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Radicalizing the equity market landscape is a thought-provoking challenge to regulators and the equity market in adopting a paradigm shift in the way securities are being traded. It calls for a complete overhaul of the markets and introduces the use of a centralised multi-ledger system, yet operating in a decentralised blockchain network architecture.
The system and solution proposed in this 26-page paper calls for a complete dematerialisation of assets, using the NEM blockchain technology. It also calls for disintermediation and re-intermediation of the equity market ecosystem.
The equity market, and the securities industry at large, is an industry that uses a multitude of ledgers to keep record of all transactions. The key challenge that leads to its inefficiencies is the need to reconcile all of these transactions among all the ledgers, and eventually, the payment and settlement process.
The paper is an extension of a proven process that is being utilised by cryptocurrency exchanges. However, hitherto, it has not been applied to long standing traditional markets. The traditional markets are a multi-trillion dollar industry, and as the saying goes, “If it ain’t broke, don’t fix it.” However, there is increased pressure to improve on the settlement period of 3 days. The current scenario is too difficult to change without completely changing the processes.
This paper explains in depth how it can be taken to the extreme using the NEM blockchain technology. It further explains how high-frequency trades and volumes can be easily catered for, using the NEM technology.
The revolutionary approach includes taking broking firms, custodians, and share registrars out of the equation. CSDs role may have to change as well to include being the operator of the blockchain solution in addition to being a trustee of funds deposited.
The disposition of the paper suggests a transformation process that could break the age old tradition that have been in existent for the longest time.
Link to paper: https://nem.io/RadicalizingEquityMarket.pdf