Sep 3, 2022 15 min read Exchange Invest Weekly Podcast

159 Exchange Invest Weekly Podcast September 3rd, 2022

The European Energy Exchange has said that traders need more government support to guarantee buying and selling.

Transcript:

This week in the parish of bourses and market structure:

There’s a Sino-US audit deal

European power markets under stress

and at last we have some multicurrency equity pricing.

My name is Patrick L. Young

Welcome to the bourse business weekly digest

It’s the Exchange Invest Weekly Podcast Episode 159.

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 many events of the past seven days 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.

China has signed an accord with the US on audit data that staves off Chinese firms being expelled from the New York Exchange. At the same time, some are saying it’s good news for markets but not necessarily so for various separate operators. Dealer or no deal Chinese firms will still ditch Wall Street say the Atlantic Council while Morgan Stanley is worried about the impact on Hong Kong exchanges which hope to have a significant substitution effect.

Likewise, the Singaporean Exchange who are hoping to have a significant knock-on effect too…And there’s still talk from Goldman Sachs that it could be something like 50:50 on delisting. Now given at stake according to the South China Morning Post: “There are about 168 Chinese companies listed in the US with a combined market value of $1.5 trillion on the NYSE alone”. That is a large chunk of the market cap that could still exit the US markets.

At the same time great to see an agreement and good to see some pragmatism from a regime previously deemed arrogant, hectoring and sublimely authoritarian with their totalitarian edicts. Presumably, the Chinese also gave some grind as well as the SEC.

Pretenders like Switzerland may yet still see some flow into their ADR products and it remains to be seen if we really have ‘peace in our balance sheet’ but there is a deal on auditing to which the US and Chinese authorities have agreed thus presumably safeguarding many of the Chinese listings in the USA.

Then again, perhaps the biggest sigh of relief will be heard in Grand Cayman, as the Cayman Islands have often been the preferred “HQ” venue for vehicles listing Chinese entities in the USA.

Meanwhile, over at the LME, of course, a Hong Kong exchanges subsidiary their member default fund contributions jumped 89% following that record-breaking margin breach in Q1 caused by the nickel nightmare, the CCP has pumped up its line of defense quite significantly.

Elsewhere, the Times of London is complaining that its namesake the London Stock Exchange is still stuck with a Jurassic Park image. Of course, one might say, fortunately, buying Refinitiv helped modernize oh, wait a moment. At the same time, a Brexit shakeup is essential to save the city of London went their headline according to the Stock Exchange’s boss in the Telegraph. Well, it’s good to see the demand for post-Brexit market development is there in Paternoster Square.

It’s just a pity it took a long period of stubborn remainer argument followed by a stubborn period of long remainer denial, followed by a stubborn period of just, well, plain stubbornness, and 6 years on we have an urge for progress tinged with an element of desperation. Foresight is clearly not the thing for some in the C-suite at the London Stock Exchange Group.

Over at the EEX markets remain open, trumpeted a release there’s a degree of duress at the European Energy Exchange. They run an orderly market, but it seems that some of the counterparties have not got enough cash in their piggy banks to comfortably afford the collateral – so a gun is pointed at the head of government because… (I think the answer is because it’s Germany but your mileage may vary on this interpretation). The European Energy Exchange has said that traders need more government support to guarantee buying and selling. Now, EEX like IEX and the other Indian markets for power a week ago is under duress due to the failure of past governments on the macro. At the same time the EEX is a mature market infrastructure, when they’re declaring their concern, the German authorities – ought to be listening attentively but at the same time, it’s a messy market for energy right now and a lot of companies seem to be balance sheet light. I harbour an uneasy feeling about ‘free’ markets ending up as the beneficiaries of government subsidies, I mean credit lines to keep the lights on. That suggests a broken corporate hierarchical model but then again, this is Germany and as we know, the 1970s are upon the once great post-war European industrial success story. Energy traders ought to be raising money from bonds, just as EUREX clearing is traditionally done to enhance their balance sheet.

Brussels and Berlin have been joining a call for ‘fundamental reform’ of the European power market. In other words, a Hail Mary pass miracle from the government of the German state, or indeed we might as well call it kickcanistan because they’ve been kicking the can down the road for the past 15 or 20 years on this front, most notably by the absolutely egregiously awful Chancellor Merkel. Indeed, the worry is that well, the term “German plan” is used to ooze efficiency. Now reminds us of Berlin airport and a multitude of railway station debacles not to mention the fundamental disaster area, which was of course Mrs. Merkel’s failing to plan coherently for anything.

