Feb 25, 2023 11 min read Exchange Invest Weekly Podcast

182 Exchange Invest Weekly Podcast February 25th, 2023

ASX eat sits writedown on the Digital Asset CHESS debacle, CZ’s $400 million shuffle, President Zelensky sanctions MOEX and there’s Indo-European CCP confusion

This week in the parish of bourses and market structure:

ASX eat sits writedown on the Digital Asset CHESS debacle

CZ’s $400 Million Shuffle

President Zelensky Sanctions MOEX

And there’s Indo-European CCP Confusion

My name is Patrick L. Young

Welcome to the bourse business weekly digest

It’s the Exchange Invest Weekly Podcast Episode 182

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 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.

This week in Bitcarnage, it transpired SBF’s Guarantors are Ivy League colleagues of his Stanford professor parents, and a judge brought Sam back to court to discuss his usage of VPNs…

Former Stanford Law School Dean Larry Kramer and Stanford tech researcher Andreas Paepcke have been unmasked as those who underwrote the world’s most leveraged security, SBF’s $250 million bail with a $500K and $250K surety, respectively, plus SBF’s parent’s leasehold home ($4 million, but very illiquid due to the land being owned by the university).

Nothing to see there, claim the guarantors, they claim not to be implicated in FTX in any way, shape, or form, and it’s fair to believe they are supporting an old friend.

At the same time, SBF claimed he was just watching NFL via his TV in the Bahamas, which raises questions on just what property he returns overseas, as well as his dubious connection to IP and sports rights, despite having had a stadium named after his company for tens of millions of dollars.

The big news in crypto this past week was the SEC clampdown.

First, the SEC came for the on ramps and having done a lot on first base (that cut crypto V1.0 off from easy access to US dollar banking) now the noose has been tightened by deftly targeting custody and essentially killing many cash crypto exchanges, which require coins to be deposited on exchange before trading. Clearly, GG is on a mission, and if that third base (second base has been the effect of the defenestration of US dollar stablecoins via the Paxos suit) one might live in hope that a homerun is not far off. Quite what that homerun entails is of course, open to wild and vivid speculation.

Frankly, it’s tough to argue with GG’s intentions here for the SEC after the crypto kiddies destroyed value and left many mature financiers convinced the crypto businesses are scammers’ paradise. It didn’t have to be this way but ultimately the digital exchange parish brought this on itself.

Meanwhile, FTX sought the return of $400 Million From an Obscure Hedge Fund and Binance sought to lead an SRO for crypto.

That plan may have been undermined by news broken by Reuters that Binance had their own Binance Moved $400 Million From U.S. Partner To Firm Managed By CEO Zhao.

$400 million moved through a supposedly independent US-related entity/subsidiary regulated by the Treasury Department’s Financial Crimes Enforcement Network (FINCEN) looks rather ugly.

The Reuters report notes “The CEO of Binance.US at the time, Catherine Coley wrote to a Binance finance executive in late 2020 asking for an explanation for the transfers, calling them “unexpected” and saying “no one mentioned them.”

“Where are those funds coming from?” She wrote in one message.

Coley, you may recall left Binance US in 2021 and has essentially disappeared from public view.

One thing unlikely to be disappearing from public view in the near term is our “Bitcarnage” column that comes out daily in Exchange Invests Monday through Friday and it’s worth the annual $349 subscription package alone.

That’s before we account for the panoply of pith and insight about all the world’s exchanges and market structure. Those arrived daily in your inbox via ExchangeInvest.com. Ping us on social media or go to ExchangeInvest.com to sign up for your free month trial.

European exchanges are collaborating for the provision of a consolidated tape in the European Union, a worthy attempt to make sense of the shambles of execution which remains the EU’s cack-handed attempts at a consolidated tape to date, part of the perpetual disappointment machine which has been Capital Markets Union.

Sadly, it’s the end of the road for JSE competitors ZAR X as the South African regulator has stripped it of its license. That was sad but seemingly inevitable after ZAR X had its license suspended in August 2021.

Happier news from the Middle East, EGX and Saudi Tadawul has signed an MoU to exchange development mechanisms.

Meanwhile, Ukrainian President Volodymyr Zelensky of Ukraine put into effect by decree the decision of the National Security and Defense Council of Ukraine on February 19, 2023 “On the application and introduction of amendments, personal special economic and other restrictive measures (sanctions).”

What that means for the parish of exchanges is that MOEX (Moscow Exchange) has been directly sanctioned, part of a wretched year from Russian markets as a result of the Russian government’s appalling invasion of Ukraine.

