Today’s trading days are the middleman’s realm, where platform-based business rule exchanges and trade, removing much control from businesses and investors; but it hasn’t always been like this. Below Finance Monthly benefits from expert analysis from Sascha Ragtschaa, CEO and Co-Founder of Chainium, on the matter of trading control.
Pulling the Trigger
Sourcing information on a global business takes seconds. In fact, the ubiquitous Google now processes over 40,000 search queries every second. This equates to over 3.5 billion searches a day and an almost inconceivable 1.2 trillion searches per year worldwide. However, pulling the trigger to invest in a global business is a whole different ball game.
Expensive, intricate and restricting, buying and selling shares between businesses and investors has significantly fallen behind advancing developments within the wider financial sector. Especially when you compare it to the latest cryptocurrencies, with the famed Bitcoin hitting a high of close to $20,000 in December last year, prior to its recent readjustment.
Disruption of the Status Quo
As one of the most vital areas of the market economy, it is essential the equity market drags itself into the 21st century and puts its businesses and investors in complete control. The simple truth is that when the global equity market was created two hundred years ago with the founding of the London and New York Stock Exchanges, the world was a very different place. Whilst middlemen can help investors identify the most cost-effective option, they can severely lengthen the exchange process and be expensive.
To become relevant for the modern investor, a certain amount of disruption of the status quo is required. The sector needs to ensure that trading becomes a more seamless experience and is put back into the hands of businesses and investors for full control.
The solution for this could well be the blockchain. The technology that underpins the main cryptocurrencies such as Bitcoin and Ethereum has the advantage of being transparent enough to ensure democracy and visibility, whilst being secure enough to protect businesses and investors alike. The technology is an enabling force for removing the middle layers, administration and reconciliation steps required in today’s global equity market solutions. This means that businesses and investors can be connected directly, leading to a rise in empowerment and the eliminating the need for middlemen.
To become truly transformative in 2018, any new equity market solution needs to be built with business and investor control at its core. The recent string of high profile data breaches – coupled with the impending Global Data Protection Regulation (GDPR) which comes into force on 25th May – have heightened the awareness among consumers regarding information security; especially when payments of any kind are involved. Blockchain can not only protect the individual, but also allow for enough transparency to ensure equity decisions, voting and resolutions are fully transparent in the process.
Removing the shackles
In order to be fully accessible, a modern equity network must be well tailored to suit the needs and interests of both investors and business owners. By democratising equity, it can bring influence and power back to the individual investor through de-centralisation, blockchain technology and crypto payments. Meaning the network becomes entirely distanced from traditional stock exchanges, government regulation and the institutional and corporate stranglehold.
Back to basics
This back-to-basics approach to raising capital reduces bureaucracy; with blockchain technology removing duplication and eliminating errors. This allow investors and businesses to exchange digital share certificates for fiat or cryptocurrency in a transparent, tamper proof and immutable distributed ledger. No intermediary or other reconciliation steps are involved in transactions, cutting through hundreds of legacy systems and solutions from the old world.
Business owners, of private and public businesses, can now sell shares directly to investors. Cutting out the middlemen in issuing and trading shares helps to give complete control back to the businesses and investors alike and help them become indelibly linked.
A transformation is needed
Giving trading control back in the hands of the companies and investors utilising the equity market is essential when it comes to promoting innovation and reinventing the processes involved in trading shares. No more trading through banks, brokers and intermediaries. No more share registrars, transfer agents or middlemen.
We have seen AirBNB, Ethereum and Uber all become the pinnacle of digital transformation in their very own industries and with the help of new technologies, we are now seeing the same beginning to happen in the global equity market too. By removing the multiple barriers to investment means that the next Apple, Google or Microsoft won’t be left on the scrapheap, but receive the investments they need to thrive.