Over in the power market, still the Viennese leading power firm Wien Energie has denied that they’re speculating in future while they seek a state loan. The worry, of course here is that the markets get the rap for what is a much larger series of problems in energy prices as well as clearly a relative shortage of collateral amongst trading counterparties.

Speaking of relative collateral quite interesting, the NFT marketplace OpenSea was telling employees to avoid securities-related words like ‘trading’ and ‘derivatives’ when talking about NFT’s. OpenSea itself is facing a massive volume collapse as it seems that not even Pudgy Penguin can replace the pixelated Bored Apes with which the public’s pixel fascination has, it seems turned to well, remarkably enough boredom. At the same time, we’re seeing statistics along the lines that OpenSeas NFT daily trading volume has dropped 95% from the 52-week high.

Over in the sports market, Prophet Exchange has launched, they claim to be the first US sports betting exchange course I mean, many pretenders to that thrown along the way. A man who was a legend of the giants’ Victor Cruz (I don’t know, ‘giants’ are like Game of Thrones or something) anyway, he placed the inaugural bet presumably he’s some sort of American sports star that we’ve never heard of. Same time various other entities are looking to launch at the same time into the American markets. And indeed, we reported this week in Exchange Invest and note that FTX CEO Sam Bankman-Fried said last year that it was “mind boggling” that sports betting did not happen more frequently on two-sided exchanges rather than centralised sportsbooks. Therefore echoing comments made by others, including this podcaster when SPF himself was barely a toddler.

In results this week, not a lot of results really although the Ghana Stock Exchange a reiterated their position to become an emerging market exchange they also give an update on the mutualization of the market which is progressing a base and they produce their second record income statement in a row while the Vietnam Stock Exchange they reported a healthy $52 million profit.

In deal news this week, it was actually a week of the un deal. Thailand’s SCBX scrapped a plan to buy a 51% stake in the crypto exchange Bitkub. The bank said that while the results of the due diligence exercise did not reveal any “significant abnormal issues which are irremediable”. At the same time Bitkub we know is in the process of resolving various issues with the SEC of Thailand, thus the deal was canceled. At the same time, we had a non-deal from CBOE in fact, actually quite a bizarre announcement they said that Robinhood and Virtu and all sorts of other people such as Jump Crypto, DRW are among potential equity partners in their crypto exchange Eros. Now, that’s a very curious preemptive announcement. It also raises questions about the whole role of RNS and related EDGAR announcements per se. Why say what you’re likely to be doing before a deal closes? In fact, actually, if you did that in London, and for example, I’m an executive director at Valereum.

So, therefore, if we threw something out saying we’re rumoured to be possibly doing a deal or something like that, we’d probably get our knuckles wrapped by the regulators simply because we would be adding to speculation in the stock rather than actually discussing fact. I thought this was a very, very strange thing to do, particularly one for a 10 billion-plus dollar company like CBOE, with the potential to be a massive international harbinger of value via the world’s exchange business, very, very strange. Maybe there was a leak, maybe they’re trying to strong-arm people before the deal closes, whatever, it just looked very, very old indeed as an announcement and even weirder to be coming from supposedly a global reputable stock exchange brand.

Meanwhile, ABG Limited a concern, that is a subsidiary of Bashundhara Group has said they want to buy 25% of the shares of the Chittagong Stock Exchange as a strategic partner.

Meanwhile, if you’re trying to get up to spec with what’s happening in the world of exchanges, markets, and of course financial technology, blockchain cryptocurrency, and the like, you want to be reading my book “Victory or Death?” – Blockchain, Cryptocurrency, and the FinTech World, 20 years on from the Capital Market Revolution. It’s an update about what’s happening in the world of digital markets. “Victory or Death?” is published by DV Books and is distributed by Ingram worldwide.

Don’t forget to check out our Livestream, we’re running repeats across the summer season right now but we’ll be back after Labor Day coming soon, only two weeks away. In the meantime, we have shows running anyway on Tuesdays at 6pm. London, 1 pm New York time the IPO video live show. You can catch the back episodes on our LinkedIn, Facebook, and YouTube by searching IPO-Vid.

In crypto land this week, gosh, fake bitcoin trading volumes continue to plague the crypto industry when the Reuters headline. In fact, more than 50%, 51% of crypto trades are a wash and that was reported indeed by Forbes who are 20% owned by Binance. Meanwhile, Coinbase is facing a class action lawsuit over alleged lapses in security. Voyager have bankruptcy court approval on $1.6 million in key employee bonuses. Binance and FTX are amongst the crypto players in the hunt to buy the Voyager digital assets as Coinbase has backed out of a possible auction.

