162 Exchange Invest Weekly Podcast September 24th, 2022

Exchange Invest
Exchange Invest
162 Exchange Invest Weekly Podcast September 24th, 2022
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Transcript:

This week in the parish of bourses and market structure:       

EU SOTU woof!

There is a certain relief to discover the cross ineptitude of VDL and her merry band at the EC but it’s scary. It’s not so much TTF as W_T_F!

NYSHEX raises $25 million Series B round

Dublin seeks tax breaks for IPOs

NASDAQ makes a crypto leap 

My name is Patrick L. Young.

Welcome to the bourse business weekly digest.

It’s the Exchange Invest Weekly Podcast Episode 162.

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 and happenings 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

Amongst the many things, the European Union does to remind us of its own self-importanc (and indeed reminds us of its broad irrelevance as a source of enterprise) is to mimic (badly) stuff the United States of America does rather well. Therefore, apart from Nancy Pelosi tantrums, the State of the Union address is a sound soiree where POTUS talks and the people listen. 

In the Brussels version, no citizen understands why there are about 47,000 people called President, and nobody listens when that blond woman who once armed the German military with broomsticks prattles on. 

Anyway, last week was SOTU2022 and as nobody was watching/listening en masse, the cravenly pro-EU media reported things badly. On the other hand (face it Who else wants to sit through this nonsense other than true believers?) Once we waded through the hollow Ukraine support (bear in mind that roughly 70% of all military aid for Ukraine has been coming from the USA, roughly 8% from the UK, while Poland leads the EU with about 5% –  thus the other 26 EU nations are pro rata embarrassing also rams in aiding Kyiv), anyway, at that point VDL got into the energy crisis, and thus things further diverged from reality. 

Once again, demand/supply curves prove a radical economic thesis beyond the comprehension of the allegedly educated technocrats. Thus, we heard specious drivel about new benchmarks and market failures.

In VDL’s very own speech writer’s words:

“Today our gas market has changed dramatically: from pipeline gas mainly to increasing amounts of LNG. 

But the benchmark used in the gas market – the TTF – has not adapted. 

That is why the Commission will work on establishing a more representative benchmark. 

At the same time, we also know that energy companies are facing severe problems with liquidity and electricity futures markets, risking the functioning of our energy system. 

We will work with market regulate blah, blah, blah, blah, blah, blah, blah, blah, blah, blah, blah. And indeed, it concludes with so we have to decouple the dominant influence of gas on the price of electricity, and which point in time actually, you are on to something here but that’s all to do with the way the electricity contracts have been written in the UK and the European Union have nothing to do with TTF.” 

I mean, perhaps there are issues with the absolute minutiae of pricing TTF that could require design tweaks (although actually I’m not terribly convinced) but it certainly not feeling wholesale to be a big market drawing in the key players to achieve a price consensus given the demand/supply.

However, the biggest issue is that the European Union continues to hobnob with the leprechauns at the end of the rainbow, and believes the fairies at the bottom of the garden think markets can be fixed in order to offer them a community and world view of permanent markets which orders price in the way they want, aka very, very low, even when there’s actually no supply about because the Russians have turned the gas pipelines off. This is, of course, the opposite of what a market is, albeit reality never particularly troubles the EUrocracy for whom six economically impossible things before breakfast always seem like an ideal approach. 

However, rather than have me say more, perhaps I can leave it to the FT alumni.. True, it was a bad week last week for the Financial Times as a whole when they were called out with some absolute nonsense being spotted by various journalists. Likewise, Michael Spencer aced the point that the FT is not pro-business in a radio interview. 

So thus we had actually in the embarrassment of Javier Bla, an ex FT Commodities Editors and now a Bloomberg columnist weighed in by tweeting:

“The only surprise here is that it’s taken **nearly a year** of crazy ups-and-downs for the European Commission to ask the European financial regulator about circuit breakers and electricity and gas markets.”

