Equibit Group Creates Blockchain Based System For Securities Settlement
By October 6, 2017– Published on
The stock market has come a long way since the Dutch basically invented the idea of a joint stock company some time ago. But while the way stocks are traded has evolved with the times, the underlying settlement system isn't very different from what existed 400+ years ago in Amsterdam. Basically, all trades are still sent through a central register, and it is from this clearing authority that title to an equity is established.
Ok, so back in the day in Amsterdam, this was a pretty simple affair. But times have changed, and in the United States alone the clearing of equity trades generates more than a billion dollars a year in profit for the companies that act as the central register for the stock market. Expand that to a global scale, and it isn't hard to see how big a market settling equity trades really is!
In fact, the wider a security is traded, the more complex the settlement will be. Until Blockchain came along, there really wasn't a better way to settle trades, but now that people are embracing change in the form of decentralized ledgers, a company called Equibit Group is pioneering the use of a Blockchain based settlement system to create efficiency, and it could make trading equities and bonds a lot easier.
When Chris Horlacher saw the way Blockchain worked, he knew that it could be expanded to function to settle many different kinds of trades in the financial markets. He had recently started work as a CFO for a stock brokerage back in 2010 when Bitcoin started gain widespread recognition. Once he got a few computer science experts on his team, they developed a securities trading platform they call Equibit.
The idea that underlies Equibit is new. Once launched, the Equibit platform will allow peer to peer exchange of securities, and uses a Blockchain to make sure there is an indelible record of ownership. In many ways this platform would cut a lot of complicated record keeping out of the equation, and in the balance users would save both money and time.
In addition to efficiency, there is a little known problem with the traditional mechanism of equity trade settlement. Most people may not realize they frequently don't actually own the shares they buy, the settlement corporation does. There isn't anything sinister about a settlement corporation owning your shares, but it does give rise to some risks in the event of market mayhem. Equibit Group does away with this oversight, and allows real transfer of title to take place nearly instantly.
There are some differences within the Equibit universe, and the first one has to do with how securities are traded in the first place. Before you can do anything with the Equibit network you need its in-house currency, Equibits.
It is as though a company would need to purchase special paper in order to trade in the exchange, but the upside is that an Equibit never loses all of its value. This makes it impossible for a security to go to zero, as the underlying Equibit that “carries” the equity on the exchange can always be sold later, for whatever the market price for it is.
This marks a radical change from the current system, and it is only one of many that this sort of securities trading platform would offer. There has been some interest in the Equibit Group from some major players, and according to Mr. Horlacher, the platform is nearly ready to be launched. If you are interested in learning more about the Equibit group, or the ideas underlying what could be a revolution in securities trading technology, their website and whitepaper can be found by clicking on the links!