Feb 4, 2023 10 min read Exchange Invest Weekly Podcast

179 Exchange Invest Weekly Podcast February 4th, 2023

German Stock Exchange Boerse Stuttgart’s digital business had a new boost with investment from Tokyo-based financial services firm SBI Group and Axel Springer.

Transcript:

This week in the parish of bourses and market structure:

NSE Co-Lo Fine $12 Million

Binance Commingles

ICE Creates A Genuine Gas Choice

And aside from bail collateral issues, SBF loses a Privacy Naming Row

My name is Patrick L. Young

Welcome to the bourse business weekly digest

It’s the Exchange Invest Weekly Podcast Episode 179

Good day ladies and gentlemen, this is a very brief reduction of highlights amongst the key headlines from the week’s news in market structure. All the analysis of the many events and happenings from the past 7 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 key story this week, the Co-Lo fiasco cost NSE over $12 million as NYSE investigated a technical issue which made the market open a bit of a wild ride on one day.

Binance commingles was a bit of a faux pas as Binance did a sort of “pick & mix” on customer funds while MarketAxess reported decent numbers and Abaxx looked to enter the LNG futures market from Singapore.

ICE at the same time has created a genuine gas choice in Europe. They haven’t moved the pipes but they have raised the possibility of diverting the market. ICE embraces EU TTF suicide caps in Europe and opens a free market in London.

And apart from collateral issues, SBF lost a Privacy Naming Row as Judge Lewis Kaplan delivered a judgment to publish the names of the 2 hardy souls backing the hyper-leveraged bail facility keeping SBF out there on the internet playing World of Warcraft and Storybook Brawl.

This week in Bitcarnage, our exclusive series covering the ongoing crypto winter. It’s interesting to note that Binance and OKX have both failed to gain crypto derivatives market share in the wake of FTX’s demise.

Meanwhile, New York regulators reminded crypto entities to separate client funds, which came uncomfortably close to a Binance announcement that they had inadvertently commingled client assets in the wrong wallet.

In the wake of their shambolic mixing of coins in the wrong wallets, Binance also announced what they deemed a great leap forward, removing self trading by clients…if the clients want to!

Coinbase meanwhile, was fined $3.6 million in the Netherlands, while there was talk of the ultimate “hail Mary pass” Celsius May Issue A Bankruptcy Crypto Token To Repay Creditors “#srsly?”. Didn’t even cut it here and that was before we saw the perhaps most damning liquidators report we can ever recall.

The Celsius Inc: Final Report Of Shoba Pillay, Examiner is about as close as any administrator can get to a full spaghetti western script. Presumably coming soon, “A fistful of Tokens” and “A Few Tokens More” from other liquidation reports. It looks as if Celsius managed to fill the bingo card of dubious activities, including outright pure play ponzidom (paying off old accounts with new money). I haven’t read the whole sorry tale yet, but a quick skim doesn’t bode well.

For example, In April 2022 Celsius’s Coin Deployment Specialist describes Celsius as practice of “using customer stable coins” and “growing short in customer coins” to buy CEL as “very ponzi like”. Yes, indeed they described it as very ponzi-like. These are not the sort of words that for one thing, keep you out of an orange jumpsuit or keep your company solvent for long as clearly was the case with Celsius.

As the report puts it very succinctly: “The business model Celsius advertised and sold to its customers was not the business that Celsius actually operated.”

The LA Times produced an article that might have appealed at one time to the likes of Mrs. Fried, but now she’s not guilty of taking possession of a $16 million condo in the Bahamas as part of an alleged fraud, her view may have changed. It’s a leasehold saga: Sam Bankman-Fried’s Parents Used Their House To Bail Him Out But They Rent The Land From Stanford.

Albeit apparently not an issue if the bail is collateralized with the property, although if SBF flees it makes the sale #verycomplicated for the Feds. Not quite as bad as having some Sam-s—coins to manage to bail out what goes on, but any buyer for the property would be contingent on Stanford granting permission.

NYSE, in the big world of legacy exchanges, has been investigating technical issues that caused a wild market open. Very many early trades had to be canceled after a NYSE employee failed to properly shut down Cermak’s disaster-recovery system — leading to a disaster.

