174 Exchange Invest Weekly Podcast December 17th, 2022

Exchange Invest
Exchange Invest
174 Exchange Invest Weekly Podcast December 17th, 2022
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Transcript:

This week in the parish of bourses and market structure:       

It’s a special end-of-year Half Wit house edition with a full roster of the dysfunctional.

From one functional to the dysfunctional, ICE is warning on energy caps.

Not the polar extremes but rather the EU’s twin track kamikaze process where they will blow up CCP from one side then blow up the energy markets (and its CCPs) from the other.

At least there’s movement on SME listings, which is great news, but it represents crumbs at the table after a solid decade of work on the topic of what is laughingly called Capital Markets Union. 

In no particular order, Half Wit house edition special includes high ranking failures from BTC, FTX, SBF to name but 3 acronyms, but also long standing institutions of at best absurd mediocrity, the European Union/ European Commission, as well as an exchange whose monopoly has long since atrophied, ASX and indeed their former best days (so long as they were passing through tens of millions from the ASX HQ) DAH (albeit anonymously).

Read – weep – enjoy, – but first of all, give this podcast a good old-fashioned LISTEN! 

And as we also note, it was a Bad Day for Inmate 14372 this week

As Bitcarnage is getting into its stride…

My name is Patrick L. Young.

Welcome to the bourse business weekly digest.

It’s the Exchange Invest Weekly Podcast Episode 174.

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 from 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.

Let’s start in the wonderful wacky, weird world of FTX and bitcarnage. This all amounts to something a bit like World of Warcraft for crypto markets – albeit, without the glamorous costumes, the Financial Times was amongst those who Revealed: The Alameda Venture Capital Portfolio, which reminds me of that old “I’m Sorry I’ll Read That Again” sketch where John Cleese’s bank manager thanks the entrepreneur for his business plan but apologises he cannot reference it on the spot as he seems to have lost the cigarette packet it was written on. 

The read lots of stories about trouble in paradise with the Bahamas fearing that the FTX crash could hurt its reputation this week. 

If we dig a little deeper – you can go look at Bahamian US dollar government debt – what does that yield of 13.3%  tell you after a stupendous rally through autumn, clearly, there are issues to the Bahamas finances. 

Put simply, to secure their reputation, it’s vital to pay debts and be an attentive citizens adhering to corporate governance. At the same time, the laws of crypto in the Bahamas were not wrong per se, but the politicians will of course bicker internally in some nations to the detriment of the financial centre. That never works. The Bahamian laws are quite coherent, the problem is when a determined psychopathic narcissist comes your way. 

At the same time, the Bahamas AG worked textbook fast this week to dump the SBF problem. As soon as the US sent over their sealed indictment, the first of several SBF was transformed from penthouse Storybook Brawl playing frat boy to incarcerated prisoner on remand awaiting a hearing in February as inmate 14372. Looks like the bad month of November has added a very bad day in December (that was December 13th) when even SBF offering fiat currency as a bond failed to sway the judge. Yes, that’s right, he didn’t offer a stablecoin or some tokens, SBF offered good old fashioned greenback dollars… and to wear an ankle bracelet so he could keep gaming from his luxury penthouse. 

Given every agency in the USA has suddenly decided Tuesday, December 13th was the day to unveil their indictments – there’s DoJ, CFTC, SEC, and some electoral funding issues – in fact, really what we’re looking at here is essentially most every agency except the DMV and the Bureau of Alcohol, Tobacco and Firearms have so far endeavored to indict the dollar store Afro a chap who didn’t get bail even when he had to break out crypto kiddie taboo of offering fiat for his freedom. Plus an ankle bracelet. At least with his wearing of shorts that bit would be clearer for the paparazzi to spot. Then again if SBF shaved the Afro and wore long trousers would anyone recognize him? No wonder Nassau deems him a flight risk. 