Happier news from the Philippines, with more IPOs looming, the Philippine Stock Exchange hopes to have a new capital inflow to the exchange and thus the Philippine economy through Manila of $2.9 billion during the course of the year.

Some relief in Mauritius after they halted flights and closed the stock exchange. The good news is that actually, Cyclone Freddy managed to pass about 120 kilometres to the north of the islands, and thus did a relative paucity of damage. Although there was a great deal of sea swell and risk of flooding on the coast of Mauritius itself.

The Indian bourses are reviewing the extension of equity futures options trading hours. That is something being pushed by the National Stock Exchange of India and they’re hoping to expand trading all the way up to 5pm local time instead of the current 9:15am to 3:30pm working hours.

It was a frenetic week for results in the parish. All the details were in Exchange Invest, 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.

ASX numbers were essentially flat but of course, they had a swinging tax write-off as they eat fiscal humble CHESS-pie after the cluster mess of digital assets settlement system technology was finally cancelled and written off.

In deals this week, was likewise quite a busy week for deals interesting to see that TMX Group completed the acquisition of SigmaLogic (owner of LOGICLY).

Black Knight / ICE deal spread has widened their somewhat on concern about the potential divestiture buyers. That’s in relation to the announcement that Black Knight is maybe looking to sell off part or all of their internal technology platform in order to satisfy antitrust authorities.

Meanwhile, the Zagreb Stock Exchange has boosted its stake in the Croatian depository agency. True they’re only up to 2.5% net holding right now but here’s hoping Zagreb Stock Exchange can gradually acquire a more controlling interest in its national CSD. Because, of course, as we all know, and indeed we learned from “Victory or Death?” Blockchain, Cryptocurrency, and The FinTech World settlement are key aspects of all fundamental tenets of markets moving forward.

If you’d like to read that book “Victory or Death?” is published by DV Books and is distributed by Ingram worldwide. Available in major bookstores, including of course the online giants like Barnes and Noble and Amazon.

While you’re waiting for your copy of “Victory or Death?” to arrive, check out our live stream that’s on Tuesdays at 6pm London time, 1 o’clock New York time – the IPO video live show. Catch the back episodes on Facebook, LinkedIn, and YouTube via “IPO-Vid”.

Last Tuesday we had an epic show IPO-Vid #095 with Tim Worstall discussing What Have We Got In Reserve? specifically devoted to the fascinating world of minerals and indeed water often called rare earth. Many many Myths were debunked in the course of that show. Absolutely a must-watch, ladies and gentlemen.

Coming this week we got IPO-Vid #096 and that’s going to be Jeffrey Kutler’s Journey from ATMs to Cryptocurrencies. A great discussion with an award-winning American journalist.

Product news this week, the Beijing Stock Exchange (BSE) has launched its stock market-making trading facility. It officially launched market-making with 13 market makers registered.

ICE has opened up the arbitrage window in London, they’ve launched their new TTF gas futures and options, that’s based out of London as planned. The option is available therefore to anybody who’s interested in the gas price you can trade EU-capped or UK-free. Expect fireworks and spreads if the gas price gets anywhere near the EU’s rather arbitrary limit.

Euronext launched the BEL ESG index.

CBOE has extended its options trading hours to fit traders in all-time zones.

Will the liquidity follow?

European options have been notoriously much less liquid than their counterparts in the USA, even for example in equivalent names that actually have their home listing in Europe (try for example, Ferrari options on Borsa Italiana versus US “RACE” options, which are way more liquid when the US markets are open…)

MCX (Multi Commodity Exchange) of India is going to be launching Zinc mini futures contracts on February 17.

ICE is going to launch a three Washington State carbon allowance futures in March.

The Indian power regulator okayed a new market segment for expensive power.

France and Germany have extended transition periods for trade from Indian clearing houses. That’s of course all part of the rather chaotic process by which Europe seems to have de-recognized Indian clearing houses albeit nobody’s quite sure what is exactly happening.

Technology news this week, SIX shocked the market by scrapping the multi-year BME (the Spanish exchange in which SIX owns) trading platform integration due to unexpected complexity.

At the same time B3 in Brazil has chosen Vermiculus to deliver a best-in-class CSD system.

Digitra.com is leveraging NASDAQ technology to establish its new cryptocurrency exchange.

Euronext has been forced to delay its commodities data due to the ION attack. Something that’s been happening the world over in terms of commodities data.

EDI (Exchange Data International) has launched the Luxembourg Funds Data Service.

QUODD has acquired Xignite and indeed going on about that ION hack of last week.

