Episode Transcript
[00:00:06] Welcome to the John Lothian News daily Update podcast for September 23, 2024. I am your host, John Lothian. This podcast is brought to you by John Lothian News, the home of markets wiki and markets wiki education.
[00:00:21] Thank you for joining us. Here are the hits and takes cabinets from today's JLN calling FMX a soft launch is an understatement.
[00:00:32] New exchange launch parties can be fun and eventful, with moments youll remember. Who in attendance couldnt forget the URX US launch party at the historic rookery building on La Salle street in Chicago, where Rudy Firsha dramatically entered the party to sending down the beautifully restored double helix staircase. ElX had a launch party of sorts. Though it was four months before the actual July 10, 2009 launch, the party was at that year's FIA. Boca Raton, Florida International Futures conference in March, at which ElX was a prominent sponsor. It was there I met Cantor Fitzgerald chairman and CEO Howard Lutnicken, my one and only time. The party was held on the lawn outside the conference center and featured a large ice sculpture of ELxs logo. ELX was Lutnicks second byte at the Apple to take on CME Group in the US treasury futures market after he had failed with the first edition of the Cantor Exchange. See my commentary from July titled celebrating independence and competition, a 4 July reflection for a more detailed history of exchange competition in Chicago and Cantors relationship and various attempts at establishing a successful futures exchange. The ELX Ice sculpture did not much like the intense march Boca Raton sun and proceeded to melt rapidly once exposed. Lutnick sensing perhaps a bad omen seeing his startup exchange company's logo ice sculpture liquefy before his eyes, became upset at the sight and had the sculpture removed. And alas, there will be no public launch party ahead of tonight's start of trading for the FMX Futures exchange. There will be no dramatic entrances, no melting ice sculpture and no lamb chops. All whistle winter, which was another memorable part of the Eurex US launch. FMX confidently launches a new exchange war with the CME group tonight when its sulfur futures will begin to trade. Many exchanges launch on a Friday, so if there are any bugs to work out, they have the weekend to do so. When ELX launched, it started with treasury futures and added euro dollars. Eleven months later, FMX is starting at the short end and will add treasury futures later.
[00:03:21] One of the value propositions FMX has promoted is its basis trading opportunities, trading FMX futures versus US Treasuries on the matching engines for Fentix UST, both of which are located at the same NY four data center. In theory, that sounds great since it will mean less latency. However, it is an exclusive club that trades cash versus futures, not an expansive or open one. It will not bring new players to its futures markets. Also, LCH needs to go on a membership expansion campaign if FMX's margins benefits versus its swaps portfolio is going to work or those firms will need to expand their customer bases. Presently, I see just five clearing members in the LCH Limited's LCH slops clear listed rates division, Goldman Sachs and Company LLC, JP Morgan Securities, LLC, Merrick's Capital Markets Inc. RBC Capital Markets LLC and Wells Fargo Securities, LLC.
[00:04:35] Of course, you won't find that information on the FMX website. You won't find much information at all on the FMX website.
[00:04:43] There is a generic contact form for general inquiries and email addresses for sales, onboarding operations and compliance. There is also no search on the site. There is no email address for the press on the FMX website or the cxmarkets.com website, which is related. FMX has a Twitter x account with one tweet on January 22 announcing its approval by the CFTC. It has not tweeted since and has just 16 followers and is following no one. Another social media anomaly is Howard Lutnick's LinkedIn account, which he has used to promote FMX, his crypto journey and his support of former President Trump. Lutnick appears as a third degree connection to me, which suggests that he either has very few connections, all from outside the financial services industry, or none at all. It's possible he has chosen to have no connections and simply allows people to follow him, of which I am one. Some other CEO's avoid LinkedIn, so his having no connections seems plausible. He currently has 6303 followers. He has not posted for four days, and that last one was about the Fed rate cut. Before that, he posted about President trumps transition and policy from an appearance on CNBC in which he did not mention FMX. To say that this is a soft launch for FMX would be an understatement of the fill in the blank. To say that I have seen better promoted soft launches, better prepared exchanges for a soft launch would also be an understatement.
