Mar 6, 2021 11 min read Exchange Invest Weekly Podcast

084 Exchange Invest Weekly Podcast March 6th, 2021

The clamor for ASX monopoly reform continues, but will the government spring into action? Or will we retain ‘business as usual ASIC inaction? And we witness Accounting Shocks at CBOE & ICE.

TRANSCRIPT

This Week in the parish of bourses and market structure, it's been a disappointing week for India with poor NSE results and the first failure for interoperability.

Meanwhile, the clamor for ASX monopoly reform continues, but will the government spring into action? Or will we retain ‘business as usual ASIC inaction?
And we witness Accounting Shocks at CBOE & ICE.

My name is Patrick L. Young.
Welcome to the bourse business weekly digest.
It's the Exchange Invest Weekly Podcast Episode 084.

Good day ladies and gentlemen, this is a very brief reduction of highlights amongst the key headlines from the weekend market structure. All the analysis of the weeks, many events, and happenings can be found in Exchange Invests daily subscriber newsletter, the unique guide to the bourse business sent daily to your inbox.
More details at Exchange Invest.com.

The Hong Kong financial Secretary Paul Chang Mo-Po has defended his move to raise Hong Kong Exchanges stamp duty from 0.1% to 13 basis points this week, amid a record deficit noting, innovation, not low costs will energize Hong Kong Stock Market.

In Good News:
For Russia, the investor cried and has grown again. The number of private investors at Moscow Exchange reached 10 million by the end of February having grown from 8.8 million at the start of the year, an increase of 1.2 million people are ready in 2021.

MOEX you will recall leaped from barely 3.5 million users to 8.8 million during 2020 marking a near 7 million investor increase in one year.

Sadly, over in Chicago, CBOE has exposed itself to ridicule this week as it turns out it charged most traders the wrong sum of years. Some were overcharged, some got away with paying less than expected but now CBOE just wants to sweep the whole sorry affair and sweep it under the carpet and move on.

This is frankly GUBU territory, grotesque, unbelievable bizarre, and unprecedented for any business. However, for a regulated provider of financial market structure, this is an absolute disgrace.

Then again, given the free ride the CFTC gave the CME over the Cushing Crisis, can we expect the SEC to intervene?

Down under the central bank is frustrated at recent ASX trading failures as an article in the Australian Financial Review notes. Reserve Bank of Australia puts heat on ASX over trading monopoly failures runs the headline.

“One theory that regulators may explore is if there is a protection racket in financial markets buttressing the ASX monopoly.

Are shareholders looking the other way and pocketing their high returns?

PLY: Reform is urgently overdue around Oz-Inc’s vastly outmoded cozy corporate club of monopolies. As noted before, it’s ironic that while engaged in a spat with China over freedom and openness, the Communist Party-controlled megastate is in fact more open to exchange (and other) competition in the private sector than supposedly free, liberal, Australia.

Meanwhile, that self-described “technology company” ASX offers no guarantees it can actually coherently achieve its self-proclaimed core competence. This nonsense makes the nation- let alone the Sydney financial center look sadly ridiculous.

Meanwhile, the UK budget marked another disappointing big state affair for the nominally pro-free-market government. At least it was good news about the state of Lord Hills listing review with reforms proposed to further advance London's competitive Stock listing venues.

Aquis CEO Alasdair Haynes made a splendid comment, disintermediating the need for “PLY” to add anything more:

“It is excellent to see recognition of the importance of retail participation in IPOs and the understanding that much of what restricts this today is down to unwieldy Prospectus requirements. We are therefore keen to see the proposals for prospectus reform implemented with as much urgency as possible to benefit the end investor.”

It was another busy week for Results in the parish, all the deals were in Exchange Invest daily- the newsletter no person can afford to be without in capital markets and market structure, for the sake of this podcast let’s look at some edited highlights.

This week we saw great news on results all the way from Johannesburg in sunny South Africa, to Bucharest in Romania. But alas, there was a big disappointment at the National Stock Exchange of India. They saw a big profit decline of 57% in the final quarter of the 2020 calendar year.

Likewise, in deals another busy week in the parish there and once again all the deals were in Exchange Invest daily- the newsletter no person can afford to be without in capital markets and market structure, for the sake of this podcast let’s look at some edited highlights.

One warning shot was fired across the boys of S&P Global as IHS Markit investors are seeking to check the math on the $44 billion mergers about which many expressed some surprise at the price S&P is paying.

