Mar 25, 2023 15 min read Exchange Invest Weekly Podcast

186 Exchange Invest Weekly Podcast March 25th, 2023

There’s a curious data couple from China as IDBs appear forced to stop their feeds while Skrill has pulled the Binance on/off ramp in British pounds

Transcript

This week in the parish of bourses and market structure:

Chinese IDB Data Cut

FTX and their GUBU Loans

LME get hit with a minor warrant issue in Nickel

B3 are All In On Vermiculus

Happy 160 years to Stockholm

And there’s a big Swiss Imbalance in the shareholder register

My name is Patrick L. Young

Welcome to the bourse business weekly digest

It’s the Exchange Invest Weekly Podcast Episode 186

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: There’s a curious data couple from China as IDBs appear forced to stop their feeds while Skrill has pulled the Binance on/off ramp in British pounds from May 22nd as Natwest looks to restrict all crypto movements.

Meanwhile, even the classic Conor Cruise O’Brien maxim of historic catastrophe GUBU: “Grotesque, Unbelievable Bizarre and Unprecedented,” is barely sufficient to surmise their rampantly ludicrous asset stripping by management loan farago of FTX and Alameda with SBF owing the company’s an eye-popping $2.2 billion.

Two interesting deals with the 10% Vermiculus stake sale to B3’s venture arm alongside EEX adding another modest Central European asset to their expanding portfolio.

NASDAQ has kicked off celebrations for the 160-year-old milestone for their flagship Scandinavian exchange in Stockholm, Sweden.

LME get hit with a minor warrant issue in Nickel.

As I mentioned at the top of the show before the theme tune, there’s a Swiss Imbalance with SIX in the balance to boot – we made our own headlines actually for this one day this week in Exchange Invest because the media had nothing overly exciting to say. The Swiss Exchange would appear to be having a constitutional issue with its shareholder structure brewing…

If you didn’t know that UBS had acquired Credit Suisse last weekend (that was faster than this Credit Suisse PR department could say “merger of equals, oh wait, wait a moment…”) then what can I say if you didn’t know they’d acquired Credit Suisse then clearly I envy your commodious sub rock abode.

A lot of people have been vexed about there being “No Go” on the “CoCos” (I think Matt Levine of Bloomberg was doing by far the best reviews of that and his money stuff this week). Nevertheless, there’s a big angle on UBS acquiring Credit Suisse, for the bourse parish. A very interesting situation indeed. The last time we checked in, was last October 17th for Exchange Invest subscribers in Issue 2482.

Don’t forget, if you want to keep up to date with everything that’s happening in the bourse business in real-time, then you need the daily newsletter of the bourse business Exchange Invest. Anyway, at the watercooler of exchanges at the time I noted Credit Suisse was preparing asset sales, which likely meant a divestment of SiX shares.

There was a clearly constructed SiX shareholder equilibrium, where UBS and Credit Suisse as effectively the dominant duopoly of Swiss banking and particularly Swiss investment banking dominated the market. But they sought to have a structure for SiX where the smaller banks did not feel excluded. Pre-COVID Credit Suisse was still acquiring SiX stock after UBS had been more aggressive still. The last score on the doors we’d recorded was circa 32%, between the duopoly while the SiX website this week actually points to that being 34.5%.

Clearly, while the whole structure of SiX shareholding is intended to ensure no single dominant party or duopoly can dominate…the logic of the system built around UBS-CS and the rest, now looks wildly lopsided when it becomes UBS alone at 34.5% and the rest.

That holding of more than a third of the stock in SiX Swiss exchange, I suspect will not remain for the long term.

Right now, I suspect the Swiss regulator FINMA, the Swiss National Bank, and the government of Switzerland are focused on smoothing the choppy waters. As opposed to what goes on with a little piece of market infrastructure, which is obviously clearly vital to the parish of exchanges, but nonetheless a lot less important than what has been going on in the mainstream banking business during the course of this week on the Swiss high street somewhere between Bahnhofstrasse and Paradeplatz.

Very roughly we can impute (based on the Banque Belleville deal while back) that SiX is worth about $5 billion. Of course, it’s private, and in Swiss German private means rampant takeovers will not be frowned upon, merely received with polite suspicion then ignored.

Of course, there might be some enterprising souls who wish to take a strategic stake and the Swiss might find themselves open to such a move – it depends, I suppose how much UBS flex its muscles.

