175 Exchange Invest Weekly Podcast January 7th, 2023

Exchange Invest
Exchange Invest
175 Exchange Invest Weekly Podcast January 7th, 2023
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Transcript:

This week in the parish of bourses and market structure:       

SEC attacks PFOF

Milan gas crunch pushing TTF to the USA?

NSE seeks longer trading hours

And SBF is home in more ways than one…as he pleads not guilty. 

My name is Patrick L. Young.

Welcome to the bourse business weekly digest.

It’s the Exchange Invest Weekly Podcast Episode 175.

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, and indeed because this is a special New Year’s edition, it’s not just the past 7 days, but actually the past fortnight or so of the festive period. However daily – if you want to stay in touch with what’s happening in the bourse business, you need to be reading Exchange Invest – the unique daily subscriber newsletter of the bourse business, which can be sent daily to your inbox.

More details at ExchangeInvest.com.

On with the news roundup, after a welter of Congressional Committee hearings, which fell after Sam Bankman-Fried was arrested much to the chagrin of many American political types. The US managed to extradite SBF on a record-breaking $250 million bail. Remember, of course, at the start of last year, $250 million was the amount of money that SBF thought was sufficient to secure the entire central counterparty clearing business. Mind how inflation obviously leaped out of the bank during the course of the last 12 months. Anyway, that $250 million record-breaking bail involved only his parent’s $4 million dollar California house’s security which makes it clearly a trade in contravention of ESMA leverage rules if nothing else. Thus, inmate 14372 in the Bahamas penal system has become free as a bird bloke behind a computer with plenty of bandwidth in sunny California.

Before Christmas, Exchange Invest had been discussing the tantalizing articles from SBF’s Mother where Beyond blame was published in 2013 by the Boston Review, noting that guilt just isn’t the thing. 

Thus SBF flew in a PJ albeit not a private jet of his own direct chartering straight from the rat-infested cells of the Bahamas’ penitentiary to the USA, where it transpired as SBF’s former colleagues had been busy ratting him out. 

On January 3rd SBF returned to court and promptly pleaded not guilty – presumably in line with familial credo. Thanks to the incredible work of staff at CFTC SEC, and elsewhere a trial is scheduled for October 2nd. That’s vastly in advance of the time it took just to levy charges alone in the likes of Madoff and Enron.

If meanwhile, you want to buy a few FTX subsidiaries, auctions are happening eminently:

Embed (the stock / clearing  business which FTX bought in June is going to be seeing initial bids by 5pm Eastern Time on January 18th. LedgerX is open to bids (AKA FTX US) on January 25, and on February 1st you can bid for FTX Japan and FTX Europe. FTX is hoping to complete the sales for the four businesses between February 27th and March 27th of this year. 

Meanwhile, with knives in the back of FTX and SBF, it appears they worry must be in Binance and much else across the cryptosphere – can they survive? 

All this news and more is going to be covered daily in Exchange Invest. We’ve had a cracking track record of predicting what’s going to be the future of cryptocurrency over the course of the last few years. Right from having been one of the earliest people to say that winter is coming and the long dark crypto winter is continuing. 

If you want to subscribe to Exchange Invest, it is $349 per user per year, one-month free trial is now available. Ping us on direct media, whichever DMS you can find us in. Whether it’s on LinkedIn, Facebook, YouTube, or indeed via our website Exchange Invest.com and we’ll get you signed up for that free trial ahead of subscription. 

Over in Australia, ASIC wrote a pre-festival letter to ASX. It wasn’t quite a “Dear Santa” but on the other hand, it does seem to have a certain degree of embedded and softness in fiction. It’s one of those read-at-your-own-blood-pressure risk letters. Essentially the unrepentant yadda yadda came from ASX after the most epic stuff up in Australian Capital Markets history. This was ASX writing to ASIC of course. All management and board are still in situ at ASX and they’ve headed shamelessly towards milking the ASX ATM throughout the Australian summer season.