Elsewhere Deuthsche Boerse has successfully completed the acquisition of an 81% stake in ISS, the governance, ESG data, and analytics provider which now leaves DB1 in a direct conflict of interest across its listing business and indeed with other listed exchanges where ISS provides services to shareholders. I believe this is untenable.

Good news at the same time for Euronext as EU competition authorities have approved their bargain 4.3 billion Euro acquisition of Borsa Italiana - a gift as you will recall from the London Stock Exchange group's history purchase of Refinitiv.

In New Markets:
In Gujarat, are they looking for a GIFT horse in the mouth?

India's NSE, INX, NSDL, and CDSL have teamed up to create market infrastructure in the GIFT financial centre. Is this Indian exchange cooperation per se or a case of risk mitigation by Indian bourses? Unconvinced, the GIFT Financial Centre is a truly viable idea but is keen to be seen doing something to support the government's initiative in its home territory?

Now don't forget ladies and gentlemen check into our Livestream IPO-Vid. You can find those via YouTube and also streaming live on Facebook and LinkedIn, which happens every Tuesday at 6 PM. Coming next week, we have Daniel Hudson, the Chairman of the City United Project- the organization that's moving forward the post-Brexit future and unity of the City of London.

This week, we had a fantastic conversation between Digital Asset, Exberry and Baymarkets represented respectively by Peter Fredriksson, Magnus Almqvist, and Eric Saraniecki. You can catch the whole of that recorded on YouTube IPO-Vid, search on YouTube.com.

Crypto News this week:
Coinbase announced a wildly exciting IPO with a valuation that could top $100 billion of relatively conservative values and if expanded to the most extreme levels of the legacy parish could make Coinbase one of the most valuable companies on earth.

Coinbase in 2020 pulled in total revenue of $1.3 billion, which's up from $533.7 million in 2019.

Coinbase reported a net income of $322.3 million last year, swinging from a loss of $30.4 million the previous year.

PLY: The fatal flaw of Coinbase remains of course the high cost of trading and crypto assets bring the fees down to something akin to the legacy markets and income collapses. At the same time and this psycho hype market, valuations are suggesting anything from umpteen to $100 billion, in which case the largest parish property at the top of the pyramid would be coin base.

That doesn't strike me as highly sensible, at least in the long term, as I'm not full of bounteous optimism. I think all the V1 legacy crypto exchanges are just not able to handle the transition to the sorts of fee structures that are common amongst our much cheaper legacy bourses.

Product News this week:
It's a sad moment in Chinese listings. The New York Stock Exchange has commenced delisting proceedings against CNOOC - the China National overseas old corporation to comply with Donald Trump's executive order 13959.

Then again, China's refusal to countenance US auditing reports for overseas listings is frustrating. As we can see the Biden administration, as expected is similarly talking tough on Chinese policy as Trump continues to shape US foreign policy ex officio. Of course, there was an interesting contrast to what the Voice of America reported this week, Chinese company IPOs on US Exchanges hit a 10 -Year High in 2020.

PLY: Who would have thunk that ladies and gentlemen, “that while President Trump has tried to ban some listed Chinese companies in the US, actually the IPO business for Chinese Corps in the USA during 2020 was hyles.

In other IPO News:
Ant Group is telling staff that they hope to resume their IPO process in the near future as Beijing is finalizing new rules for the Digital lender.

Who knows where that valuation may lie when it eventually comes to market for a second attempt at an IPO, albeit I'm not sure it will still be in World Record territory.

Interesting to see that Clara first is making a return to the edges of the parish as the UK Chancellor of the Exchequer announced during a rather intervention as the big-government Budget speech this week that Dame Clara - the former London Stock Exchange Group CEO will lead a new policy group seeking to establish London as a Global Carbon offset market hub.

Technology News this week:
Dominated by the National Stock Exchange of India's mega glitch, the fallout in the aftermath thereof. Even the finance minister Nirmala Sitharaman intervened this week to say that the recent technical glitch at the National Stock Exchange(NSE), which led to trading being suspended has cost India both in fiscal and reputational terms.

This is quite correct, could the Treasurer of the Australian Commonwealth please take note? And indeed back to India: the cost of the NSEL debacle is even greater still.

Regulation News this week:
Gary Gensler went to the Hill and was expanding in confirmation hearings how he expects to run the SEC this week.