[00:06:39] Here are the excerpts from in front of Fow's paywall from some recent stories. Today, multiple exchanges are set to launch 37 new contracts, highlighting a busy trading day. Notable introductions include the FMX Futures exchange's three month sulfur future, eurox's inaugural us credit futures and CBO Global Markets s and P 500 variance feature the head of the European securities and Markets Authority, Esma, has emphasized the urgent need for tangible growth in european capital markets after years of developing a regulatory framework in India. Experts at the Fow trading India 2024 conference discussed a recent consultation paper aimed at better protecting retail investors in the equity derivatives market. Meanwhile, SGX announced the appointment of a new chief financial officer from Standard Chartered bank following recent management changes in Europe. The EEX has reported sustained volume growth in its core market, driven by us high frequency trading activity. Finally, a CFTC commissioner criticized the excessive focus on the voluntary carbon market, particularly following new guidance on the listings of derivatives contracts today marks the 35th anniversary for my wife and me. It was a cold, blustery September day in 1989, fueled by the after effects of Hurricane Hugo, which made landfall in South Carolina on September 22. The hurricane caused widespread damage across the southeastern states, particularly in South Carolina, North Carolina and parts of the Caribbean. Before it weakened.
[00:08:45] Hugo was one of the most powerful hurricanes to hit the east coast in the late 20th century. Despite this tumultuous beginning, we have enjoyed 35 years of relative calm happy anniversary Cheryl on Saturday I'm headed to Florida to work on the 1958 mobile home I bought from my brothers after we inherited it from our mother. I have been trying to sell the home and despite many people looking at it, weve not had any takers. Im going to Florida to address any issues that might be holding back any potential buyers. Ironically, there is a hurricane threatening Mexico's Oaxaca state and Florida's western coast this week. Hurricane John.
[00:09:36] Don't forget Wednesday is the South street fundraiser for the Boy Scouts. It's not too late to make a donation or if you want to attend, shoot me an email. I have some free tickets FTSE Russell's 8th annual Sustainable Investment owner survey, analyzing how asset owners around the world perceive, consider and use sustainable investing, has found that confidence in the availability of ESG data has grown among the surveys findings, 86% of asset owners with AUM of $10 billion or more say they are implementing sustainable investment considerations as part of their investment strategies. 90% of asset owners agree that sustainable investment and ESG regulations have helped meet their sustainable investment goals. In 2024, 66% of asset owners implement or are considering implementing sustainable investment considerations through passive strategies. Respondents say their main challenges is aligning portfolios with sustainable investing climate guidance to meet regulatory requirements. Conducted between March and April 2024, the survey by FTSE Russell asked 303 asset owners with AUM between 5.3 trillion and $9.2 trillion about their sustainable investment approaches. You can view the report with a link in today's newsletter. Our most read stories from our previous edition of JLN options were Howard Lutnick's challenge to CME's treasury dominance turns political from Bloomberg hedge fund two Sigma is in settlement talks with CME from the Wall Street Journal and Nvidia's options expiry may allow renewed surge spot, Gamma says from Bloomberg. Subscribe to the free JLN Options newsletter with a link in today's JLN. Here are more stories from the first read section of today's JLN. Here's a message from JLN. La Salle street racing to move scouts forward fundraiser on September 25 the pathway to Adventure Council of the Boy Scouts of America is hosting the La Salle street racing to move scouts forward event at the Chicago Board of Trade building. This annual tradition, dating back to 1971, brings together professionals from La Salle street to support scouting in our community. The highlight of the evening will be a Pinewood Derby race. Youll have the opportunity to build your own car or lease one at the event. Its a fantastic way to tap into your competitive spirit while enjoying cocktails and delicious food with colleagues and friends. Your participation will directly benefit scouting programs that will help develop leadership skills and character in youth. There are various sponsorship levels available to suit your preferences. The event will be held at series with plans to move outdoors if weather permits. It's a perfect opportunity to network, have fun and make a difference. You can register with a link in today's newsletter. Here's a story it's an editorial from the editorial board of the Financial Times. The headline the path to global carbon pricing to tackle climate change, the polluter pays principle needs to spread further and wider. Economists are rarely ever unanimous, but one matter on which they almost all agree is the need for carbon pricing. Their support is paying off. The principle that polluters should pay is in increasing force around the world.
[00:13:43] In an interview with the Financial Times last week, Ngozi Okojo Iweala, the head of the World Trade Organization, said that globally there were 78 different carbon pricing and taxation mechanisms. They cover close to one quarter of international emissions, up from just 5% in 2010, according to the World bank. My comment there needs to be a price and it needs to be paid. Simple enough? Here's a story from the Financial Times with blue sky, the social media echo chamber is back in vogue. The great migration from Elon Musk's axe has seen users, especially progressives, retreat into one particular silo.