The derivatives market, the Financial Times intoned sternly has still been hit by fall out from the cyber attack on ION markets several weeks ago.

Regulation news this week, the CSRC (Chinese regulators) have been moving to soothe nerves, saying that new regulations they’ve imposed will not lead to a blanket ban on mainland investors trading stock in Hong Kong or overseas shares.

At the same time, the SEC has finalized the rules for shortening the equity securities process from T+2 to T+1. The DTCC is very excited about that, the T+1 implementation date has been set for May 28, 2024.

Bit of a bad week for the Options Clearing Corporation in the end in relation to federal regulators allegations that the world’s largest options Clearing House had fallen short on enforcing policies designed to manage its operational risks. OCC is ultimately going to pay in total of $22 million in fines.

And that of course brings us back to this whole kerfuffle about India and European clearing recognition. It has to be said the removal of CCP recognition – even on India – which the EU says is not its fault, although I thought they actually began the process of derecognition? Anyway, #It’sComplicated but when you look at the chaos that’s ensuing from simply cutting off the recognition of India’s clearing houses in Indian rupee products, which are a minor effective marketplace for major European banks. That strikes me as a very, very modest harbinger of things to come if the European Union opts for its suicide pact of forcing Euro product clearing to come into CCPs on the continent and predominantly out of London.

Career paths this week, the ASX has gone through another Company Secretary Lucy Barnett. She has resigned as a Company Secretary of ASX Limited effective 17th of February. She was only appointed last October 19. Somebody who lasted longer in office in Australia, but then he was running a rival platform.

CBOE Australia CEO Vic Jokovic is retiring as planned. His successor is going to be Emma Quinn, who joined CBOE Australia from AllianceBernstein where she was Global Co-Head of Equity Trading.

Also interesting in that announcement to see that the CBOE’s International man of mystery, Asia supremo Ade Cordell has been confirmed as having relocated to Singapore. His former position as Head of CBOE Netherlands has been assumed by Alex Dalley, formerly the CO-Head of Sales, European Equities for CBOE.

Over in Brussels, Benoît van den Hove will succeed Vincent van Dessel as CEO of Euronext Brussels as van Dessel reaches the mandatory retirement age.

Congratulations to Oleg Tkachenko, the Chief Executive Officer of Ukrainian exchange who’s become a new member of the board of the International Association of Exchanges of the CIS countries (IAE CIS).

Now when it comes to exchanges ladies, and gentlemen, as many listeners will know who have heard my rants, seen my speeches, etc, in recent year ( all of which I have to say is also available for your group on decent commercial terms for conferences and internal meetings). PLY is partial to noting how frustrating it is that unthinking pillocks grace to many startup conferences with gushing statements to the effect of “OMG, Uber is the world’s biggest car service but doesn’t own any of the vehicles!” and of course related comments on other Web 2.0 megastar businesses.

Naturally, the simple answer to this unthinking gush is to note that “it’s because Mercado Libre, eBay, Uber et al are exchanges!”. Of course, they don’t have to own inventory, albeit those are exchanges beyond the regulatory world remit.

Anyway, congratulations to one of that number of outlying B2B and B2C and C2C digital exchanges that have been on the web for many years, a household name in every sense have finally broken into profit.

AirBNB’s move into the fiscal black has been considerably helped by revenue from “cleaning fees” – probably not something exchanges in the regulated parish can consider, but it must be tempting to try…

And on that mysterious and magnificent note, ladies and gentlemen, my name is Patrick L. Young. Thank you for listening to this podcast #182 of the Exchange Invest Weekly Podcast.

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

LINKS:

European Exchanges Collaborate For The Provision Of A Consolidated Tape In The European Union
DB1

End Of The Road For JSE Competitor ZAR X As The Regulator Strips It Of Its Licence
News24

EGX, Saudi Tadawul Sign MoU To Exchange Development Mechanisms
ZAWYA

Zelensky Enforces Sanctions On Moscow Stock Exchange, Russian Bankers
Ukrinform

With More IPOs, PSE Pegs P160b ($2.9b) New Capital Inflow
Philippine Star

Flights Canceled, Bourse Shut As Intense Cyclone Nears Mauritius
Bloomberg

Indian Bourses Review Extension Of Equity F&O Trade Hours
The Economic Times

ASX 2023 Half-Year Results Market Release Opens New Window
ASX

TMX Group Completes Acquisition of SigmaLogic, owner of LOGICLY
TMX

Black Knight / ICE Deal Spread Widens On Concern About Potential Divestiture Buyers
Seeking Alpha