Oct 6, 2019 9 min read Exchange Invest Weekly Podcast

Exchange Invest Weekly 016

How much money can they get from the banks? Welcome to the Exchange Invest Weekly.

Apart from all the other excitement of the past week in London, a sudden cold snap and a lot of rain had helped me almost lose my voice, hence a slightly hoarse and even faster than usual review of the week!

Transcript

This was the week when HKEX enjoyed two separate sets of conversations. How much money can they get from the banks? And the investors? Well, some of them are saying: “What do we want? 20%! LSE deal: is it on? Welcome to the Exchange Invest Weekly. My name is Patrick l Young

Indeed, the Hong Kong exchanges LSE potential deal leads once again. Remember we've got a big calendar day coming this week, the ninth of October. Will the LSE be talking or willing to go hostile? What we know is the Hong Kong exchange has been talking to a lot of bankers. They're looking to raise the cash component of their bid clearly. Investors are asking for anywhere up to 20% more in terms of the total bid value, and they want that in cash. Interesting to see what takes place next week.

Meanwhile, in deals this week and NASDAQ have sold their stake in Scila to Max Siebert, the investor based in Sweden. They've had a minority shareholding as a result of their acquisition of Cinnober, who separately had held that Scilla shareholding for over a decade.

Euroclear: watch this space. The story begins. Hellman and Friedman, a massive us buyout group apparently exploring a bit, so at least the investment bankers leaked to us this week, it seems, via their friends at the Financial Times. A potential offer could value Euroclear up to 5 billion pounds. How much is Euroclear worth once they clear out the seven tiers of Belgian middle management? I wonder. The answer. There's a great deal more. But of course, that requires some form of Congress of Vienna-like settlement in order to build a new European settlement structure which is going to be actually not owned by a group of different people. It's going to be a series of different structures in different places.

Public Offerings this week, Boursa Kuwait have launched their offering. it started the first of October, gonna run all the way through to December the first, so a massive opening window. Their subscription is open, the government's going to be selling a 50% stake that will leave them with only 6%. While Of course, as you will remember from previous podcasts, and indeed the extent invested in newsletter 44% of the organization is in the hands of a consortium who invested earlier this year comprising the Athens Stock Exchange, National Investments Company, First Investment Company and Arzan Financial Group.

Apart from the Greeks, of course, they're all based in Kuwait.

NASDAQ beefed up their very interesting governance solutions business this week with the addition of the Center for Board Excellence sound parish stewardship for better boards. Elsewhere, the Philippine Stock Exchange announced it has spent 445 million Philippine dollars in buybacks. Borsa Istanbul have restructured their main markets. They're going to have a couple of large free market floating bourses and indeed two tiers of star startup or at least SME markets. can do something like the UK AIM but divided in two.

The Indonesian central bank, they are paving the way for a derivatives Clearinghouse to reduce risks. We were told by the good folks of Reuters. Well, the Business Times in Singapore noted that the stock exchange of the city state SGX aims to be the single point of access to Asia. CBOEs European post-Brexit share trading hub and Amsterdam got off to a quiet start for trading late in the week.

And of course, then we move on to data with the SIP wars. Lots happening there. The stock exchanges have been “dealt a blow” as Bloomberg law put it because the SEC is reviewing the powers to raise fees. Frankly, that strikes me as a highly contentious and prescriptive move. Can we investigate overcharging by investment banks in a cartel like fashion as well? it amounts to a great deal more money than data fees, a great deal higher percentage than data fees. And indeed, Curiously, isn't it interesting how when you go for, say an IPO, all listing fees and all related fees, all seem to have an almost uncannily similar tone of financing from one bank to the next?

Cum-Ex rattles on: The EU watchdogs have finally woken up, they’re worried about double tax reclaim, they’re going to try and review and produce some regulation against that.

Yes, I'm in two minds about that.

Of course, they need it. It's a good thing. Of course, they need to regulate and stop this absolutely disgusting situation of frankly, theft by greedy bankers. But at the same time, is the EU really fit to produce cohesive rapidly produced coherent law? Well, on one side we have MIFID 2 that worries us a great deal, doesn't it Ladies and gentlemen? However, one looks at it. I don't have a lot of faith that the EU can coherently regulate in a short period of time. Meanwhile, Merrill Lynch hid tax fraud profits, one trader has told the court as this scandal rumbles on.

In the world of alchemy, alchemy, I suppose for the Middle Ages, the art of trying to make gold out of well, any old thing, you know, recycled, I don't know, toenail clippings or something. Everybody's been talking in the last couple of centuries or certainly the last century about the concept of a free lunch. And when it comes to nobody's free lunch. That's the whole issue behind stock commissions and indeed, commission free trading. Commission free trading is now all the Zeitgeist of the US equity market. However, thankfully, Interactive Brokers Chairman and CEO Tom Peterffy has weighed into the affair and pointed out the fact that even though he's now offering a commission free trading device, it's all about being a trade war. It helps investors potentially save money, but above all else, it's not free!

Thank you, Thomas, Peterffy for a blunt and transparent statement, a typical Peterffy clarification. There is no such thing as a free lunch, which briefly attracted the attention of alchemists everywhere. This is just a way of concealing commissions by selling your order flow to probably get you worse execution. And it's a mess. I'm actually completely against the whole concept of commission free trading because it's simply storing up a huge, huge, huge Bonanza for the legal fraternity and multiple class-action suits in the future. There is no such thing as a free lunch and zero Commission does not mean no cost.

