptocurrency and the FinTech world” my latest book on the FinTech environment and its future ...coming well, 21 years after my original book on FinTech, the first bestseller in the world of FinTech publications “Capital market revolution!”

Victory Or Death is published by DV Books and is distributed by Ingram worldwide.

Don't forget too: while you're waiting for our next podcast or your copy of Victory Or Death to arrive, check out our live stream.

It's on Tuesdays at 6:00 PM. London time, 1:00 PM. New York, the IPO video live show. Most recently we had an excellent discussion with one of the flash boys, the fabulous President and co-founder of IEX the investors exchange. Ronan Ryan.

Back in the world of bourses, product news this week. First of all, there was the IPO or what one might call the Ant-aftermath in the wake of the cancellation of the IPO of Ant Financial, which proved so spectacularly controversial just well, 48 hours to go before first dealings were expected in China and Hong Kong.

There was much discussion this week on how? Well, according to the FT headline, “the party is pushing back. Why Beijing Reined in, Jack Ma And Ant.

There are many, many more interesting consolidations of the discussion and indeed, while slightly cushioned in his fall to earth, it is true that Jack Ma is now only China's second richest, man, but then again, he's waking up with a bank account, carrying a panoply of zeros on his credit balance compared to even most of the 1% folk. Nonetheless interesting to see some of the conclusions, the Hong Kong exchange’s CEO. Charles Li noted he was disappointed by the suspension of the Ant Group IPO as is quite realistic, but he was relieved to see regulation.

That's a highly coherent piece of cogent analysis. The short-term ramifications of the Ant financial IPO have rippled across the world. But at the same time, various elements of the Chinese FinTech space could benefit from precisely that: some coherent regulation - where previously they were deemed pure play tech companies.

In that sense, whatever the arguably tortured gestation of the Chinese pushback, I also think regulatory clarity will be a long-term boon to Chinese valuations and probably much sooner than many think.

Elsewhere in news this week, of course, that fabulous announcement: it is coming, live in Q1 2021, actually just after the Dubai world cup horse races. Next year, that'll be Monday the 29th of March, we're going to see ICE Futures Abu Dhabi launching. Moreover not only is the launch looking good for Q1 of next year, but indeed we have a series of very exciting new entrants to that market, all of whom have signed a memorandum of understanding with ADNOC, the Abu Dhabi National Oil Corporation and of course the IFAD exchange itself to look at pricing a great deal of their oil that is heading into Asia will be using the Murban futures leg. It seems those three parties that have already signed up are none other than household oil names, Chevron, Trafigura and Occidental.

Technology. Well delusion unbonded at ASX. I've always admired many of the team there, but at the same time, when they made the remark that “we're not flying to Mars,” that opened them up to some ridicule because indeed with NASA now thinking it can make it to the red planet by about 2035...That could be how long we have to wait for the Australian stock exchange to finally replace their antiquated CHESS settlement system with the blockchain solution that is already several years overdue.

In people news this week. Three exciting stories. Mrugank Paranjape who was the former CEO of MCX, the Multi Commodity Exchange, he's moving over to the National Commodity Derivatives Exchange and he's going to become the head of NEML, which is their new NCDex E-markets subsidiary. Hearty congratulations to him and hearty congratulations too, to the highly capable Hope Jaworski who has been named as NYSE's new head of equities.

Currently, the co-head of ICE’s government affairs division, Hope will be assuming P&L responsibility for ICE’s five equity exchanges amongst other assets, including TRF global OTC, & BYSE bonds. Good luck to her and good luck to, to the head of the Korean exchange. Their chairman, Jun Ji-won is set to take the helm at the general insurance association of Korea next month.

And on that note, ladies and gentlemen, it only serves to mention some interesting research that's come from the world of academia: Social media can influence stock returns, according to a leading finance professor. Some folk, perhaps those residing at 1600 Pennsylvania Avenue, Washington, DC might be likely to say that the impact of social media can be YUGE!

But who am I to confirm this rumor? ...and on that mysterious and magnificent note, ladies and gentlemen, thank you very much for listening to this. The latest exchange invest podcast issue. 071. Join us during the week If you are looking for more in news and information and pith about the business of bourses ExchangeInvest.com the business of bourses every day in print.

My name is Patrick L. Young: have a great weekend and a great week in life and markets. I look forward to joining you next week for episode 72 of the Exchange Invest Weekly Podcast.

Links

Britain Pursues Brexit Finance Plan, Door Open To EU Firms
Reuters

Nasdaq And Other Trading Exchanges To Meet With Texas Gov. Abbott About Potential Move
Dallas Morning News

Texas Gov. Abbott Welcomes Major Stock Exchanges To Austin
Fox Business

CFTC Issues Order of Registration to ICE Futures Abu Dhabi Limited to Permit Trading by Direct Access from the U.S.
CFTC

Update 1-Hong Kong Stock Exchange Operator Q3 Profit Jumps 52% On Trading Revenue, Listings … (PLY: actually, pretty much everything…)
Reuters India

National Stock Exchange's Revenue Up 40% In H1
The Hindu BusinessLine

TP ICAP Cautions On Flat Revenue Growth As Trading Dries Up
FT

TP ICAP Launches Electronic Trading System For Reducing Risk In Fixed Income Portfolios
The TRADE News

TP ICAP Third Quarter Revenue Down, Eyes Cost Savings Of Gbp35 Million
Morningstar

TP ICAP Expecting Full-Year Boost From Brexit And US Elections Market Turbulence
Financial News

London Stock Exchange Group Faces New Hurdles Over Refinitiv Deal
The Times