On the other hand, ASIC has now gone so surreal that it rivals the FTX telenovela in certain parts, essentially asking what it ought to have been asking about 5 years ago of ASX back when some might have not sniggered when the “we’re a technology company” strapline was being test marketed to a focus group by ASX.

How to surmise? Well, it looks like a lot of analogue people leading rather incapable of being digital people to put it politely or is that the other way round? Certainly, I can imagine somebody in Sydney can coalesce “CHESS replacement”, “donkey management” and “Gallipoli” in no more than 2 steps. Does it effectively matter anymore who is at fault – is anybody innocent from ASIC, RBA and the appalling ASX management after the original system was allowed decades of underinvestment atrophy? 

Australia deserves better actually, Australia deserves anything better than this. Hopefully, CBOE amongst others can lead the vanguard of sorting the embarrassing Oz-shambles towards coherence and proper markets once again. 

Over in Chicago, CME (Chicago Mercantile Exchange) still have an open-outcry pit. It’s making a great leap forward not into the digital world (I hasten to add) rather Eurodollars are going from Libor-based Eurodollars to SOFR based. That’s in the CME Eurodollar options pits. 

Suicide move of the month, the European Union countries have agreed on a gas price cap to contain the energy crisis. 

You can read the blah blah, of course, it was all covered in Exchange Invest but ultimately, there’s one single line that ought to bring you out into a cold sweat as reported by Reuters: ICE Warns It Could Relocate Gas Trading Out Of EU If Bloc Caps Price. 

This story boils down to two key salient facts:

  1. ICE is a business which means it has responsibilities (and takes them very seriously) and also wants indeed to keep its customers happy. 
  2. The European Union is not a business – doesn’t think like one, doesn’t act like one, and thus is sealing its own fate. 

There are also side elements of these issues where the EU has a chronic corruption problem, no credibility in most of its major competencies (where the word is clearly used to mean the opposite and so too thus European Union competencies are well, Brussels #It’sDepressing.

Anyway, ICE being coherent pragmatic folks, who actually make a profit and keep customers happy are looking at the hectoring halfwits of Brussels, various unable to exercise their shoulder chips at being spurned spouses in Brexit and are most clearly out of their depth in the world of financial markets. 

Remember, the European Union/European Commission has been consistently WRONG in a fashion that armed with rocks over the course of the last decade, the lure of fire would be a near impossible byproduct to fashion (I exclude here honourable and decent, coherent technocrats like John Berrigan, who actually understands markets, as opposed to the clod-head Brussels political types who only understand finance when it comes in Harrods bags, and containing a large amounts of notes).

Thus, we have the European Union as the apotheosis of incompetence, and we have ICE being rational and understanding they must produce a balanced market. If that balanced market might price gas in Europe but does not exist in Europe, then the European Union has only itself to blame. 

Elsewhere, the European Union reached a deal on major carbon market reform, which is of course completely irrelevant if they’ve already managed to banjax their energy markets. 

In better news good news from the 2 leading exchanges for stocks in the world. The New York Stock Exchange (NYSE) report an unprecedented year of activity in 2022 despite the bear market, it had some 34 transfers of listings to the NYSE as of December 20th, 2022, the highest number since 2002. 

Meanwhile, NASDAQ welcomed 156 IPOs and 29 exchange transfers in 2022. Quite a spectacular series of results from both of New York’s finest despite this being overall a bad year for bourses.

 Hedge Funds had a bad year with nickel, they say they lost $95 million in the LME nickel crisis. Nonetheless, a London court threw out the Hedge Funds case in the first round of litigation against the London Metal Exchange over the $4 billion nickel nightmare, giving LME the upper hand for the time being. 