Elsewhere the pace of SBF reaching indictment is a good thing but as noted before the crypto contagion of bitcarnage looks to be only warming up…

If you want to join the dots and thread the story through – to name but a few random folks, Wilmer Hale’s crack legal team, Gary Gensler, Rostin Behnam, and Mr. Wonderful Kevin O’Leary, for instance, then you need to be reading Exchange Invest, the bourse business daily digest and more importantly for you, it’s just $299 per annum if you pay before December 31st and it will be going up to $349 in the course of 2023. If you want to understand where Bitcarnage goes next? I can recommend no better source. 

However, let’s end our Bitcarnage coverage this week with a zinger from the FTX CEO and liquidator John Ray III at a Congressional hearing:

“This is really old-fashioned embezzlement. This is just taking money from customers and using it for our own purpose. Sophisticated perhaps and the way they were able to hide it from people in front of their eyes.”

“Plain old embezzlement. Old school.”

And indeed there was a wonderful dialogue between Representative Emmer and John Ray III in the same hearing. 

Rep. Emmer: “Was there a compliance department? 

Ray: “Er, there were people with titles.” 

Let’s go and tip the day, in Digital Asset has been anonymously blaming ASX for the CHESS debacle. 

When Accenture report that a “draft delivery plan” proposed by Digital Asset was considered by Accenture, “high risk with low confidence” due to “significant decision changes and refactoring”. 

We all knew it was the end for the whole CHESS replacement farago. Not however, that ASX might not have been able to notice that say $150 million several years earlier. 

The breakdown of relations between DAH and ASX was inevitable when ASX’s ongoing train wreck of non-pology includes a liberal dollop of blamestorming as sorry posterior protection risk.

Ultimately, we’re approaching Christmas and it seems quite incredibly that the senior management of the ASX is still in situ, when there needs to be a mass clear out of pretty much everybody in the C-suite and the board of directors in order to manage to try to regain some confidence in what was once a world-leading technological exchange franchise and is now a sorry mess. 

Speaking of sorry messes, the EU had a flurry of proposals this week. Madness on CCP, some useful sense on SME moves, which were the latter at least welcomed by various industry bodies. As the Daily Telegraph put it: Brussels Launches Fresh Raid On Prized City Clearing Houses

It’s everyday GUBU (Grotesque, Unbelievable, Bizarre and Unprecedented)  behavior from Brussels. Try, try, and try again to destroy economic success as – surprise surprise top down-regulating for success has never worked anywhere, ever… 

The Brussels CCP moves retain 100% spurned spouse psychosis and have zero no merit. Europe is cruising for a bruising and will see its banks punished accordingly with this latest anti-competitive idiocy. 

On the other hand, it is encouraging that there’s some progress on the mythical concept of CMU. But that has never been tangibly organised / promoted / supported for the course of the last decade or so when the EC/EU has been talking about it but doing precious little. At the same time, the EU started to crack down on commodity firms using derivatives markets. What a great piece of timing pushing people out of trading commodities, removing liquidity just when it’s acutely needed, because of course at the same time the EU has a suicide move on the gas price cap. 

The old lie:  “Suicide as painless” as the “M*A*S*H” theme song put it. 

ICE in particular have been volubly warning that this is a multibillion dollar crisis that is going to freeze the citizens of Europe in their homes. during the course of winter. 

On a better note, happy birthday, many happy returns to Miami International Holdings, they’re commemorating the 10th anniversary of the MIAX Options Exchange launch. We look forward to their IPO in 2023. 

Meanwhile, NASDAQ and NYSE, are set to further ease the rules on direct listing for capital raises. 

Ladies and gentlemen, the future of listings await ever more growth. 

Finally, one great statistic even though it hasn’t been the best year for stock exchanges overall. Congratulations to the New York Stock Exchange (NYSE) they have set a world record as the World’s Largest Stock Exchange with an equity market capitalization of just over $22.1 trillion as of October 2022. 

In results news this week, the CME declared an annual variable dividend of $4.50 per share, good for long-term hodlers.

In new markets, the LCH is exploring crypto derivatives clearing.

CCP is mulling a partnership with GFO-X for clearing crypto index futures and options.

Bursa Malaysia launched its VCM market for local and international carbon traders as well. 