Ladies and gentlemen, if you want to read the rest and understand who the possible bidders might be, you need to be a subscriber to Exchange Invest. Some of the crown jewels, we’re not going to be giving away free in this podcast. We do enough for free these days. If you want to subscribe to Exchange Invest, you can sign up easily, ping us a message on social media or direct message me on any social media (Facebook, LinkedIn, or YouTube) and we’ll get you signed up rapidly or you can go to ExchangeInvest.com.

Bitcarnage this week: The FTX debtors filed schedules and statements of financial affairs with the bankruptcy court. The most exciting bit was a breakdown in payments and loans to the founder chiefly made from Alameda research as opposed to from FTX per se. And the numbers were simply eye popping $2.2 billion to Sam Blankman-Fried, $587 million to Nishad Singh, and $246 million to Zixiao “Gary” Wang. A mere $87 million to Ryan Salame seems like small change, but it’s still considerably more than 99.9% of the world’s citizens will ever see in their entire family’s lifetime. $25 million went to John Samuel Trabucco and rather emphasizing the fact that this really was a major league boys club, the only woman on the list Caroline Ellison received what seems almost paltry by comparison to $6 million.

Leaving the $6 million woman to one side, these numbers for any corporation would be broadly 7 sigma beyond GUBU. For a relative startup like FTX, this is a simply sublime amount but the guilt-free one continues to seek yet more at the trough.

Yes, indeed, SBF is demanding that FTX cover up to $5 million of his legal fees and to prioritize reimbursing his legal fees over and above the money. You know that money that belongs to the customers that have disappeared and is the reason why Sam Bankman-fried is currently on a catastrophically huge amount of bill payments to live in his parent’s basement.

What an utterly grotesque farce…and to think some apparently credible people in the parish appeared to believe these thieving charlatans when we assembled at Boca Raton, and thereafter last year for the FIA Conference.

All the Bitcarnage news is in Exchange Invest Daily. There’s much much more where this came from. DM us on social media now to subscribe.

Over in Hong Kong: Great excitement, the 3-month countdown is now being followed in Hong Kong with veracity more often reserved by small children awaiting Santa Claus.

The excitement in the SAR is palpable and entirely justified because the Hong Kong Exchanges Connect system is really hitting its stride in a way that makes what was a fabulous gateway into a massive capital portal between the world and China’s mainland. Looking like an elegant piece of intermediation through Hong Kong’s world class exchange and financial center. Suddenly, that gateway becomes an enormous portal and looks all the more exciting still, as we’re gonna see Renminbi payments and indeed therefore, a free flow of investment between Chinese stocks and Hong Kong stocks through the Stock Connect gateway.

Some concerns in crypto land: Moscow-based exchanges are offering to anonymously convert stablecoins for cash in the UK. That was a report from Transparency International this week which will have doubtless unnerved UK authorities as much as it will everyone else has been looking at the sanctions that are supposedly levied upon Russia.

There are also concerns about whether London can recover as a center of capital raising expect that story to go on and on.

The truth is yes of course London can recover. The problem is it means a pivot away from the LSE, me thinks, as that now appears less motivated to be in capital markets and sees data as a panacea for profitable expansion. I’m not convinced of that move but at the same time, if London really wants to have a world-class equity capital market, it needs to do something nice. And that I think involves a greater swing towards the other exchanges, which are already highly successful in the London market, such as CBOE Global Markets, Aquis, and other platform participants across the city.

Charles Schwab was doing a lot this week to build itself as a safe port in a storm trying to take in as many new assets as possible. Receiving billions during the course of the past week after the Silicon Valley Bank, Signature Bank, a Sesame Street, S Bank – week of collapses.

Over at the Korea Exchange, the CEO there wants to lift the curb on short selling in the Korean market.

Many happy returns to NASDAQ Stockholm, they’re celebrating their 160th Anniversary, which is a huge milestone for the Swedish capital market.

While over in Nepal, not such happy gathering, investors were being arrested for staging a sit-in at Nepal Stock Exchange offices in Bhadrakali. They were demanding the implementation of the recommendation report prepared by the task force formed under the coordination the then Deputy Governor of Nepal Rastra Bank Shivraj Shrestha for seeking capital market reform.

One CEO being misrepresented on social media this week was the Borsa Malaysia boss Muhamad Umar. The exchange issued a statement it would like to reiterate that these Facebook pages have no relation to Muhamad Umar nor the exchange and measures are being taken to remove them.

Hopefully Bursa Malaysia will have a better time getting the execrably useless Facebook numpties of matter to remove this material than has been the case where somebody actually copied my (the Patrick L Young) Facebook page in its entirety almost a year ago and the Zucker-barbarians have done absolutely nothing about it after umpteen calls, cries, and complaints.

