Oct 1, 2022 12 min read Exchange Invest Weekly Podcast

163 Exchange Invest Weekly Podcast October 1st, 2022

Over at the Pakistan Stock Exchange (PSX) earnings are -42% on the year, net profit -398.7 million Pakistani rupees (which is $1.64 million in hard currency).

This week in the parish of bourses and market structure:

Revenue Roaring at Aquis

NYSE Tokyo cooperation

Are CME the new DraftKings?

ICE collateralizes hot air

and there’s talk of a TP ICAP breakup?

My name is Patrick L. Young.

Welcome to the bourse business weekly digest.

It’s the Exchange Invest Weekly Podcast Episode 163.

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.

The New York Stock Exchange and Tokyo Stock Exchange announced a new collaboration to support cross-border investment between the USA and Japan this week. Another interesting cooperation deal for NYSE following on from the SGX where a wide-ranging collaboration including a dual listing of companies was announced in July.

Meanwhile, the European Union has cast doubt on its ability to intervene in energy derivatives markets. In other words, Brussels finally concluded that big swings in power prices are not due to ‘market malfunction’. Of course, Brussels did its usual political grandstand bereft of facts, and then rolled back to the actual salient facts in a newspaper comparatively nobody reads AKA the Brussels bugle, the Financial Times, having first sent out their message of market failure to the widespread media with friends like this.

Elsewhere, the CME was under attack this week from the Bloomberg organization and Washington Post, skewering the Chicago Exchange playbook, where they were claiming that their latest events contracts were a substantial addition to the exchange. Whereas the Bloomberg viewpoint had it that actually what they were doing was simply adding gambling products, hence the DraftKings moniker.

Over at ICE, very interesting maneuvering as they try to find a way to solve the current energy crisis, or at least deliver some degree of resolution that helps the counterparties thus ICE Clear Europe has proposed accepting European Emission Allowances Certificates (EUAs) as margin cover, which in other words means that could allow anybody participating in the energy market to use the EUAs as collateral against other energy positions. It may sound counterintuitive, but actually, ICE allowing ‘hot air’ as collateral makes a lot of sense. Come to think of it, the ICE move makes a lot more sense than the ‘hot air’ bereft of the underlying collateral, which keeps coming out of Brussels during the course of this feverish hotbed of energy activity.

Borsa Italiana plaudits to them, they’re simplifying their rules to streamline the process of going public in Italy and TMX is going to close down their fund platform TSX NAVEx, which they launched in 2016, and will be shuttered on December 30th.

The results of the ASX AGM came out and Chairman Damian Roche noted at the AGM:

“The CHESS project is highly complex and remains challenging. There is no question that the performance of this project did not meet our or our shareholder’s expectations in 2022. We share the frustration of our stakeholders. Hence ASX’s commissioning of an independent expert review into the aspects of the project by Accenture.”

Ultimately, the Board has used its discretion to materially reduce the former CEO (as you can recall, the CEO resigned just a few months ago) and his variable reward was reduced by 40%. Other senior executives accountable for the CHESS project also had their rewards reduced by between 10 and 20%.

Thus, downgrading pay from egregious to merely excessive is a fine mark of the ASX’s remaining out of touch after squandering years and hundreds of millions of dollars on the folly of integrating Digital Asset to become their CHESS replacement.

It was a moderately busy week for results in the parish, all the details 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, some edited highlights.

Aquis Exchange saw net revenue soaring +21% nonetheless, pre-tax profits slipped ever so slightly from £1 million to £0.7 million. At the same time, Aquis Exchange remains very confident about the portfolio’s future.

Over at the Pakistan Stock Exchange (PSX) earnings are -42% on the year, net profit -398.7 million Pakistani rupees (which is $1.64 million in hard currency).

Profits at Euronext Dublin arm rose by 10% up to €24 million for the former Irish Stock Exchange.

Meanwhile, in new markets, Thailand has launched its first carbon credit exchange to curb emissions that new carbon market it’s called FTIX and is being operated by the Federation of Thai Industries which comprises a membership of around 12,000 private companies across some 45 sectors.

If you’ve been looking for an opportunity to trade in dates, then good news Agthia Group has launched eZad, the world’s first virtual platform for trading in dates.

One unfortunate piece of news, the Bashundhara Group, has not been allowed to set up a commodity exchange in Bangladesh.

If you’re trying to keep up with the news on the world of exchanges week and week out, then there’s only one place to go, Exchange Invest, the daily watercooler of the bourse business. Free trials are available by emailing us or sending us a message via any of our social media channels, and we will sign you up for a 30-day free trial. In the meantime, subscription rates themselves start at a very reasonable $299.

Deals this week, the Nigerian Exchange Group is raising some N35bn (that’s $80 million) for expansion. That of course comes after the Nigerian Exchange Group was listed on the NGX in 2021 following the demutualization of the former Nigerian Stock Exchange. The voices of angry shareholders are starting to break out apart from the one or two isolated voices we’ve heard already such as Justin Hughes, TP ICAP is under pressure to sell off its high-margin Parameta data division.

In other words, they want to divide the company into well, a good data subsidiary and a bad broker subsidiary. Eric – the competent manager – Sinclair’s data business Parramatta remains the good bit amidst an oasis of ongoing management failure masquerading as a listed company. Chairman Richard Berliand has made little or no apparent impact in turning the business around, leading to investors anguished calls for a break-up. Not before time as readers of Exchange Invest, will know only too well.

The Zagreb Stock Exchange, their boss Ivana Gažić announced this week a buyback programme. They’re going to acquire up to 10,000 shares that will have a maximum amount of expenditure of up to 500,000 Croatian kuna and that’s going to be $64,000 roughly in real money. The programme is expected to be completed at the latest by October 2, 2023.

Meanwhile, if you’re looking for some reading, as we get into autumn or indeed spring in the Southern Hemisphere, check out my latest book “Victory or Death?” Blockchain, Cryptocurrency, and the FinTech World. 20 years on from the excitement of the original FinTech tech best-seller “Capital Market Revolution!”. It’s time to look at some of those loose strands hanging around, which need a spot of perspective, whether you are an exchange parishioner, a FinTech professional, or anybody just trying to stay abreast of where technology is now driving investments in finance. “Victory or Death?” is published by DV Books and is distributed by Ingram worldwide.

Don’t forget while you’re waiting for your copy of “Victory or Death?” to arrive, check out our Livestream, Tuesday 6pm London time, 1pm New York time, the IPO-Vid live show. Catch the back episodes on LinkedIn and YouTube via IPO-Vid.

This week, we had an epic show with our guest Kevin Brady discussing A2X A Market For All. A very, very interesting discussion there of the upstart competitor secondary market to the Johannesburg Stock Exchange monolith.

Coming this week is going to be Paul Conn a veteran of the parish, now of course with Computershare in New York, that’s gonna be the start of Season 14, Episode 01, our 79th Livestream Paul Conn: Around the World From Front Office To Back and that’s coming up on Tuesday at 6pm, London time, 1pm New York time.

In crypto land this week, while a lot of news, the rescue plan is in for CoinFlex, they’re floating the possibility of creditors owning 65% of the previously insolvent exchange. That filing is taking place in Seychelles.

Meanwhile, FTX is apparently in talks to raise up to a billion dollars at a valuation of about $32 billion in line with their prior round. First, there was the news of a simultaneous parent and US subsidiary round. Then came that leak of the accounts which looked magnificently profitable and now we have this rumour still unsubstantiated at the time that we went to the recording studio for this podcast, the rumour saying that a deal will be done that miraculously assures the existing FTX valuation, but at the same time, it only raised a billion?

…and I say “only” because well FTX has been talking about spending a lot more than this as they seek to rescue a lot of the crypto V1.0 architecture from bankruptcy.

And indeed, last week, we had confirmation that FTX is going to be acquiring the bankrupt assets of Voyager after an auction which they won, and it’s going to be somewhere around a $1.3 to $1.4 billion price tag in total.

Elsewhere crypto exchange FTX is going to be moving its headquarters in the USA from Chicago to Miami. Presumably, that leaves them rather closer to the overall global HQ which is just a short hallway in Nassau in the Bahamas.

Coinbase have rejected a story in The Wall Street Journal that they were about to or testing an indulgence in proprietary trading and crypto market making. Coinbase have also been sued for patent infringement over crypto transfer technology by Veritaseum Capital LLC who sued in a Delaware federal court. They’re a bit they have succeeded in raising money, they’ve raised a total of $40 million out of a $400 million valuation.

In product news this week, SGX has launched a new central limit order book for FX Spot and NDFs, while SGX is going to launch a series of very exciting contracts in September that are aiming around the whole world of EV and battery technology. They’re going to launch futures contracts for cobalt metal, cobalt hydroxide, lithium carbonate, and lithium hydroxide on the 26th of September those went live.

MCX lead the technology news this week, they are in talks with NSE for tech support as we reach the 1st of October deadline where their contract runs out with 63 moons.

On a scale of 1-10 in terms of ugly scenario, MCX has now surpassed “coyote” as it scurries to have a viable system operating in a matter of days after TCS embarrassingly failed to deliver their system on time.

Moreover, indeed, TCS went on to say it’s going to take them at least 3-4 months in order to manage to deliver the technology involved for the replacement of the 63 moon technology at MCX. 63 moons themselves said they are discontinuing the tech support after September 30th, leaving MCX which would appear flying somewhat blind without access to its code.

Regulation news this week, shock from the SEC, they’re gonna let payment for order flow leave after a great deal of, well, one might say hot air being spurted being spouted by Gary Gensler, the chairman of the SEC. Ultimately, the US securities regulator rolled back and rolled over when it came to the reform of payment for order flow.