[00:14:33] There is currently greater danger a man wrote two years ago that social media will splinter into far right wing and far left wing echo chambers that generate more hate and divide our society. It may surprise you to learn that the man in question was Elon Musk, who wrote those words when he bought the social media platform formerly known as Twitter back in October 2022, stressing the need for humanity to have a common digital town square that was warm and welcoming to all, not a free for all hellscape. And yet, and yet, my comment hello, hello, hello.
[00:15:21] There's my echo chamber. Here's a story from Bloomberg. The headline the russian bot army that conquered online poker how a card playing siberian AI outsmarted the world's brightest researchers and raked in millions.
[00:15:44] Ferulou is near the top of poker's food chain. A professional from Russia, he makes a living gambling anonymously on GG poker, America's card room and other sites, sometimes using Darth Vader as his avatar. Fellow sharks and smaller fish with money to lose are his prey. Ferrule keeps his emotions in check during games, but he's outspoken in poker forums when he sees something he doesn't like. In 2013, another player caught his eye.
[00:16:20] Vlakislav Karpov, aka performer, was posting lurid tales in a russian language chatroom about prostitutes and card tricks he'd learned from gypsies. To the cerebral ferrule, Karpov's boasting looked ridiculous. Even worse, he was charging young male acolytes for the privilege of receiving his audience, including how to cure anxiety with booze.
[00:16:50] My if you ever thought online gambling was a good idea, think again.
[00:16:56] Here are the top three stories from Fridays. JLN our top story Friday was Howard Lucknicks challenge to CMEs treasury dominance turns political from Bloomberg. Second was notice of disciplinary action from CME Group against CTC Limited. Third was a tie between notice of disciplinary action from CME Group against Mark Aronson and Microsoft. AI need so much power, it's tapping sight of us nuclear meltdown from Bloomberg here are the top three stories from the lead section of today's JLN. The first is from Bloomberg traders don't fall in love with your machines. Finance is rushing to use rapidly evolving AI tools. As the machines get smarter, the risks get weirder. Gary Gensler, chief us securities regulator, enlisted Scarlett Johansson and Jaqueen Phoenix's movie her last week to help explain his worries about the risks of artificial intelligence in finance. Money managers and banks are rushing to adopt a handful of generative AI tools, and the failure of one of them could cause mayhem, just like the AI companion played by Johansson, left Phoenix's character and many others heartbroken. The problem of critical infrastructure isn't new, but large language models like OpenAI's chat, GPT and other modern algorithmic tools present uncertain and novel challenges, including automated price collusion or breaking rules and lying about it. Predicting or explaining an AI models actions is often impossible, making things even trickier for users and regulators.
[00:18:50] Here's another story, this one from the Financial Times. The headline BGC's Howard Lutnick takes on CME with interest rate futures debut bank of England's credibility under fire from Chicago in battle with New York billionaire Howard Lutnick will this week make a third assault on CME groups interest rate futures dominance, with the high stakes at play demonstrated by a lively trade in barbs between the New York based trader and the Chicago Exchange veteran head Terry Duffy. Lutnick's BGC group will debut trading in rate futures on his FMX venue in a direct assault on one of the biggest fortresses in global financial markets, seemis hold on futures on us rates and government debt.
[00:19:46] And then heres one more story, this one from Traders magazine. The headline Nasdaq private market launches next generation electronic secondary liquidity platform Nasdaq Private Market, a provider of secondary liquidity solutions, has launched a next generation NPM second market platform, the first platform to offer this breadth of combined services across each segment of the private market ecosystem, including private companies, employees, investors and intermediaries. We are proud to officially launch second market. Our new platform will facilitate wealth creation events for millions of private company employees and investors. This disruptive technology benefits private companies and their employees by making transacting private shares faster, cheaper, easier and more secure. Second market will help unlock capital in the $3.5 trillion private market to power and accelerate the innovation economy, said Tom Callahan, chief executive officer, Nasdaq Private Market we're grateful for your attentive listening to the John Lothian news Daily update. Please spread the word about our podcast among your friends. We would greatly appreciate it if you could spare a moment to leave a review on Apple Podcasts or whatever platform upon which you access this podcast. Your reviews play a crucial role in introducing our content to new listeners. Also, if you havent subscribed to the Daily John Lothian newsletter Email yet you can enjoy a complimentary 90 day trial by visiting johnlothianews.com trial. Thank you for your valued support. Have a great day and stay safe and treat people the same way you want to be treated, with respect, equality and justice this has been John Lothian. Goodbye.
[00:21:58] This podcast has been produced by Andrew Lothian.