Results this week: A busy week for results in parish. One highlight, BVC Group (that’s the Colombian Stock Exchange which of course is soon going to be emerging into the Chilean and Peruvian Exchanges) has great revenue numbers of +25%, EBITDA +16%, merger costs a bit of an issue there, overall Net Profits down unfortunately -34%.

In new markets: There seems to be life, possibly even a market actually happening. Archax which has been good grief regulated now for what 2 years or more by the UK regulators. Apparently, they are actually launching their primary raise platform.

Indonesia’s IDX is going to be launching its carbon exchange on National Independence Day.

Nairobi Coffee Exchange (NCB) is set to go live in April.

Bursa Carbon Exchange has completed Malaysia’s inaugural carbon auctions.

Coinbase is looking for a platform outside the United States of America. They don’t know where they don’t know when they don’t know quite what. And this seems to be well, the latest double down, quadruple down, octuple down and some might say it’s a satoshi down AKA there are 100 million satoshis in one bitcoin but there have been so many double downs by Coinbase so far in their short but highly troubled stock market history. Who knows where we’re going at the moment? Anyway, Coinbase is apparently looking at delivering a new platform outside the United States of America, although they haven’t decided where and under what regulatory base presumably that’s to try and bulwark against there are many regulatory clampdowns taking place in the United States of America.

A very exciting week for deals, let’s just highlight a couple of major ones. The L4 Venture Builder (B3 of Brazil’s Venture building arm) has taken a minority stake in Vermiculus. 10% of the surging Vermiculus software vendor. There’s been a lot of volatility in the exchange vendor business of late more than that is to come. And Nils-Robert Persson has led what amounts to a remarkable near stealth bid out of

a serious competitor to the established ventures (including of course Cinnober which he himself co-founded which is now within the NASDAQ domain).

The announcement last month was of course that B3 Chooses Vermiculus to Deliver A Best-In-Class CSD System, and now B3 venture arm has multiplied that with a hefty investment to acquire 10% of the vendor itself. That’s a canny deal to as B3 won’t be viewed as a potential threat by many potential Vermiculus clients.

Elsewhere GET Baltic, that gas market is going to become part of the EEX Group. A further step towards Peter Reitz’s EEX empire building a Pan-European gas market. Well done Peter and team.

Of course, what we can see in this world ladies and gentlemen is that it’s a “Victory or Death?” environment and indeed “Victory or Death?” Blockchain, Cryptocurrency, and the FinTech World was the name I appended to my most recent book. It was 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 live stream, Tuesdays at 6pm London time (it’s oscillating in other parts of the world due to the UK not having yet moved along with Europe towards Daylight Saving Time).

Nonetheless, you can catch the IPO video live show. The back episodes are on LinkedIn, Facebook, and YouTube you can search via “IPO-Vid”.

Last week’s show #099 was a wonderfully interesting segue into the world of numismatics with Colin Formosa. He’s the Secretary General of the Malta Numismatic Society discussing Maltese Money & More. Really, really worth a watch ladies and gentlemen.

Coming on Tuesday IPO-Vid hits it’s 100th Episode and we’re going to have the fabulous James block of Dirty Bubble Media. Doing (guess what?) yes indeed, James Block will be Examining Dirty Bubbles. Don’t miss that Tuesday at 6pm London, 7pm European time.

Product news: The London Metal Exchange (LME) is seeking to rebuild its first step back after the Nickel nightmare was a major profile in the South China Morning Post this week. Of course, the parent company of LME, being the Hong Kong Exchanges group. It’s interesting to note what has been going on there there was also this unfortunate kerfuffle 0.14% I think it was of the total amount of nickel stock turns out for the last 3 years to have been nothing other than rocks. Rocks that had been attributed to JP Morgan somewhere along the trading pattern of life but nonetheless, JP Morgan were themselves entirely not guilty. They were in Rotterdam warehouse, and obviously, a lot of people are very concerned about how that places LME at a time when major league players in the industry such as Trafigura all the way through to BHP are requesting that the LME looks at reviewing the overall status of the contract specifications for the nickel product. That comes in the same week that the LME Nickel lawsuits have now reached up to at least $581 million from aggrieved counterparties following the nickel nightmare last year.

Meanwhile, on the Chinese mainland Guangdong government is helping the Guangdong Futures Exchange to explore weather futures.

China has published draft rules for 30 year treasury futures trading at the CFFEX. Of course, that’s the Chinese financial futures exchange, which has already launched successfully futures contracts for 2-year, 5-year, and 10-year Chinese government bonds. And indeed watch this space because that’s somewhere that thanks to Stock Connect soon, the Hong Kong exchanges will be moving into the same market.