Elsewhere the CFTC judgment on Ooki DAO has rather shattered the illusion of a regulator proof protocol as a story put up in CoinDesk. Many people have been shocked including crypto lawyers that the CFTC’s complaint indicated that the lawyer saw all voting governance token holders as potentially culpable members of a DAO (Distributed Autonomous Organisation).

This again ladies and gentlemen is something that we’ve been noting in Exchange Invest for years…a Distributed Autonomous Organisation (DAO) is a really cool idea, however, the legal system is based around the idea somebody is responsible. That remains somewhat impossible within the DAO structure like Raymond Smullyan logic puzzles, such as “what happens when an unstoppable cannonball hits an unbreakable post?” Regulatory law may allow loopholes but it despises a paradox. Ooki doki?

In career paths this week, the LSEG announced a change of its Directorate. William Vereker, currently chairman of Santander UK and formerly Theresa May’s business envoy when she was Prime Minister from 2018-2019, is going to be joining the board of LSEG as a Non-Executive Director with effect from the 3rd of October. He’s also joining the Risk, Remuneration, and Nomination Committees.

Binance has announced a high-profile Global Advisory Board (GAB). The former US Senator Max Baucus was the man tipped to lead the board as chairman, along with 11 other prominent figures perhaps the most fascinating addition of which is the European community’s former regulatory panjandrum, and leading figure in the world of regulation, David Wright.

Lots of upheaval in the management of crypto exchanges over the course of the last week, Jesse Powell has stepped down as the CEO of Kraken, amongst others. The co-founder is moving out to be replaced by Chief Operating Officer David Ripley. This comes shortly after Genesis’s Michael Moro and Bitcoin evangelist Michael Saylor, along with Sam Trabucco of Alameda Research, all relinquish their C-suite positions around the crypto industry.

At the same time big news just as we were preparing to record this podcast, the crypto exchange FTX’s US president Brett Harrison is stepping down, and thus, Zack Dexter who is the CEO of FTX’s US derivatives unit, formerly LedgerX where he was CEO, he’s going to take over the operations of FTX’s US, and of course, as we mentioned earlier, FTX’s US in the process of moving now from Chicago to sunnier, lower tax, lower crime, Miami.

The final news of the week is another interesting hire, Komainu, you may remember that Komainu some months ago announced a new CEO none other than the London Metals Exchange CEO Matt Chamberlain. Ultimately Matt decided to stay with the exchange to sort out the nickel nightmare aftermath and thus in his stead Komainu, this week, a Nomura-Backed Digital Asset firm announced the appointment of my old friend Nicolas Bertrand who’s joining from where he was previously employed at Borsa Italiana as head of derivatives markets and commodities. All the very very best to Nic on an exciting new position.

In “Big World” this week, we were reflecting on the fact that Louise Fletcher has died aged 88, as the Telegraph put it: “having gained that cinematic immortality through her portrayal of the terrifyingly cold and manipulative Nurse Ratched in Milos Forman’s 1975 adaptation of Ken Kesey’s novel One Flew Over the Cuckoo’s Nest”

In an on-set interview at the time, Fletcher remarked of Nurse Ratched: “I see her as a human being – she’s not a medieval witch. I see her as a woman who believes totally in what she’s doing. She believes that what she’s doing is absolutely right and best for all the patients.”

In other news this week, Italy actually electing its own government, for the first time in 14 years has been viewed very dimly by the European Commission. Even on the eve of the vote, there were threats by European Commission president Von Der Leyen saying Brussels has ‘tools’ if the wrong parties win, which came of course from Brussels, the supposed champion of democracy across Europe. Thus voters may have chosen the “wrong” winner according to the European Union’s narrow view, but at least now I can finally realize who President Von Der Leyen reminds me of.

And on that mysterious and magnificent note ladies and gentlemen, my name is Patrick L. Young, creator of exchanges, publisher of the bourse business newsletter, and an information platform Exchange Invest.

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

LINKS:

The New York Stock Exchange And Tokyo Stock Exchange Announce New Collaboration To Support Cross-Border Investment Between The U.S. And Japan
Business Wire

EU Casts Doubt On Ability To Intervene In Energy Derivatives Markets
FT

The CME Is Becoming the DraftKings Of Exchanges
Washington Post

CME Group Has Investment Ideas For The Masses
Chicago Sun-Times

Borsa Italiana Simplifies Rules To Streamline Process Of Going Public In Italy
Euronext

TMX To Close Down Fund Platform
Investment Executive

Results Of ASX Limited 2022 AGM
ASX

Aquis Exchange PLC – Half Year Results Highlights
Aquis

Aquis Exchange ‘Very Confident’ About The Portfolio’s Future
Proactive YouTube

PSX Earnings Down 42pc
Dawn