Thesis On Adoption
I will state up front that some of these features could be delivered through a relational database, and yet, they haven’t been. I offer some initial thoughts in the Interoperability section. In fact, companies often release information after p.m. It is worth noting here that expanding trading hours comes with a cost. The blockchain ecosystem is a technology stack where “always open” is the de facto standard for cryptocurrency exchanges, time will tell whether security token exchanges adopt similar policies.I conclude with a section on the potential for innovation in security design, which is the most interesting part of the whole thesis. Prior research has found that trading outside regular hours is characterized by lower liquidity and higher spreads. Fractional ownership is not unique to blockchain, in fact, it’s not even unique to this century.Imagine being able to go long Brooklyn and short Manhattan, thereby creating an “NYC market neutral” real asset portfolio.Admittedly, these strategies require that either a security token lending market or synthetic derivative product develops to facilitate the short.The degree to which these processes can be automated through interoperable smart contracts will determine the gains in settlement speed.Advisory services around securities issuance are costly, and that’s not going to change in the near term.Taken together, the features listed below form the foundation of the thesis that security tokens will see widespread adoption across numerous asset classes in the coming years. Eastern Time each weekday, with the exception of holidays. Teams all over the world are working on tokenizing assets and some observers suggest that this will accelerate the integration of global markets.
Long-short strategies have been used in stock markets for years and these will expand to any asset class with fractionalized ownership.Settlement is when ownership of the assets actually changes hands.Exchanges like NASDAQ and NYSE can asset transfers takes time.However, several parts of the issuance process will eventually be automated, which will reduce costs in the long run.Post-issuance, there are a lot of administrative costs around ownership reconciliation.Joint ownership dates back to the Roman Republic, or the Dutch East India Company in more modern times.However, some assets classes such as commercial real estate and fine art continue to be characterized by high unit costs.Trade execution means recording an agreement between a buyer and a seller to exchange a specific quantity of an asset at a specific price.Settlement means that the documentation around the transfer of ownership from the seller to the buyer (and payment from buyer to seller) is recorded and complete.There are complexities such as short selling and margin buying.Blockchain has the potential to increase settlement speed for securities, but it’s more complicated than a comparison to cryptocurrencies.