Jump to content

Stock exchanges primers


jfan
 Share

Recommended Posts

Stay in one country, research the history of the Vancouver Stock Exchange, the Toronto Stock Exchange, and the history of one of the carbon trading platforms. To their credit, the VSE has many of the best scum in the world, and their reputation is well earned! The TSE illustrates establishment, carbon trading illustrates the new world digital market place. A decade out, most would expect the existing opaque institutional bond trading market to have migrated to a national version of the transparent carbon trading platform.

 

In 2022, we live in the disintermediation world of blockchain and smart contracts - materially changes the monopoly economics of the 'old style' exchange. Monopolies become very strong oligopolies, with state partner oversight. Canadian banking often held up as a working example of the principles involved.   

 

SD 

Link to comment
Share on other sites

Blockchain tech is inherently slower than a centralized database which is essentially what an exchange is. I don’t see blockchain disrupting exchanges.

 

The Twitter user HideNotSlide has good info on exchanges. I recommend following him:

 

Link to comment
Share on other sites

Blockchain markets are private permissioned ledgers running on the hyper-ledger. They have the speed/scalability of the conventional database, trade/confirm/settlement takes seconds (slow versions) and is driven by algorithm, but access to the ledger is by invitation only. Country/global scale enables use of super computers, to ramp up performance to hundreds of times that of a conventional database. The only contact with existing payment rails is via a net settlement between ledger and invitee, multiple times a day. Behind the curtain, some of these markets are already in the box and ready to go.

 

Joe Sixpack opens an account with an invitee, who executes on his/her behalf for an access fee. Each transaction on the exchange regulated, but not the exchange itself as it is purely a facilitating business application. Regulator has 'god' access and can see all transactions in live time. 

 

SD

 

Link to comment
Share on other sites

Posted (edited)

Thanks @Spekulatius. Will check out his resources.

 

Wrt Blockchain, if you eliminate the central exchange, the regular trader would still need a communication interface with the ledger. I assume this would be the function of wallets in this case. My question is then, how do we trust the wallet provider to provide us the info that we needed and guarantee it's authenticity ( given that most of us have no coding skill). And how will these wallet providers have a profitable business model and goes will regulations affect them?

 

I assume these wallets will not need some minimum amount of liquidity given that the Blockchain ledger is publicly transparent? And this statement is true, disrupts the centralized stock exchanges?

Edited by jfan
Link to comment
Share on other sites

In the blockchain world, the central exchange is the market. No elimination.

 

Wallets/interfaces are not required either. Joe Sixpack continues with his existing KYC account at XYZ broker, the broker executes his trades, and settlement is immediate vs the current 3 days. Joe see's the same bid/ask on his broker interface as he does now - everything remains the same, except that there is faster settlement and lower transaction costs. All the fintech is behind the curtain, and not a concern of the investor. The value proposition if you use a main line broker.   

 

Only apps use wallets, and they act as KYC accounts. The app is just an on-ramp, and the fintech is more visible, but otherwise it's the same as the main line broker. The main difference being that an investor keys some trade details into a smart contract, versus the broker populating it from the investors KYC account.

 

Yes, one can trade via a consensus mechanism on a distributed ledger. But are you really willing to pay many times the cost, and wait minutes vs seconds, for the higher security and quasi anonymity of the process? If I have something to hide, or need that level of security, maybe. But otherwise ..... no, the value proposition just isn't there. 

 

Tech is nice, but if the user will not pay for it, it's worth squat.

There is a reason why tech startup's are such shitty businesses - 'build it, and they will come' is not a real business strategy.

 

SD

Edited by SharperDingaan
Link to comment
Share on other sites

  • 2 weeks later...
Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...