Whether I agree with these developments or not is completely irrelevant. I'll personally stick to pursing a market neutral strategy and exploiting intraday ETF discrepancies for now.
I’m not advocating this argument, just relaying it since you asked.
Can you give specific, real-world examples about how the "friction" is lower? And what precisely do you mean by "friction" - lower cost? ease of use? something else?
I am in Argentina. I can make a VC-style investment on a company being founded in Europe tomorrow and resell my shares 3 months from now to another investor in Australia with no middlemen, brokers, filings, etc.
That just didn't work before. It would have been impossible for me to do that. Its also more risky in terms of regulatory protection, of course. But in any scenario ICOs are huge disruption for the VC industry, and if the crypto market matures, I expect that to expand into other spaces.
Specific instances of friction: transferring funds, assigning shares, lack of liquidity of both shares and secondary markets (or, quite simply, lack of markets).
Tokenizing securities can open that up, make it more transparent, safer, and less friendly to incumbent interests.
With Coinbase I pay a MUCH larger fee, that is a percentage of the transaction size rather than zero (with Robinhood) or a low fixed cost. With Coinbase I would pay a ~15 dollar fee to buy or sell $1000 dollars of BTC or ETH.
As far as moving money in/out of Fiat, Robinhood/Etrade/etc also win with near instant transfers if your account is already funded. Coinbase buys and sells take days to clear.
Can you provide specific real-world examples of how tokenized securities can help with "transaction costs, slowness, brittleness, mistakes" ?
All securities exchanges incur fees, varying based on wherher you’re eating or supplying liquidity. I forget what these are called, but companies like Interactive brokers pass those fees on. Robinhood eats the fees for you.
With coinbase, you pay a 0% fee as long as you use GDAX, which is a no brainer, and place limit orders that are not immediately executable e.g. sell $.01 above the current price or buy $.01 below.
I’m not the parent so I’m not gonna address the tokenization question, but my opinion is that tokenization helps the users (stockholders), but takes power away from centralized exchanges thus the NASDAQ would be kinda crazy to switch to decentralized assets
Do you really expect the typical person to set a bunch of passive limit orders on GDAX until they get filled? What kind of user experience is that? I would be willing to wager that 95%+ of Coinbase users are just buying and selling directly on Coinbase (and paying the extremely high fees) and have no idea what GDAX is.
Of course that's the case. I never said everyone does that. I said it's a no-brainer to do it.
Back when investors held paper stock certificates, including bearer securities, which de-centralised ownership recording, shares were frequently lost, stolen, damaged and fought over after someone's death, intestacy, bankruptcy et cetera. Returning to tokenized holding would heap costs currently well managed by the system onto end users. (One would also have the problem of irreversible transactions being incompatible with modern law and securities practices.) "Stocks but on blockchain" is a regression for everyone except the hucksters.
There is no really easy way to "get rid of HFT", and it's unclear whether we actually want to do that. Equity trading is very cheap & efficient w/ tiny spreads on everything remotely liquid. Pretty much the only people who get hurt by HFT are big institutional investors (hedge funds, etc) that used to be able to move big blocks of stock without affecting the price as much as they now do. If anything - the pricing is better now. If you own a truckload of oranges and you hear that someone is going around frantically buying up all the oranges at every store, do you not feel like you should consider raising the price of your oranges?
I'm not against HFT at all. But having such granular pricing doesn't do anyone favours. More decimals would reduce spreads as well as silencing HFT critics and maybe make trading a bit more accessible without as much high end systems. But the spread reduction is valuable alone.
If they're running a blockchain on their own, doesn't that defeat the point?
> To eliminate _single points of failure, siloing and centralized control_.
I think we're getting closer to tokenizing actual securities. Similar to how TrueUSD is tokenizing U.S. Dollars, I think we're fairly close ( 5 years out) from NASDAQ officially tokenizing their stocks ( as an erc20 on the ethereum blockchain)