Interesting news from the National Stock Exchange (NSE) their new CEO Ashish Chauhan is eager to expand the Indian trading days: “If Singapore and America can work for 16-18 hours, India, as a developing market working for 6 hours and 15 minutes is not a great idea. We continuously resisted longer hours, and countries like Singapore prospered using our prices to trade”, noted the new boss of India’s largest stock exchange. 

Exciting news in the eurozone, it’s got a new member Croatia and congratulations to Ivana Gazic and the Zagreb Stock Exchange for managing to effect seamless trading as they denominated their product in Euros across the board at the Zagreb Stock Exchange. 

One Brexit story which absolutely no mainstream media seem to have picked up. London as a financial center since Brexit evidence from the 2022 BIS Triennial Survey. The Bank for International Settlements has said that at worst London is back to where it was in 2016. Curiously some might argue actually growing its share of the Euro-denominated pie in 2019, 3 years after the referendum but before the full year a settlement was agreed. 

In essence, this is the most perfect demonstration that Euro crisis tales of woe, where complete codswallop from embciles and closed minds blindly following the Brussels order with a hint of independent thought capacity being absent. 

The Euro repo market may have taken a bit of froth off the top London market share. That business was always going to return to the Continent but as things stand, the ‘allegedly-on-its-last-legs’ London financial center amounts to over 60% of global Euro denominated interest rate trading. Read – weep and give up on Europe, you cannot win this one until you fill the left-hand side of the grave with your own corpse. Well, Happy Christmas and Happy New Year European Union, I suppose, is the order of the day. Magnificent news from London all round. 

Deal news this week, just one thing, the Euronext completed the sale of MTS Market International Inc, a US subsidiary of MTS. 

Don’t forget, you can still pick up a copy of my most recent book: Blockchain, Cryptocurrency and the FinTech world is the topic “Victory or Death?” looking at the futures of markets. Published by DV Books and distributed by Ingram worldwide. 

While you’re waiting for your copy of “Victory or Death?” to arrive, check out our livestream – it’s on a Tuesday 6pm London, 1300 hours New York time. The IPO video live show! Catch the back episodes on LinkedIn and YouTube via IPO-Vid. We will be coming up following our “Reviews of The Year” which took place over the festive season, with a very exciting first show for 2023 IPO-Vid # 89 is coming up next Tuesday. That’s going to be ADGM: Building An Island of Excellence with Simon O’Brien

Product news this week, Euroclear have announced a plan to stop supporting ‘cannabis-related stocks’. That’s clearly going to put a crunch into the whole marijuana marketplace. 

Meanwhile, SEBI has suspended the trading of agri commodity derivatives on various products for one more year. That applies to (non-basmati) Paddy, wheat, chana, mustard seeds and its derivatives, soybeans and its derivatives, crude palm oil and moong remains suspended until December 20, 2023 in an act of standard issue micromanagement and over intervention by SEBI. That was probably met by farmer groups protesting against the SEBI ban on trading in 7 agri commodities. Let’s hope 2023 might be a better year for open markets. 

Technology news this course of the festive update edition, in this IPO podcast for Exchange Invest Weekly #175:

ICE global have expanded their network in key Asian markets. 

The London Stock Exchange group is acquiring Acadia.

SEBI to enhance their vigil on MCX technology transition while the Australian Stock Exchange’s blockchain failure has burned market trust according to Reuters, and pretty much anybody else who doesn’t work for the ASX but as in the Australian financial market. 

One good piece of news, well done to the folks of NASDAQ. Dhaka Stock Exchange have exceeded ended their technology partnership with NASDAQ worldwide. 

Regulation news this week, the SEC “Gift” to the industry: four market structure proposals, 3-2 votes (in part), but No Partridge in a Pear Tree was the way Goodwin Procter surmise the whole thing.

For those somewhat bamboozled by the sudden arrival of mega-complex SEC proposals just before Christmas and in the wake of the agency doing next to nothing about crypto despite repeated empty threats – the threats remain empty. 