Same time as the NSE’s various disasters Co-Lo being amongst them. In Co-Lo alone, they’re having to pay ₹100 Crore in penalties to SEBI for their lapses (that’s about $12.2 million in total) which is a pretty astounding amount of money. On top of the fact that there were various other orders made against the NSE over the course of recent years for other different offenses.

At the same time they handed bids in this line saying it was time to shut the past on the NSE.

I’m somewhat minded to agree with the editorial – the NSE has been working to reform and while it may take some time for the Indian blob to react, it’s time to work towards rehabilitating the NSE after its period of wayward hubris.

At the same time, one thing which is not wayward hubris but rather was an incredible success, a monumental achievement no less in India this week. India has achieved a complete transition to a T+1 settlement cycle in equity markets.

It was a 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 let’s look at a couple of edited highlights.

MarketAxess is looking very, very good. Revenues +8%, Diluted EPS +15%.

NASDAQ is a little bit more static overall, with Net Revenues at 5% for the whole year in 2022 but nonetheless remarkably good numbers given they had some spectacular quarters in recent times. Results at JPX, MSCI, and others were all covered in Exchange Invest over the course of the week.

Plaudits to this week’s winner DFM (Dubai Financial Market) recorded a net profit increase of 41.7%.

It was a busy week for new markets in the parish but the most exciting new market of all was clearly ICE’s plans to implement the EU market correction mechanism, a price cap on gas.

Well, that all sounds very Canutian, but doesn’t make sense. How can that be an exciting new market? Well, the thing is, that’s the status quo now in continental Europe, but thanks to Brexit ICE can do its own thing in London. And what they’re gonna do is they’re going to run an open free TTF market, which will actually be priced according to what the market decides. Let’s see where the volume goes in our business in the near future.

Deal news this week, the LSEG strategic partnership with Microsoft has completed their share purchase into the LSEG relieving Thomson Reuters and Blackstone of some of their shares.

German Stock Exchange Boerse Stuttgart’s digital business has had a new boost with investment from Tokyo-based financial services firm SBI Group and digital publisher Axel Springer.

If you’re trying to work out just why Axel Springer and SBI Group might be investing in Boerse Stuttgart, then you ought to consider reading my latest book “Victory or Death?” Blockchain, Cryptocurrency, and the FinTech World. 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 Tuesday 6pm London time, 1300 hours in New York time – it’s the IPO video live show. Catch the back episodes on LinkedIn and YouTube via IPO-Vid.

This week we had the joy of hosting the IPO-Vid #92 with Alina Aldambergen: Making The KASE For Kazakhstan as the Chief Executive of the Kazakhstan Stock Exchange.

Coming up this week, we’re gonna have a fabulous show with Craig Pirrong: The Streetwise Professor Speaks

Product news this week, the Ex-Citi analyst who exposed LIBOR has now taken aim at its SOFR successor.

It’s almost as if a cabal of central bankers, regulators, and politicians rushed into making a replacement for the established interest rate benchmark methodology without really thinking it through. How on earth could government technocrats let us down in such a way?

Meanwhile, in another move of the “what could possibly go wrong?” genre, Brazil and Argentina are apparently discussing whether or not to combine their currencies.

Abaxx submitted an LNG futures contract specification and published a white paper on physical commodities markets with a view to launching their LNG solution from Singapore while Saudi Arabia is planning to boost the listing of agricultural firms on Tadawul.

Technology news this week, the Philippine stock market had a bit of an oops nasty delaying the opening for half an hour on Wednesday because of a technical issue.

Equally MSCI partners with Google Cloud, they’re going to be building a secure global investment data platform in the cloud.

JPX CCP’s, blockchain technology utilization has begun. They’re implementing a rubber futures settlement by delivery as a first opening into the world of the distributed ledger on top of their CCP.

In regulation news this week, the most interesting of the many elements related to crypto was the SEC Chair Gary Gensler saying there are 3 ways to tell if a crypto project is a scam:

“(1) the crypto project can’t provide clear documentation regarding how it works or how it plans to deliver on its goals; (2) the project can’t demonstrate that it’s in regulatory compliance; (3) the project can’t easily explain what it is at all”.