It was a busy week for deals in the parish, all the deals and all the details were in Exchange Invest daily the newsletter no person can afford to be without in capital markets and market structure. Remember, $299 a year if you pay before December 31st going up to $349 per annum from January 1st, 2023. Anyway, for the sake of this podcast let’s look at some edited deal highlights.

Fascinating Cloud Pro Quo between the London Stock Exchange Group (LSEG) and Microsoft.

Microsoft, the world’s largest legacy software vendor has teamed up with LSEG who owns the world’s largest legacy data provider, for cloud services. 

Fascinating kicker: MS is buying 4% of LSEG for exclusive dibs on all of that holding (that’s going to be a 4% stake worth around $2 billion in the LSEG). At the same time, that is going to amount to something like an LSEG spend of at least 2.3 billion Pounds ($2.7 billion) on cloud services via Microsoft over the course of the next 10 years. Subject to regulatory approval Scott Guthrie, Microsoft EVP, cloud, and AI group will be joining the board of LSEG once of course the FCA has approved.

A fascinating division of the cloud software world. LSEG has gone with that provider of software to old people, Microsoft, while CME with Google, you may remember a year or so ago we reported how Google Invests $1 Billion In Exchange Giant CME, Strikes Cloud Deal while meanwhile NASDAQ is partnered up with AWS and Equinix

Interesting news, the LME apparently has been drawing takeover interest from rivals. That was pretty much before the nickel crisis, but it remains to be seen if the Hong Kong Exchanges are now willing to sell because then obviously the logical buyer would be the previous inquiring bidder ICE as their companies are contiguous, but unlikely to overlap with the Hong Kong Exchanges footprint (indeed, they might be entirely complimentary in many ways). 

If you’re looking for some reading, there’s still time to order a copy for Christmas “Victory or Death?” – Blockchain, Cryptocurrency, and the FinTech World 20 years on from the excitement of the original FinTech, best-seller “Capital Market Revolution!”. I review the trends, the theories, the ideas, and what’s going to be happening in the future. “Victory or Death?” is published by DV Books and is distributed by Ingram worldwide.

If you’re looking for something to listen to in the meantime, well, our 2022 In Review – Part II amounted to the final show of 2022 for IPO-Vid. You can catch the back episodes on LinkedIn, YouTube, and Facebook via IPO-Vid. 

Our next show coming in January is going to be IPO-VID #89 “ADGM: Building An Island of Excellence” with our guest Simon O’Brien. 

In crypto land, interesting this whole proof of reserves, they may be starting to bite the crypto exchanges on the backside. Binance has enough reserves to pay out customers holding Bitcoin. According to Mazars review, albeit the actual balance of assets seemed to be that there were slightly fewer reserves of Bitcoin than there were actual liabilities. 

Coinbase’s CEO Brian Armstrong, sees revenue falling 50% or more on the crypto right. 

Welcome to the great crypto revenue gameshow where the audience only knows how to shout “lower!”. 

Meanwhile, the Supreme Court of the USA is taking a Coinbase appeal over various crypto lawsuits. And indeed, Coinbase noted that their law enforcement requests grew by 66% year on year. 

Short selling giant Jim Chanos is still short Coinbase and at the same time, there has been a situation where the bonds of Coinbase are now trading at 50 cents on the dollar as investors get very very worried indeed, who might be next in bitcarnage. 

Product news this week, Chinese government bond futures are going to be relaunched in Hong Kong. 

I’m repeating myself here, but I must admit I am so excited at the idea of being able to trade a futures yield curve with options of the Chinese RMB out of the Hong Kong exchanges that tied in with Swap Connect is going to be the most phenomenal package for growth during the course of the next year. 

And indeed there’s more from Hong Kong exchanges, they’re going to be introducing Hong Kong dollar RMB dual counter market-making programmes in the near future in the Hong Kong securities market. Another exciting development alongside the impending arrival of the RMB yield curve, all trading on Hong Kong exchanges and open to the world’s investors. 

Bad news, somewhat of a body blow or perhaps a growing pain for the Long Term Stock Exchange (LTSE), albeit this as a market which does itself zero favours and PR terms. That’s a deficiency in the short and long term. Anyway, Twilio, which was one-half of their entire roster of listings has decided to delist reducing the LTSE to just Asana stock.