At the same time, there are some very exciting new proposals around a payment for order flow, which seemed to be beyond complex in many, many ways in terms of what they’re trying to achieve. Where perhaps it might have been better just to come our forth a ban. At the same time the European Union, didn’t come up with a ban on payment for order flow during the course of their meeting since before Christmas, which was rather a surprise. 

In career path this week, we’re delighted to see that the NASDAQ CEO Adena Friedman is assuming an additional role as Chair of the NASDAQ Board of Directors in addition, of course to her Chief Executive position. 

Michael Splinter was also appointed Lead Independent Director. 

That news came out just before a story circulated that Carlyle is reportedly struggling to find a new CEO. 

Now, much as I think Adena Friedman would be a superbly admirable prodigal returnee to go from former CFO to the CEO hot seat at Carlyle. I sincerely hope she will be staying longer in the parish as the joint Chairman/CEO of NASDAQ. Seems her instinct is to stay put for now….fingers crossed for the parish.

Japan Exchange (JPX) had a major upheaval of management. Farewell to the retiring Group CEO Akira Kiyoda, and congratulations on their elevation to the new Group CEO Yamaji Hiromi, Group COO Iwanaga Moriyuki and Executive Director Yokoyama Ryusuke.

Hong Kong government named a replacement for Ashley Alder as the boss of the Securities and Futures Commission (SFC) and the first female to run the Hong Kong regulatory organization will be journalist turned regulator Julia Leung. 

CBOE Global Markets announced the election of Hillary Sale to the boards of CBOE U.S. Securities Exchanges, CFE and CBOE SEF Boards. 

Congratulations to my old friend Lord Jeffrey Mountevans who’s been appointed Chairman of the Baltic Exchange Council with effect from January 1st, 2023, succeeding Denis Petropoulos

Akif Saeed has been appointed as the new Chairman of Securities and Exchange Commission of Pakistan (SECP)

And we end our update with some sad news the Lusaka Securities Exchange announcing the tragic passing of their CEO Mrs. Priscilla Chikuni Sampa….RIP.

Of course, interest rates were a big topic of conversation across the Christmas dinner tables, the Hanukkah tables, and indeed much else besides in the course of recent days. 

A useful point to ponder in the macro picture of interest rates…Yes yes, we all realize that interest rates have gone up from nada to by 425 basis points in a year in the USA, which is an extent of increase not seen for 40 years. However, the interesting point is we’re now at 450 basis points and the average from 1971-2022 for Fed Funds is circa 5.4%, 90 basis points above where Fed Funds are sitting at the moment and millennials are throwing their toys out of the pram. 

In other words, the average is way above what at least a generation and a half of citizens and indeed mortgagees regard as preposterous. 

Considering those interest rate rises – most recently, the Fed leaves us with a bit of a hangover. The insane era of the technocratic imbeciles who prevailed in Davosian haze (AKA like Panglosian but fiscal) have left the UK alone with £847bn of QE gilts on the books (that’s over a billion trillion, dollars worth rather, I should say). Now, that’s all in a private subsidiary, which could have required at any point in time before Christmas, a bailout of more than $200 billion even before the Fed had their Christmas surprise interest rate. It’s a bit of a concern for everybody, particularly in Europe after the rest of QE there now appears to be a dubious rest between the likes of France, Germany, Italy, the broader EU and indeed the UK who are all trying to be competitive in this dubious race to be the next Argentina. 

Meanwhile, the Bank of England at night has an independent mandate to set interest rates at a time for a decade or more while holding a huge pile of debt that it needs to assuage. “Conflicts of interest” is one phrase which springs to mind…”how does this differ from FTX” might be another?

However, let’s end this first podcast of 2023 on a much happier note: the Bombay Stock Exchange (BSE) announced late in December, they had added 10 million investors in just 148 days during 2022 to reach the 120 million investor mark

A rather astounding number outright. Not too shabby either as a percentage of the near 1.4 billion Indian population (and of course, foreigners are mostly locked out of investing directly in Indian stocks).