Elsewhere crypto exchange Zipmex is hiring a restructuring firm to oversee their recovery plan. I have to admit I’ve never been overly convinced that a Phoenix miracle revisited versus a Hail Mary pass makes for a sensible binary but this is crypto land of course ao maybe Zipmex will recover.

FTX’s Sam Bankman-Fried has denied that his crypto exchanges planning to acquire Huobi but Binance will be helping the South Korean city of Busan launch a digital assets exchange.

In South Korea, Samsung could be launching a crypto exchange in 2023 and GammaX have raised $4 million to launch a crypto derivatives exchange in Singapore. At that point in time, it’s actually worth pondering just how many crypto exchanges there are around, well, what we recognise that in Exchange Invest was some 23 were missing in action or dead over the course of recent weeks and months. That was 10 missing an action, 11 closed and 2 restructuring. You can catch that article in a medium or LinkedIn Crypto Exchanges 2022: 23 DOA…MIA is the opening headline and the Missing in Action line (MIA) gives us some exchanges which seem to have just simply disappeared. Catch that article online at medium or LinkedIn, as I mentioned.

Finally this week in crypto land, Coinbase, FTX, and Binance have received inquiryies from Congress on crypto scams. A series of letters were sent by the Congressional committee asking for agencies including the Department of the Treasury, the Federal Trade Commission, the CFTC, and the SEC, as well as five digital asset exchanges in total – Coinbase, FTX, Binance.US, Kraken and KuCoin – for information and documents about what they’re doing, if anything, to safeguard consumers against scams and combat cryptocurrency-related fraud or in other words, to reduce this to one line, it’s an election year in Washington DC.

Product news this week, ICE will be launching UK Carbon Emission Allowances (UKA Options) a handy added dimension to UK emission trading as ICE have powered through August with a constant stream of product tweaks while competitors appear to have been rather more beach-focussed. US elections may be a future big bet for Wall Street says Bloomberg repeating a story we’ve had for a while, good grief, for more than two decades now. In this case, it’s the CFTC may begin taking public feedback on a proposal from prediction-market operator Kalshi Inc. as soon as this month to discuss US election market trading.

Moscow Exchange they will be resuming evening stock trading during December. They will be restarting early morning FX trading during the course of September. They also hoped for the revival of local bond sales after a six month freeze during the month of September. One thing that might happen in September is finally the IPO of public companies in Venezuela, as you’ll remember the communist government there has been endeavouring to finally try to privatise a few minority stakes because they’ve run out comprehensively over other people’s money in any way, shape or form. Nonetheless, the actual IPOs are running 100 days late because well, of course because the government is communist and utterly incompetent.

Mega news of the week is the ICE benchmark administration consultation in the product line, they’re talking about a potential cessation of ICE swap rates based on USD LIBOR

Technology news this week, well, it’s partially technology, partially product, and partially a joy to see after only discussing the idea for more than 20 years. Global Investors on Turquoise (the London Stock Exchange’s subdivision) they can settle cross currency equity trades in their currency of choice through a Turquoise M-DAQ FX Workflow. Delighted to see that after only 20 years of suggesting this to pretty much every exchange I ever spoke to that Dr. Robert Barnes’ team at Turquoise have adopted multi-currency equity trading.

The Johannesburg Stock Exchange they’re on another of my famous ongoing plans for exchanges that have taken a while to adopt they’ve turned to gamification to promote financial literacy in South Africa.

That was something that I’ve been discussing again for 2 decades. This does sound like vilification of Patrick day doesn’t it? But it’s a clean sweep in today’s technology section of PLY’s 2 decade old suggestions come frustrations. I rarely been keen to discuss the gamification topics since 2000 AD and vividly I can recall discussing this at for example, an AFM Istanbul Conference in 2006 on precisely the topics of the wonders of gamification in promoting investor literacy.

Regulation news this week, the SEC published their draft financial year 2022-2026 strategic plan for public comment. “We can’t take our leadership in capital markets for granted” said SEC Chair Gary Gensler. “Technology and business models always are changing, and it’s important for our agency to evolve in kind”.

Absolutely nobody can expect to lead in financial markets, I would hasten to add when they’re overwhelming the market structure with overly prescriptive edicts fundamentally expanding the original remit of the agency and to which we can actually rapidly conclude the overall thrust of the past week’s regulatory news with a Forbes headline Gary Gensler resign.

Career paths this week, very busy, some exciting news delighted to see the former chief executive of Nadex Tim McDermott, has been named CEO of the SEF TeraExchange. We wish him every success, as we also wish Lee Hodgkinson, another good friend of the parish. He’s rejoining the Parish, he’s going to be becoming Tadawul’s Chief Strategy Officer. We’re not the scoop business per se, but just FYI, this was actually a story first reported in Exchange Invest hours before the rest of the mainstream media and the mainstream financial media got a whiff of the story. I’m delighted to have reported that the outgoing CEO of OSTC, former Swiss Exchange and Euronext London boss, Lee Hodgkinson is returning to the parish as Group Chief Strategy Officer at Saudi Tadawul Group. Lee will be based in Riyadh. That’s very exciting news for Lee, a great hire by Tadawull and delighted to note that Lee will be remaining chairman of BMLL Technologies and their mega tasticly enormous, multi petabyte data lake to boot.

Over at EuroCCP, their CEO Cécile Nagel she’s departing the parish having served as CEO of EuroCCP since 2018. She’s going to be heading up Mellon Pershing’s EMEA Business.

We’ve got a new head and deputy head for the Egyptian Stock Exchange (EGX) PM of Egypt Mostafa Madbouli issued a decree appointing Ramy El-Dokany as head of the Egyptian Stock Exchange board, chairman in other words, and Hebatallah El-Serafy as his deputy for a one year term. Congratulations to Ramy El-Dokany, the former Arab Federation of Exchanges (AFE) Secretary General who is replacing Mohamed Farid Saleh, who has been appointed to run the Egyptian regulator.

A retirement this week, CEO of the Ghana Stock Exchange Ekow Afedzie after 31 years of service to the exchange, will be retiring as Managing Director of the Ghana Stock Exchange in November 2022, after of course delivering two spectacular years of record profits to cap a lengthy and successful career.

Andrew Tobin is joining the ASX filling one of their many C-suite executive vacancies. He’s going to be becoming the Chief Financial Officer.

Marc Peter Klein, he’s going to be joining Deutsche Börse as Chief Compliance Officer and on the other side of the compliance equation, the fugitive CEO of Turkish-based crypto exchange Thodex was arrested in Albania, the founder of the cryptocurrency exchange Thodex, Fatih Ozer was who was suspected of having fled Turkey with the assets of his clients was arrested in Albania on Monday or Tuesday. As recalled previously in Exchange Invest, of course, Thodex was a biggie in crypto fraud terms, something like $2 billion is alleged to have been stolen from the exchange. Funny that with allegedly $2 billion the fugitive Mr. Ozer only ended up so close by in Albania.

In “Big World” this week, ladies and gentlemen it’s good to see that Gibraltar, the rock, has been awarded UK city status, albeit the award was originally made by Queen Victoria in the fifth year of her reign, that was 1842 AD but it was omitted from the list of recognised cities because the award was made due to a bureaucratic error under Diocesean Letters Patent rather than the normal city status letter patent.

A mere 180 years later and the British blob have corrected their administrative error.

Presumably that means we can expect an official apology for the COVID lockdown fiasco early in the 25th century? Delivered by Buck Rogers, I presume.

And on that mysterious and magnificent note ladies and gentlemen, my name is Patrick L. Young, creator of exchanges the world over and also founder and publisher of Exchange Invest – the daily bourse business bulletin, the watercooler of the exchange business.

I wish you all a great week in blockchain, life, and markets.

LINKS:

China Signs Accord With US On Audit Data, Staves Off Chinese Firms’ Expulsion From New York
South China Morning Post

US-China Audit Deal: Good News For Markets, Not So For Bourse Operator HKEX, Morgan Stanley Says
South China Morning Post

Deal Or No Deal, Chinese Firms Will Still Ditch Wall Street
Atlantic Council

SEC Chair Gary Gensler Breaks Down The Agreement With China Over Audit Inspections
YouTube

Goldman Sachs: 50% Chance US Exchanges Delist China Stocks After Audit Deal
Fortune

LME Member Default Fund Contribution Jumps 89%
Risk.net

London Stock Exchange Still Stuck With Its Jurassic Park Image
The Times

Brexit Shake-Up Essential To Save The City Of London, Stock Exchange Warns
The Telegraph

EEX Markets Remain Open
EEX

EEX Markets To Remain Open Despite German Derivatives Markets Issues
Hedgeweek