Could you imagine market participants dealing directly with other market participants setting market prices, the horror lol.
Decentralized Stock Exchange
- Thread starter kmiklas
- Start date
Could you imagine market participants dealing directly with other market participants setting market prices, the horror lol.
I'm not saying it's good or bad. I'm saying that the SEC will not allow companies to issue shares outside of regulated exchanges. Someone can set up a nice blockchain-based decentralized exchange with a nice GUI but you simply won't have any shares available to exchange.
Yeah for the time being there would be many legal headwinds but I'm sure that will change in the next 5-10 years. The Bitcoin sphere is still working towards a decentralized exchange so I'm sure we'll see something from them first. There are some interesting projects like Bitsquare working toward this goal https://bitsquare.io/
I'm familiar with Bitsquare. The mechanism for sending/receiving USD involves divulging your bank account number. The problem is that banks are obligated by law to flag "suspicious" transactions. If there's a weird pattern of deposit/withdrawal your account could be frozen until they get to the bottom of it.
You should hire random people, and make a Youtube trading documentary of it
Watch, and document, all those sheep comically fail.
If you wanted to do it, why does it have to be based in the USA. You could get around all the regulations by basing it on some island. The real problem would be getting companies on board. Why would coke or pepsi want to switch to a unregulated system. I myself don't trust anybody regulated or not. Sure don't trust the idea of a unregulated system. I could imagine you could also artificially create a price to jump or drop with just a couple a hand full of guys in a unregulated marked. Who created the block chain would matter alot. And each ipo would need its own block chain i would imagine. Bitcoin works by verifying the block chain every ten minutes with a algorithm that pays out i believe its 25 bitcoin for the first group to solve the problem(keeping computers hooked to the net).
What kinda of payment would you give people to verify the block chain. Company stock for each company. (these chains eventually run out and no more payments no more verification).
Its a fairly new concept and fairly complicated. Giving out a free currency of mythical coins is one thing mythical stocks could be another form of payment.
What kinda of payment would you give people to verify the block chain. Company stock for each company. (these chains eventually run out and no more payments no more verification).
Its a fairly new concept and fairly complicated. Giving out a free currency of mythical coins is one thing mythical stocks could be another form of payment.
Ultimately the companies that issue the stock are the ones that hold the record of who owns their stock.
Brokers just match buyers and sellers more efficiently. So ultimately the blockchain solution would somehow have to match buyers and sellers with something like the NBBO, limit orders, etc.
Brokers just match buyers and sellers more efficiently. So ultimately the blockchain solution would somehow have to match buyers and sellers with something like the NBBO, limit orders, etc.
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Latency arbitrage only exists because of the physical distances between the multiple exchanges.
Example :
Your looking to buy 1000 shares of stock ABC at 10.00$ and you can see on the order book that their are 1000 shares available with an ask of 10.00$
500 of those shares are at exchange XYZ and 500 shares at exchange UVW. You send your marketable limit order or market order to buy 1000 shares at the current offer of 1000 shares at 10.00. Unless your broker has sophisticated enough execution programs to make sure that order which is for 500 at one exchange and 500 at the other hit the exchanges at exactly the same moment, half your order is going to get picked up by a HFT trader.
They seeyou pick up 500 at one exchange and race off to the other exchanges to pick up any offers and sell them back to you at lets say 10.01 or 10.02 or whatever the spreads allow them to be the best in the book now. If the offer was 10.00 and the 2nd best offer was 10.25, they can pick those 500 at the second exchange at 10.00 and quickly flip them to you at 10.24 beating the rest of the book. Bit of an extreme example but is possible.
Payment for order flow really only exists because a lot of institutions can't compete on the open book against HFT and they want pieces of the "dumb money" (retail) so their willing to give us price improvements for our order to get a piece of the action.
The idea of just IPO your own company isn't exactly a great idea either. We need IPO's to keep the market going but we also need quality IPO's. For example take a look at the TSX venture which is just an absolute ghost town. Way too many garbage companies eating up what little liquidity is available there. Could even really look at the OTC markets.
With a quick screen of U.S stocks I see just shy of 8000 stocks listed. If I add a filter of a 90 DSMA of volume > 1million and a stock price > 5.00$, that world drops to 1000 stocks.
Traders want liquidity, it keeps transaction cost down and creates more oppurtunities. Liquidity comes greatly from HFT and for a market to offer a good depth of book, you need participants. The participants all congregate where everyone else is. You can have 1000's more of IPO's but you need participants to make the market.
Now don't get me wrong. I think a lot of HFT actually offers some usual service to the markets. For instance take someone running a strategy trading inter-listed stocks and their corresponding currencies. Theirs an arbitrage there that they will dominate and this helps keep the markets locked step. Perhaps someone running a statistical arbitrage between a cash index and its corresponding futures market listing.
I really think it should all be ran on a central exchange with a central order book. However then this creates the oppurtunity for monopoly for an exchange which is also never a good idea. It's kind of this fine line.
Here's a couple good podcast that kind of go over these topics.
https://chatwithtraders.com/ep-088-dave-lauer/
https://chatwithtraders.com/ep-075-dan-aisen-iex-trading/
https://chatwithtraders.com/ep-071-eric-hunsader/
Also these little documentaries are well put together.
So @kmiklas do you want stocks to be traded on DSX which are now available on other exchanges... or create new stocks from new companies etc, which is a bit like gofundme?
The former is already being done by BATS, CHIXEN, etc... which are run by mainly the banks.
Otherwise it sounds more like CFD trading, where you don't actually trade the shares but trade the daily difference, like a bet. Shares are centralized since it's basically an ownership certificate...
The former is already being done by BATS, CHIXEN, etc... which are run by mainly the banks.
Otherwise it sounds more like CFD trading, where you don't actually trade the shares but trade the daily difference, like a bet. Shares are centralized since it's basically an ownership certificate...