And on that mysterious and magnificent note my name is Patrick L. Young builder of marketplaces the world over, the publisher of Exchange Invest, the watercooler of the bourse business. 

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

 

LINKS:

ASIC Letter To ASX
ASIC

ASX Acknowledges ASIC and RBA Requirements Related To CHESS
ASX

CME’s Last Open-Outcry Pit Makes The Leap To A Post-Libor World
Finance Yahoo

EU Countries Agree Gas Price Cap To Contain Energy Crisis
Reuters

ICE Warns It Could Relocate Gas Trading Out Of EU If Bloc Caps Price
Reuters

ICE Warns Of Risk To TTF Gas Market Viability If Price Cap Imposed
S&P Global

ICE Warns of Margins That Could Rock European Natural Gas Market If Price Cap Moves Ahead
Natural Gas Intelligence

EU Gas Price Cap Will Be Self-Defeating
Reuters

EU Reaches Deal On Major Carbon Market Reform
ZAWYA

The New York Stock Exchange Reports An Unprecedented Year Of Activity In 2022
Business Wire

Nasdaq Welcomes 156 IPOs And 29 Exchange Transfers In 2022
Globe Newswire

Hedge Funds Say They Lost $95 Million In LME Nickel Crisis
Bloomberg

London Court Throws Out Hedge Funds’ Case Against London Metal Exchange Over $4bn Nickel Debacle
Financial News

National Stock Exchange: NSE Chief Favours Longer Trading Hours
The Economic Times

EU Member Croatia Joins The Eurozone – 01/01/2023
Deutsche Welle

London As A Financial Centre Since Brexit: Evidence From The 2022 BIS Triennial Survey
BIS

Euronext Completes The Sale Of MTS Markets International Inc., A US subsidiary Of MTS S.p.A
Globe Newswire

Euroclear Announces Plans To Stop Supporting ‘Cannabis-Related Stocks’
BusinessCann

SEBI Suspends Trading Of Agri Commodity Derivatives For 1 More Year
Business Standard

Farmer Group To Protest Against SEBI Ban On Trading In Seven Agri Commodities
The Indian Express

ICE Global Network Expands In Key Asian Markets
ICE

LSEG To Acquire Acadia
LSEG

SEBI Enhances Vigil On MCX Technology Transition; Madras HC Issues Notices
Mint

Australian Stock Exchange’s Blockchain Failure Burns Market Trust
Reuters

Dhaka Stock Exchange Extends Technology Partnership With Nasdaq
Globe Newswire

SEC “Gift” To The Industry: Four Market Structure Proposals, 3-2 Votes (In Part), But No Partridge In A Pear Tree
Goodwin Procter

EU States Reject Ban On ‘Payment-For-Order-Flow’ Share Trades
Reuters

Nasdaq CEO Adena T. Friedman To Assume Additional Role As Chair Of The Nasdaq Board Of Directors – Michael R. Splinter Appointed Lead Independent Director
Nasdaq

Carlyle Is Reportedly Struggling To Find A New CEO
Yahoo Finance

Japan Exchange Group, Inc. Change Of Management
JPX

JPX Taps TSE President Hiromi Yamaji As New CEO
Nikkei Asia

Hong Kong Government Names Journalist-Turned-Regulator Julia Leung As The First Woman CEO Of SFC
South China Morning Post

Cboe Global Markets Announces Election Of Hillary A. Sale To Cboe U.S. Securities Exchanges, CFE And Cboe SEF Boards
Cboe

Mountevans Appointed As The New Chairman Of Baltic Exchange Council
India Shipping News

Akif Saeed Appointed As New SECP Chairman
BOL News

Lusaka Securities Exchange Has Announced The Sad Passing Of Its CEO Mrs. Priscilla Chikuni Sampa
Zambian Observer



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