The standard leftist's tropes, loomed large amongst the confirmation hearings of all the protagonists looking at regulatory positions. Protecting investors was writ large where the reality is the analogue regulatory blob is still stuck in a Dickensian age in the USA and elsewhere, including it seems, unfortunately, Gary Gensler who likes to suggest he has digital skills after a university flirtation with Bitcoin during the Trump years. However, I am rather unconvinced, there needs to be new thinking and regulation, but none of the regulators appear up to the job right now in the United States or the European Union.

Elsewhere, ESMA is proposing improvements to the transparency directive after the Wirecard case.

PLY: Well, the culture's tough rules are surely an erroneous assertion. The idea that everything can be solved by needing more regulation is typical of the EU mindset. Rather, what we need is competent, open-minded regulators not driven as Baffin in Germany were by blinkered protectionism of anything German. That would have seen the fat part of me. That would have seen the wire card scandal being discovered much much earlier.

In Careers News this week:
Intercontinental Exchange their CFO Scott Hill is retiring after 14 incredible years of service having joined the just public Intercontinental Exchange, and turned it into the Global Powerhouse that it is today at the top of Young's pyramid.

PLY: This is a shock in many ways as Scotts Hills' effortless mastery of the ICE finances has been a cornerstone of the business's vaulting success from small-cap to top tier player in Young's Pyramid in just over a decade. I can only applaud Scott Hill's enormous success of ICE and wish him all the best for the future.

Meanwhile, huge congratulations to Investor Relations (IR) supremo Warren Gardiner, who is moving up to fill Scott's shoes from May the 15th while Scott himself will remain an advisor to the Intercontinental (ICE) exchanges until February 2023.

The new CEO of the Hong Kong Exchanges (HKEX) group Nicolas Aguzin has been approved by the Hong Kong regulator from May the 24th for a three-year term as expected.

Elsewhere in the UK, Paul Fincham will join the London Stock Exchange Group (LSEG) as head of communications.

PLY: The London Stock Exchange Group (LSEG) communications mass hopefully hit its all-time now, when it transpired that the last geezer in charge of messaging has in fact been a woman all along, not that we actually knew. Let's optimistically say good luck to Paul Fincham while realistically acknowledging that we don't expect to hear from him in keeping with the world cowardice/indolence or whatever of London London Stock Exchange Group (LSEG) to engage with anybody who doesn't toe the line with their historic misunderstanding that agitprop and PR are not as interchangeable as they were on, say, Russian railway lines during the 1920s. Meanwhile, for anybody on the Refinitiv side of the LSEG monolith, remember, apparently there's been a revolution in Russia. Just a heads-up list might help.

Finally, this week, a Valet to Alvin Donahoo, who he lived to be 102, a ripe old age. He was a D-day veteran and Former Minneapolis Grain Exchange VP, valet to a great American hero.

Finally, this week in Big World:
The former president of the French Republic, famed for its “Liberte! Egalite! Fraternite!” a revolutionary call to arms - has been sentenced to jail for corruption, including judge bribing. But he won't spend a day in jail because two years of the sentence are suspended, leaving Nicolas Sarkozy with a year of house arrest with Carla Brun. Or as the rest of us know it: lockdown, albeit without Carla Bruni.

And on that mysterious and magnificent note ladies and gentlemen…

My name is Patrick L. Young. Thank you very much for joining me for this Episode 84 of the Exchange Invest Weekly Podcast.

We'll be back next week, in the meantime, have a great week in the markets.

LINKS:

The Number Of Private Investors At Moscow Exchange Reaches 10 Mln Since Beginning Of Year
TASS

CBOE Wants To Ignore Years Of Bungling How It Charged Traders
Bloomberg

RBA Puts Heat On ASX Over Trading Monopoly Failures
AFR

Britain To Ease Listing Rules To Buttress London After Brexit
Nasdaq

London To Join SPAC Boom In Post-Brexit Market Overhaul
Bloomberg

JSE Enjoys Surprisingly Good Year, Eyes Asia In Search Of Growth
Business Day

JSE Limited “Summarised Consolidated Annual Financial Results And Cash Dividend Declaration
Moneyweb.co.za

Bucharest Stock Exchange Ups Revenues By 21% Amid Higher Transactions
Romania-Insider.com

National Stock Exchange Of India Consolidated Net Profit Declines 57.70% In The December 2020
Business Standard

IHS Markit Investors Want To Check Math On $44B S&P Merger
Law360

Shareholder Alert: Rigrodsky Law, PA Announces Buyout Investigation
GlobeNewswire

Deutsche Boerse (DB1) Successfully Completes Acquisition Of ISS
Deutsche Boerse AG