Meanwhile, in People News, TP ICAP’s long standing director, Angela Knight who's been a non-exec around there for a couple of terms: She's going to be stepping down. In the same week, I hear from my agents in the Square Mile that she's also joined the court of the Worshipful Company of Bankers. Congratulations to Angela on an excellent term with TP ICAP and all the best with the Guild of Bankers.

Elsewhere. Wu Lijun, who is the Shenzhen Stock Exchange’s Communist Party Secretary and Chairman has become Vice Chairman and general manager of the vast financial conglomerate Everbright. Congratulations to him.

Meanwhile, Euronext FX have added the veteran Ben White into the fold. And indeed speaking of Euronext, one of their most illustrious alumni Lee Hodgkinson, the CEO of OSTC, the multi-faceted company that began as a prop trader, but does a great deal more these days and all sorts of parts of the world. He's becoming the non-executive chairman of BMLL technologies a ‘data engineering as a service’ company. All the best to Lee and indeed, all the best to BMLL Technologies on picking a very, very astute chairman.

Regulation news, LedgerX claim that personal animus drove the former CFTC chair to stall approvals for the crypto exchange. That sounds like a bit of a challenging argument for the future let's just not go there, shall we Ladies and gentlemen? There's a good article on CNBC actually this week TV18 that's the Indian subsidiary “why everyone loves to hit SEBI” certainly a headline I think that a lot of people have said over the years CFTC were quite active, they were finding a number of people including a couple of the FX Options Brokers, but overall it was a quiet week for regulation per se.

Technology news, ladies and gentlemen, Percival CSD solution “Depend” has gone live in Ukraine. And the Japanese exchange group have a schedule for setting up systems that they use secondary data center. Once again, a reasonably quiet week in the whole technology remit as well.

Over in products, a flurry of news. There's a new rule about ETFs from the SEC. That has encouraged the Intercontinental Exchange who we know, were planning an ETF hub.

Meanwhile, NASDAQ cracked down on the IPOs of small Chinese companies, as we heard actually, briefly in the last installment of this weekly podcast. Quite fascinating. It's of course, a very, very good example of all the problems that may arise between the London Shanghai connect in the near future and the many advantages that you have from a Hong Kong - London Stock Exchange tie-up, because Hong Kong being in the same time zone being actually in the same overall administrative area, albeit their SAR under their own system, but they are connected to the Chinese landmass, It must be a great deal easier to manage these sorts of things in a way that NASDAQ has struggled with quite understandably, by dint of being on the other side of the world. Meanwhile, the second element to that story was his ‘inserene’ Trumpiness, the President of the United States of America, was saying something about banning Chinese listings altogether. Not helpful for free markets per se, but surely manna from heaven that the prospect of a Hong Kong exchange London Stock Exchange tie-up, which could become a huge Pan Pacific capital marketplace.

LIBOR LIBOR LBOR as usual, everybody worried everybody concerned? Nobody quite knows what's happening. Well sounds a bit like Brexit only with interest rates, frankly,

Interesting story though I have to say was 70%, or more of European government bond yields ended this week in negative territory, ladies and gentlemen, that strikes me as something that's only storing up problems for the future. And that, ladies and gentlemen, I think it's a perfect note upon which to end this remarkably swift weekly bulletin. I'm terribly sorry, it couldn't be longer. But actually, we've had, well, an incredibly frantic fortnight in London, we've been recording a lot more podcast material, which will be coming to you soon in another format.

And finally, ladies and gentlemen, on a personal note, Victory or death, it's live we have a magnificent launch with the sheriff of the City of London, Oldham and Professor Michael Minnelli this week at the GuildHall in London that most historic and storied business.

The initial copies were distributed to a lucky few buyers who were in attendance on the course of the evening. And ultimately, we've had a wonderful reception so far. I'm delighted to say the book is going to be parsing through the world's publishing systems and it will be live in the very near future Ladies and gentlemen, coming to a system near you, be at Amazon, be at a bookstore, be it all manners of business distribution across the world, but admittedly, they don't quite run the T plus two and publishing so it'll probably be about t plus 12 to t plus 20. However, Victor death is live. I have a few copies in my suitcase, and I'm now about to leave London. Thank you very much for joining me for the Exchange Invest weekly. My name is Patrick L. Young. I look forward to speaking with you next week.

Transcript below, links this week:

Some LSE Investors Call On Hong Kong Exchange To Up Bid By 20%, Add Cash
Reuters

China's Financial Market Reform Opens Up Opportunities For Hong Kong, Strengthens Gateway Role
South China Morning Post

HKEX To Seek Up To $9.8Bn Loans To Fund LSE Takeover
Gulf Times

Nasdaq Sells Scila Stake To Ab Max Sievert
Finextra

Hellman & Friedman Considers Joining Battle For Stake In Euroclear
FT

Boursa Kuwait Public Offering Launches Today
MENAFN

Nasdaq And CBE Come Together To Advance Governance Excellence
Nasdaq

PSE Spends P445 Million In Buyback Program
Business Mirror

Borsa Istanbul Restructure To Boost Interest In Stocks, Capital Markets
Daily Sabah

Indonesia C.Bank Paves Way For Derivative Clearing Houses To Reduce Risks
Reuters

SGX Aims To Be The Single-Point Access To Asia
The Business Times