“Late better than never, but Oh, my God!” – Blas continued in his tweet with a link: Facing the energy crisis in the EU: work streams related to the financial system by the Commission

The problem with this is, of course, well, maybe I missed something, but according to me, I could find easily enough using uncle Google. A Reuters story which said ICE circuit breakers to cover energy, US softs which dated back to 2012, and from sometimes there abouts, or at least during 2013, I do believe, it was automatic to add “IPLs” (“Interval Price Limit Circuit Breakers” – ICE jargon) to all new futures markets? 

Another bad day for the FT cadre and alumni is that they simply don’t understand these things, and nor does the European Commission, the price limits, and circuit breakers are there in a fabulously dynamic fashion so that it doesn’t overly gum up the market. 

So anyway, TTF has all the buyers and sellers in European gas and it has dynamic and configurable price limits circuit breakers. So one might gently inquire “whither this farce?” of the European Union (and indeed what many seemingly clueless journalists are talking about). 

However, in a harrowing week, where the FT was called out, as I mentioned by Michael Spencer, and its banking editor, former banking editor, now Deputy Editor seem to not really understand markets at all. Thank goodness for one man who was having a coherent week at the Financial Times. 

Well done Philip Stafford:

“Exchanges correspondent and as of much of the crypto digital coverage these days, in response to a very shouty tweet about EC President Von der Leyen, the Commission will propose new gas more representative market benchmark to move away from TTF.”

Phil casually replied:

“TTF is a benchmark that reflects the price of gas being traded on the market. Actual transactions. So how do you get something more representative?” 

Mot juste from one man at the FT. A phrase alas, you hear about as often as EU competence these days. 

Anyway, well done Phil and in answer to various parish enquiries, I would like to add that I am not “Ed”, I am flattered to have been accused of being Ed as the wonderful correspondent who took down some really really dismal FT journalism in the course of the last week, but let’s face it, have I ever felt the need to criticize the Brussels bugle or anybody else for that matter – anonymously? 

Nasdaq (a good week for them) they partnered with Onbrane to launch the NASDAQ primary. An all-in-one tool that makes raising debt capital easier and more ESG conscious. They also moved into the crypto custody service in another announcement during the course of the last week hiring Ira Auerbach to run that unit from Gemini.

In Hong Kong, US inspectors arrived at PwC, KPMG for the first audit review. Hopefully, therefore, US listings of Chinese stocks will manage to survive. 

Whereas in Chicago, Chicago Faces Deep-Seated Ills In Shadow of Citadel-Boeing Defections went the headline in Bloomberg. 

Ed Tilly was trying to defend Chicago but the problem of a high tax, high crime city is that after generations of mismanagement, the competitive south as evidenced by the likes of Florida, offers sunshine and fewer shootings with zero state income tax. That’s a tricky trifecta to defeat when you’re Chicago and Illinois. Hence, the likes of Citadel are heading south. Chicago is a great city, but its future is looking underwhelming until it cleans up its act, curbs union entitlement, and indeed gets the horrific crime wave under control. 

Something else that’s being sought to be under control, the NCDEX chief in India, following on from a study that demonstrated that futures trading in commodities is not leading to price rises. He’s asked for the various Indian commodity futures bonds to be themselves banned and removed from circulation. Indian commodity future bans remain an impediment to free market prosperity for everyone on this subcontinent.

The US SEC are proposing clearing reforms, they’re going to try and centralize the clearing of the $24 trillion US treasury bond market. A highly exciting development there and actually one where the otherwise hyperactive but not necessarily productive Gensler regime is not so much micromanaging as actually macromanaging something that looks like a great solution. The Philippine Stock Exchange is targeting 20 Initial Public Offerings during the course of 2023. Having already seen their 2022 target of 11 companies looking very likely to be met it has taken place so far, which actually equaled the 2021 total. Moreover, we had an exciting moment this week during the UN Week in New York and none other than the new president of the Philippines, President Marcos was seen ringing the bell at the New York Stock Exchange.

Controversy in the UK, it’s a case of Scrap the cap: It’s the right thing to do

There’s a big issue at the moment the banker pay cap which was imposed of course as ever by the top-down European Union. 

Those are to quasi-Marxist diktats which continue to stifle the European Union economy now with Brexit, the UK ought to have no truck was such nonsense if it wants to demonstrate it is recovering from the quasi-Socialism of Blair/Brown/Cameron/May/Johnson. Of course, there will be those jealously complaining about the rich getting richer, but ultimately the UK needs all the tax it can get on there’s no reason to wrap financiers in ludicrous structures, which hinder economic growth as it wastes time, which could be used productively and eliminates incentives to deliver more revenue. Pay related to the banker’s profit and society will progress. 

The LME has been involved in another legal action over their decision to cancel nickel trades that includes the hedge fund AQR, trading firm DRW commodities flow traders, Capstone Investment Advisors, and David Hardings or Winton Capital Management all seeking more information which the LME has very rapidly rebuffed saying the disclosure request is without merit.

New markets this week, well, exciting news in Kazakhstan, they’ve created the committee which will look after the idea of creating the AIFC Derivative Commodity Exchange. A meeting of the Project Office for the launch of the Astana International Financial Centre Derivatives Exchange has taken place, and thus hopefully we’ll soon see the commodity market being built. 

On Wall Street, Green Exchange PBC is seeking regulatory approval to operate a stock exchange that allows investors to trade equities with a demonstrated commitment to ESG.

Deal news this week, it was a busy week for deals in the parish, all those 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. 

NYSHEX (New York Shipping Exchange) has closed a $25 million Series B round to improve the reliability and efficiency of global shipping. Very exciting. They’ve now raised $69 million overall as NYSHEX seeks to lead in freight worldwide by $25 million in the latest round with no clear valuation given however previously the company was valued at $48.5 million prior to raising $15 million last year. 

One other interesting transaction, EPSO-G have increased its stake in TSO Holding, the indirect operator of the Nord Pool power exchange. 

If you’re looking for a means to understand the fascinating world of exchanges, FinTech et al., then pick up a copy of my most recent book “Victory or Death?” Blockchain, Cryptocurrency, and the FinTech World, it’s published by DV Books and is distributed by Ingram worldwide. 

Meanwhile, while you’re waiting for your copy of “Victory or Death?” to arrived, check out our Livestream, that’s Tuesday 6pm London time, 1 o’clock New York time – the IPO video live show. You can catch the back episodes on LinkedIn and YouTube by searching IPO-Vid. Our latest show was a fabulous Episode #77 with Caterina Caramaschi: Coming of Age With ICE discussing the job of the Global Head of Exchange Traded Derivatives in the equity segment with Caterina Caramaschi, and all about her 21-year career history with LIFFE (now ICE futures).

Coming up on Tuesday at the same time 6 o’clock London, we’re gonna have Kevin Brady, the CEO of the South African competitor stock market A2X. Kevin Brady: A2X A Market For All will be live on Facebook, LinkedIn and YouTube. Coming Tuesday at 1 o’clock Eastern time. 

Cum-Ex news this week, well, quite a flurry looks as if the efforts to try and recur, transitory to try and recoup money or at least gain extraditions is going well in the UAE while extradition moves may not have succeeded, a UAE court has ordered the cumecs suspects there to return an eye-popping $1.1 billion to Danish authorities. 

Similarly, there is an extradition Anthony Patterson will be extradited from the UK where he’s been a hedge fund trader to Denmark to face his day in court over the Cum-Ex and extraordinary Cum-Ex events of a number of years past from cumulative dividends.

 In crypto land, Coinbase is  highlighting politicians on their crypto friendliness and how active they’ve been in the crypto market via the Coinbase app. 

FTX’s CEO Sam Bankman-Fried says the firm still has a billion dollars in cash left to deploy for acquisitions. How many firms in the crypto 1.0 universe can he possibly rescue, at the same time FTX crypto exchange was listed as ‘unauthorized’ company in the UK by the FCA.

Product news this week, the Shanghai bourse and China Reform have teamed up to develop stock indexes for state-owned enterprises that are listed.

Ethereum merge quite curious, the Binance CEO CZ said the drop in gas fees won’t happen immediately. In which case the whole merge is in my humble opinion rather useless as more modern built from scratch and – vastly cheaper – blockchains will eat the lunch of the expense of Ethereum which benefits from a crowd ignorance of fact right now, but really is already looking rather dated (not as dated as Bitcoin’s blockchain, but it’s definitely very Gen V1.0). In essence though, our rentier class look to reckon they can milk Ethereum and those high fees will contribute, I do believe, in due course largely to the downfall of Ethereum in the final reckoning.

Bursa Malaysia Derivatives are launching enhanced gold features on September 19th while the Indian Gas Exchange (IGX) are seeking to launch a truck-loaded LNG contract.

CME have launched their events contracts, and the Moscow Exchange will stop trading in British pounds on October 3rd.

Down under in Australia, FEX Global are readying Australian Large-Scale Generation Certificate (LGC) futures and options contracts which is a very, very interesting issue for the whole gamut of power, energy, and emissions in the antibodies.

Technology news this week, well, quite an earth-breaking announcement from the TMX Group CEO John McKenzie. He’s planning to make Canada’s capital markets great again amidst a huge amount of competition for the franchise of TMX, and at the same time he’s gone out on a limb somewhat and said blockchain technology is not robust enough for key stock exchange systems, thus contradicting the likes of well, for instance, ASX in Australia who have been enduring a long painfull and so far utterly unsuccessful attempt to integrate digital asset holdings as the CHESS replacement. The announcement from TMX also rules back their 2018 statements when the Bank of Canada and TMX had said blockchain was feasible for security settlement. 

Regulation news this week, SEBI in India have come up with a framework for the social stock exchange, and Sebon of Nepal  have decided to distribute licences to open stock exchanges, commodities exchanges, and brokerage firms. Interesting amount of competition coming on the stock exchange front in Nepal potentially.

 In “Big World”, London cast a pall along with the UK over the world this week. At one stage, the queues appeared to have taken a life of their own. In a tribute to British values, the centre of London was ‘queue central’ last weekend, with a ‘queue to see the Queen lying in state accompanied by a queue to get into the queue, and a queue waiting to join the queue waiting for the queue. There were also people queuing in bars to watch the queue as it went by, and at Buckingham Palace queues stretched across St. James’ Park to see the flowers left as a tribute to the Queen. 

On various occasions, it was impossible to get into the queue to get into Hyde Park or Green Park in order to manage to see the floral tributes that have been left there. Indeed, to get an idea of just home mega this whole event was at 0630 London time on the morning of Monday, 19th of September, almost 5 hours ahead of the funeral service at Westminster Abbey. The final visitors saw the Queen lying in state and there were some 16,000 people watching the Livestream on YouTube alone. 

In fact, in total that lying in state queue involved about 550 years of collective waiting amongst 400,000 people walking 4 million miles between them (that’s greater than 150,000 marathons) and that’s just for the one key of the lying in state, mourners were waiting up to 26 hours noting with typically British candour “it’s the least I can do” to show their appreciation of the most famous woman of the past century. 

Pretty much every leader on Earth was represented at the funeral during an emotional bank holiday as the beloved brilliant Queen Elizabeth was laid to rest after the ceremony at Westminster Abbey, and a further ceremony, indeed a pair of ceremonies, the second being private for the family in the Windsor Castle church.

It was worth noting that Her Majesty Queen Elizabeth II was the first monarch whose funeral service took place at Westminster Abbey since King George II in 1760 A.D…a handy reminder of the longevity of monarchy, given the fact that the British monarchy, therefore, in that funeral alone, predated even the nation states, most of the nation states, whose representatives paid tribute on September 19th by attending the Westminster Abbey.

We could say ladies and gentlemen, Britain is certainly not dead, now the Elizabethan era has ended, but full marks to UK Inc, to the Duke of Norfolk, and the organising party of this incredible ceremonial occasion. 

Here’s hoping that the defenestration of the blob catches fire under PM trusts and King Charles III.

Long live the King! 

And on that mysterious and magnificent note, my name is Patrick L. Young, wishing you a great week in blockchain, life, and markets.

 

LINKS:

2022 EU State Of The Union Address By President Von Der Leyen
EC

EU Commission Proposes Relaxing Rules On Energy Trading Margins
Bloomberg

Nasdaq Partners With Onbrane To Launch Nasdaq Primary, An All-In-One Tool That Makes Raising Debt Capital Easier And More ESG Conscious
Nasdaq

Nasdaq Launches Crypto Custody Service
Finextra

Delving Into Nasdaq Digital Assets With Ira Auerbach
Nasdaq

US Inspectors Arrive at PwC, KPMG In Hong Kong For Audit Review
South China Morning Post

Chicago Faces Deep-Seated Ills In Shadow Of Citadel-Boeing Defections
Bloomberg

Ban On Futures Trade Of Agri Items Must Go: NCDEX Chief
The Financial Express

Futures Trading In Commodities Not Leading To Price Rise, Says Study
The Hindu Business Line

U.S. SEC Proposes Clearing Reforms To Boost Resilience Of $24 Trillion Treasury Market
Reuters

Philippine Stock Exchange Targets 20 Initial Public Offerings In 2023
BusinessWorld

Scrap The Cap: It’s The Right Thing To Do      
City A.M.

Bankers Wary Of Backlash If Britain Ditches Bonus Cap To Cut EU Ties
Reuters

LME Faces New Legal Action Over Decision To Cancel Nickel Trades
Financial Times

David Harding Wades Into Legal Battle With London Metal Exchange
This is Money

LME Says Disclosure Request Over Nickel Meltdown ‘Without Merit’
S&P Global

Kazakhstan Creates AIFC Derivative Commodity Exchange
Kazakhstan Newsline

Green Stock Exchange Focused On ESG Seeks Path to Wall Street
Bloomberg

NYSHEX Closes $25 Million Series B To Improve The Reliability And Efficiency Of Global Shipping
Business Wire

NYSHEX Lands A Fresh $25m To Match Shippers With Ocean Carriers
TechCrunch

EPSO-G To Increase Its Stake In TSO Holding, The Indirect Operator Of The Nord Pool Power Exchange
GlobeNewswire

UAE Court Orders Cum-Ex Suspects To Return $1.1 Bln To Denmark
Reuters

Coinbase Is Highlighting Politicians On Their Crypto-Friendliness
Bloomberg

FTX CEO Sam Bankman-Fried Says Firm Still Has $1,000,000,000 In Cash Left To Deploy For Acquisitions
The Daily Hodl

FTX Crypto Exchange Listed As ‘Unauthorized’ Company In The UK
Crypto Economy

Shanghai Bourse, China Reform Team Up To Develop Stock Indexes Of State-Owned Enterprises
Yicai Global

Ethereum Merge: Binance CEO Says Drop In Gas Fees Won’t Happen Immediately
CNBC YouTube

Bursa Malaysia Derivatives To Launch Enhanced Gold Futures Contract On Sept 19
The Edge Markets

India Gas Exchange Seeks To Launch Truck-Loaded LNG Contract
Energy Intelligence

CME Group Announces Launch Of Event Contracts For Trading Global Benchmark Products
PR Newswire

Moscow Exchange To Stop Trading In British Pounds On Oct 3
Reuters

FEX Global Readies Australian Large-Scale Generation Certificate (LGC) Futures And Options Contracts
Business Wire

Blockchain Technology Not Robust Enough For Key Stock Exchange Systems: TMX Group CEO John McKenzi
The Australian

How TMX Group’s CEO Plans To Make Canada’s Capital Markets Great Again
The Globe and Mail

SEBI Comes Out With Framework For Social Stock Exchange
The Economic Times

Sebon Decides To Distribute Licenses To Open Stock Exchange, Commodities Exchange And Brokerage Firms
myRepublica – Nagarik Network



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