Career path news this week, ICE has appointed Gary King as president of ICE Futures Abu Dhabi replacing Jamal Oulhadj (who enjoy the cameo role in Trabue Bland’s IPO-VID 058: Master Of ICE Futures from Boca Raton in March) Jamal has left IFAD and we wish him every success in the future. 

Former Dubai Merc (DME) veteran, Gary King is moving to The Island of Excellence Emerging Among Murban Futures (The National). At an exciting moment as the market achieves the lift-off which DME never managed with the Oman crude Gary was responsible for launching in 2005. 

And finally, ladies and gentlemen, today we report on the end of an era – the last surviving Dambuster George Leonard ‘Johnny’ Johnson died aged 101

He was the last surviving original member of RAF 617 Squadrons famous “Dambusters” raid of 1943, dying peacefully in Bristol in the United Kingdom. 

The remarkable Mr. Leonard not only happily told the story of his role as a bomber aimer in the Dambusters raid, he also noted:

“I don’t volunteer, but if people ask, will I talk to their club or their group, that means they are interested and if they’re interested, I will talk to them.”

I’ve got to the stage now where I say to the children ‘If I say I don’t want to do this anymore, you can send the box in as soon as you like’. We will remember them Ladies and gentleman, the right stuff. 

And on that mysterious and magnificent note ladies and gentlemen, my name is Patrick L. Young wrapping up this the December 17 Episode number 174 of the exchange invest weekly podcast I wish you all a great week in blockchain life and markets.

 

LINKS:

 

Trouble In Paradise: Bahamas Fears FTX Crash Could Hurt Its Rep
Protos

Digital Asset Blames ASX For CHESS Debacle
AFR

EU Proposals – Some More Madness On CCP, Some Useful Sense On SME Moves
EC

FESE Welcomes EU CMU Moves
FESE

EACH Welcomes The European Commission Proposals To Make European CCPs More Competitive While Safeguarding Resilience
EACH CCP

Brussels Launches Fresh Raid On Prized City Clearing Houses
Telegraph

Post-Brexit Derivatives Clearing Tussle Continues As European Commission Clamps Down On Non-EU CCPs
The Trade

EU Starts Crackdown On Commodity Firms Using Derivatives Markets
Nasdaq

ICE Warns EU Gas Price Cap Could See Prices Rise
Reuters

Miami International Holdings Commemorates 10-Year Anniversary Of The MIAX Options Exchange Launch
PR NewsWire

Nasdaq, NYSE Set To Ease Rules On Direct-Listing Capital Raises
Bloomberg

World’s Largest Stock Exchange: The NYSE Sets World Record
World Record Academy

CME Group Declares Annual Variable Dividend Of $4.50 Per Share
CME

LCH Explores Crypto Derivatives Clearing
Risk

Bursa Malaysia Launches VCM Exchange For Local And International Carbontraders
Carbon Pulse

LSEG And Microsoft Launch 10-Year Strategic Partnership For Next-Generation Data And Analytics And Cloud Infrastructure Solutions; Microsoft To Make Equity Investment In LSEG Through Acquisition Of Shares
Microsoft

Microsoft Invests $2 Billion In LSEG Cloud Deal
Reuters

LME Draws Takeover Interest From Rivals After Nickel Crisis
Bloomberg Law

Binance Has Enough Reserves To Pay Out Customers Holding Bitcoin: Mazars
Business Insider

Coinbase CEO Sees Revenue Falling 50% Or More On Crypto Rout

Bloomberg

Supreme Court Takes Coinbase Appeal Over Crypto Lawsuits
CNBC

Coinbase Says Law Enforcement Requests Grew By 66% From Year Ago
CoinDesk

Short Selling Giant Jim Chanos Is Still Short On Coinbase, Tesla And The FOMO-Investment Market
MarketWatch

Chinese Government Bond Futures To Be Relaunched In Hong Kong
Risk.net

HKEX To Introduce HKD-RMB Dual Counter Model And Dual Counter Market Making Programme In Hong Kong Securities Market
HKEX








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