In a rare moment of Genslerian diplomacy, GG avoided adding a fourth point “when the chairman of the CFTC says the idea is something like an exciting new frontier to be considered…”

Meanwhile, the UK Treasury is planning to bring crypto under city rules. That of course could be both a poisoned chalice as well as a welcome move depending on what happens especially if crypto investors ultimately fall into the idea of being bailed out along the way.

Career news this week, Oliver Hans is going to be leaving the Boerse Stuttgart Group.

The Microsoft VP of Cloud Scott Guthrie is joining the London Stock Exchange Board as expected. And of course following the completion of Microsoft’s acquisition of a 4.2% stake in the LSEG.

Tim Baker, CFA has joined Expero as Managing Director of the Financial Services Practice Lead. All the best to Tim who helped position BMLL for their us launch over the past year.

And finally this week in career paths all the very very best in the future to Matthew Gibbs, the seemingly indefatigable General Manager, Media and Communications at ASX Group

Matt has endured almost 22 years in the parish (19 at ASX, 3 at the Sydney Futures Exchange across 7 CEOs and 5 chairs). In Corporate Communications terms, this has often been a challenging brief defending the ASX during various kerfuffles and of course, on the basis of several management foibles, such as the CHESS non-replacement et al.

However, Matthew has demonstrated throughout fairness and maturity that I truly appreciate: he’s a genuine PR professional who I recommend wholeheartedly, having always robustly and rationally promoted his charge when engaging and answering queries promptly. It’s been a real honor to work with you. Good luck, Matt. You may never want to see another exchange but I would be very happy if you return to the parish after a much-needed chance to unwind!

Over in South America, the unification that’s going on between Santiago, Colombia, and the Lima Stock Exchange has led to them announcing their candidate for the CEO position of the unified exchange. And it’s someone we actually do happen to have on our roster of people we can identify with from South American CEOs from the position of Europe or North America. Here’s the BBC Columbia boss, Juan Pablo Cordoba, who was previously chosen as a compromise World Federation of Exchanges Chairman, when Sandy Frucher’s mercurial demeanor garnered significant opposition from certain quarters in what was probably the last WFE Chairman election anybody actually paid attention to before the organization sadly accelerated its slide into obsolescence and broad irrelevance.

There’s a new head of Turquoise, congratulations to Adam Wood who’s going to endeavor to fill the enormous boots that were left behind after 9 incredible years by Dr. Robert Barnes.

And that leads us to consider ‘Big World’ ladies and gentlemen, I spent a week in the UAE recently I didn’t manage to make it as far as Kuwait.

Interestingly that the moves there, the emir has pardoned dozens of critics (many of whom were in jail )under a new amnesty It’s part of a reform process to build political cohesion and internal consensus to speed up development and indeed lure Foreign Direct Investment as the nation considers its future after oil.

At the same time, I would also note Kuwait Buys Turkish-Made Bayraktar TB2 UAS, the fabulous drone, which has been so successful, both actually in various parts of the Middle East, and becoming Turkey’s most spectacular military export of the modern age, as demonstrated to great results in defending Ukraine most recently.

And on that mysterious and magnificent note, ladies and gentlemen, my name is Patrick L. Young. I wish you all a great week in blockchain, life, and markets.

Links:

Coinbase was meanwhile Fined $3.6m In The Netherlands (CoinTelegraph)

NYSE Investigates Technical Issue That Caused Wild Market Open
Bloomberg

NYSE Mayhem Traced To A Staffer Who Left A Backup System Running
Bloomberg

NSE Co-Location Case: NSE To Pay ₹100 Crore In Penalties To SEBI For Lapses
Mint

Indian Securities Tribunal Gives Relief To NSE In Colocation Case
Reuters

Editorial. It’s Time To Shut The Past On The NSE
The Hindu BusinessLine

India Achieves Complete Transition To T+1 Settlement Cycle In Equity Markets
Sakshi Post

MarketAxess Reports Q4 And Full-Year 2022 Results
MarketAxess

Nasdaq Reported Financial Results For Q4 And Year 2022
Nasdaq

DFM – Press Release Regarding Financial Results For The Year Of 2022
DFM

UAE’s DFM Net Profit Up 41.7% To AED 147.1m ($40.05m) In 2022 -Statement
MarketScreener