On the other hand, one piece of bad news, the Chinese-Swiss stock link that seems to have fallen victim to somewhat flimsy foundations. The Chinese securities regulator is holding applications from mainlan- listed firms seeking to sell their global depository receipts in Zurich.

And finally, an ongoing scandal, we’ve got the prime minister and finance minister of Western Australia facing the music on this scandal at the Perth Mint. Many on the opposition Liberal Party are promising to ask the labour politician uncomfortable questions about just why it was thought to be a good idea to reduce to just above the four nines threshold, the purity of Perth Mint minted gold.

Technology news this week: Boerse Stuttgart’ crypto app BISON expanded all the way back into legacy markets. It’s now available to trade through to securities as well as the wonderful new new thing of crypto.

The Head of EGX Ramy El Dokani announced this week the launch of the first center to spin innovative financial technology solutions for non-banking activities in Egypt under the name “CORBEH”.

AMX (Armenian Exchange – now under 65% ownership from the Warsaw Stock Exchange) have launched a new trading system in the market AMXTrader, which fully replaces the old RTS-Armex Plaza system, as the exchange of Armenia moves forward from its headquarters in Yerevan.

Regulation news this week: Yes, that Chinese regulatory requests asked the money brokers to suspend their data feeds. Quite a strange move to make from any perspective uncertainly plunged into chaos, the entire inter-dealer broker market within China’s mainland.

At the same time, Belgium is making a pretty strong move. They’re requiring all crypto ads to state “Only Guarantee in Crypto is Risk”

Career paths this week: We got the Deutsche Börse Annual Report published for 2022. Most exciting piece of information there was the fact that Deutsche Börse CEO Theodor Weimer received $12.2 million in total remuneration. That was more than doubling his 2021 package as he received a first tranche of performance related shares.

Now that’s nice work if you can get it, particularly as Theodor Weimer has been by far the most parochial, least often seen overseas CEO of DB1 in its entire history. The fact that Theodor Weimer’s profile is so low overseas, he makes Terry Duffy of CME looks quite the globetrotter by comparison.

Most exciting Career paths news of the week, Luc Bertrand will be helming the board of the TMX Group replacing the retiring Charles Winograd as chairman.

That’s absolutely awesome news for both Luc and the exchange parish as we learnt of a splendid piece of prodigal son repo. Luc Bertrand is the most influential individual in the modern history of Canadian exchanges. His revolution at the Bourse de Montreal shaped the TMX that exists today. In that respect, for Canada’s financial markets to move forward at the quantum pace they must in a very competitive marketplace, there is simply no better believer in the Canadian Federation to drive the exchange group forward. It’s a world of opportunity, and Luc knows how to profit from that both within Canada and beyond.

Meanwhile, changes the NZX board Rob Hamilton who was a former CFO of the SkyCity Casino in Adelaide. After he retired the casino got embroiled in an AML/KYC kerfuffle, he himself hasn’t been named personally, although obviously there are concerns as he was the former CFO. In that regard, Hamilton has taken the sensible decision to step back from becoming the next chairman of the New Zealand Exchange, a shame for him personally. And obviously, it’s great though, that New Zealand Exchanges can at least in the short term, still rely on their excellent Chairman James Miller, who was due to retire at the annual shareholder meeting in April.

I have to say, selfishly for the parish, I think it would be much better if James actually stayed on for another term but I think his work is probably done it ends at NZX as far as he sees it, and he expects to stand down in due course.

And that leaves us with a little automotive thought ladies and gentlemen. Over a quarter (25.7%) of the new cars bought in the UK last year were grey, according to the industry body Society of Motor Manufacturers and Traders. The next most popular colors were black ( 20.1%) and white (16.7%)

Across the world, grey, black, white, and silver cars account for more than 80% of the total number of cars sold globally.

Part of the issues apparently residuals – a healthy dose of, say yellow (for example, the racing color of Belgium, seeing as you wondered) that apparently means a price discount of 6-8% in the secondhand market, which means a more expensive lease or a simple capital loss to whoever has been leasing the car.

Indeed, having just spent a week in that buzzing entrepreneur of American positivity Florida, I minded to think their data may be a bit different as they seem to have a lot of sunny and wonderfully colorful cars. Or perhaps that’s because I only noticed the modern-retro Mustangs, Camaros and Challengers nestling amongst the rice crushers and SUVs. Anyway, actually, at the headline level across the whole federal US, the data is remarkably similar to the world: