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Key Concepts
US Securities clearing system
https://en.wikipedia.org/wiki/Clearing_(finance)#United_States_clearing_system
Explainer videos
Audience?
internal? external? DLT technologists? Other technologists? non-technical users? business analysts and planners? other?
what is the right context for: community > roles > goals > challenges > opportunities > problems solved > investments > risk management > expected impacts
DLT Explainer story
Key Concepts
US Securities clearing system
https://en.wikipedia.org/wiki/Clearing_(finance)#United_States_clearing_system
Security identity types > CUSIP, SEDOL, ISIN, TICKER registry lookups
https://blogs.cranfield.ac.uk/library/company_codes/
Explainer videos
Audience?
internal? external? DLT technologists? Other technologists? non-technical users? business analysts and planners? other?
what is the right context for: community > roles > goals > challenges > opportunities > problems solved > investments > risk management > expected impacts
DLT Explainer story
What use case to focus on?
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wholesale and retail markets
A Prefunded Account is a collateralised trading account where the trading limit is equivalent to the amount of funds deposited into the account. It lets you enjoy lower online brokerage rates for SGX and other markets.
Prefunded Load
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https://www.sec.gov/rules/proposed/2022/34-94196.pdf
DeFi settlement example
creating escrow contracts with token assets for buyer and seller with DEX intermediaries
assumptions for escrow trades of DeFi assets
- Buyer and Seller have accounts with a decentralized exchange ( DEX )
- Buyer and Seller have software or hardware wallets and applications to access their DEX platform
- the DEX platforms can access ALL related assets for sale on ALL DEX s to get the best prices ( not true in crypto now )
- the DEX platforms are backed by custodian banks with insurance on assets from bank failure ( not true in many cases now )
- the DEX trading fees are low ( not as low as CeFi - Classic Finance platforms now )
- the DEX purchase fees for purchases of products ( eg debit cards ) are low ( similar or higher than existing bank debit cards )
- the DEX withdrawal fees for withdrawal of fiat for crypto are zero ( no they are very high today )
- the DEX provides fully compliant KYC, AML and OFAC verifications on all account holders and asset transfers ( usually not true )
- the management of accounts, funds and trades at a DEX involves no security risks or identity theft risks ( not true )
process for escrow settlement of a trade
- Given
- buyer and seller have wallet apps with funds, token assets
- and market place and settlement servicer are replaced by
- decentralized exchange market places ( a DEX ) banked by digital asset custody banks
- with a MarketMakerMatcher service in compliance with US securities laws
- TradeManager service to record trades for all parties in compliance with US securities laws
- SettlementManager services to clear and settle trades for all parties in compliance with US securities laws
- When
- the MarketMakerMatcher.tradeMatch is made
- Then
- the TradeManager.createTrade and recordTrade
- the TradeManager.notifies all parties and the SettlementManager of the trade execution
- the SettlementManager.settleTrade for the Trade
- validating the trade inputs and consents by buyer and seller
- placing the seller assets in escrow contract
- and the buyer funds in escrow contract
- and issues the seller the funds from escrow
- and issues the buyer the assets from escrow
- notifies the seller, buyer and market the trade has completed successfully
- So
- the trade can be completed for the buyer and the seller
- with no risk of loss to either party
- with all obligations fulfilled on payment and receipt of assets
- using the TradeManager smart contract processes
- in compliance with US securities laws
Lessons learned on Digital Asset Trading
- if you want secure, legally compliant trades with good execution and minimal risk of loss there is ALWAYS at least 1 intermediary
- DEFI DEX platforms in general are less secure, higher cost and less efficient than CeFi ( Classic Finance ) platforms today in general
- The concept of P2P peer-to-peer trading without any intermediaries safely, efficiently, without risk or a middle man ( as a platform ) does not exist today
- Reality is a digital platform is always an intermediary between a buyer and a seller to manage counter party risk between buyer and seller
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Cross Margin arrangements
https://www.investopedia.com/terms/c/crossmargining.asp
can be between traders, exchanges or clearing corporations
for CME and DTCC , SEC has to approve
KEY TAKEAWAYS
- Cross margining is an offsetting process whereby excess margin in a trader's margin account is moved to another one of their margin accounts to satisfy maintenance margin requirements.
- The process allows a company or individual to use all of their available margin across all of their accounts.
- Cross margining increases a firm's or individual's liquidity and financing flexibility by reducing margin requirements and lowering net settlements.
- The unnecessary liquidation of positions and therefore potential losses is also avoided through cross margining.
- Cross margining services are calculated through clearing houses and clearing members, including prime brokerages that offer cross margining services to their clients.
- As a strong risk management tool, cross margining is particularly useful in volatile markets and for long-term trading strategies.
DeFi settlement example
creating escrow contracts with token assets for buyer and seller with DEX intermediaries
assumptions for escrow trades of DeFi assets
- Buyer and Seller have accounts with a decentralized exchange ( DEX )
- Buyer and Seller have software or hardware wallets and applications to access their DEX platform
- the DEX platforms can access ALL related assets for sale on ALL DEX s to get the best prices ( not true in crypto now )
- the DEX platforms are backed by custodian banks with insurance on assets from bank failure ( not true in many cases now )
- the DEX trading fees are low ( not as low as CeFi - Classic Finance platforms now )
- the DEX purchase fees for purchases of products ( eg debit cards ) are low ( similar or higher than existing bank debit cards )
- the DEX withdrawal fees for withdrawal of fiat for crypto are zero ( no they are very high today )
- the DEX provides fully compliant KYC, AML and OFAC verifications on all account holders and asset transfers ( usually not true )
- the management of accounts, funds and trades at a DEX involves no security risks or identity theft risks ( not true )
process for escrow settlement of a trade
- Given
- buyer and seller have wallet apps with funds, token assets
- and market place and settlement servicer are replaced by
- decentralized exchange market places ( a DEX ) banked by digital asset custody banks
- with a MarketMakerMatcher service in compliance with US securities laws
- TradeManager service to record trades for all parties in compliance with US securities laws
- SettlementManager services to clear and settle trades for all parties in compliance with US securities laws
- When
- the MarketMakerMatcher.tradeMatch is made
- Then
- the TradeManager.createTrade and recordTrade
- the TradeManager.notifies all parties and the SettlementManager of the trade execution
- the SettlementManager.settleTrade for the Trade
- validating the trade inputs and consents by buyer and seller
- placing the seller assets in escrow contract
- and the buyer funds in escrow contract
- and issues the seller the funds from escrow
- and issues the buyer the assets from escrow
- notifies the seller, buyer and market the trade has completed successfully
- So
- the trade can be completed for the buyer and the seller
- with no risk of loss to either party
- with all obligations fulfilled on payment and receipt of assets
- using the TradeManager smart contract processes
- in compliance with US securities laws
Lessons learned on Digital Asset Trading
- if you want secure, legally compliant trades with good execution and minimal risk of loss there is ALWAYS at least 1 intermediary
- DEFI DEX platforms in general are less secure, higher cost and less efficient than CeFi ( Classic Finance ) platforms today in general
- The concept of P2P peer-to-peer trading without any intermediaries safely, efficiently, without risk or a middle man ( as a platform ) does not exist today
- Reality is a digital platform is always an intermediary between a buyer and a seller to manage counter party risk between buyer and seller
Potential Value Opportunities
PERPETUAL FUTURE CONTRACTS IN DLT-2024-paper link
PERPETUAL FUTURE CONTRACTS IN DLT-2024-paper.pdf file
This study presents a groundbreaking Systematization of Knowledge (SoK) initiative, focusing on an in-depth exploration of the dynamics and behavior of traders on perpetual future contracts across both centralized exchanges (CEXs) and decentralized exchanges (DEXs). We summarize the features of CEXs and DEXs and propose 4 exchange models that govern the operations of exchanges in different type, allowing for the classification of any exchange into one of these predefined models Our research also includes an empirical analysis of traders behavior in exchanges of the 4 types of models. On DEX of Virtual Automated Market Making (VAMM) Model, open interest on short and long positions exert effect on price volatility in opposite direction, attributable to VAMM’s price formation mechanism. In the DEXs with Oracle Pricing Model, we observed a distinct asymmetry in trader behavior between buyers and sellers. Such asymmetry might stem from uninformed traders reacting more strongly to positive news than to negative, leading to a tendency to accumulate long positions. This study sheds light on the potential risks and advantages of using perpetual future contracts within the DeFi space while provides mathematical basis and empirical insights based on which future theoretical works can be configurated, offering crucial insights into the rapidly evolving world of blockchain-based financial instruments.
Startup Business Valuation Metrics Models - 2023
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"Private markets", on the other hand, deal with "venture capital" (VC) or "private equity" (PE) which is ownership in a company that is not publicly listed.
Like investing into a hot tech company like Google.
Main difference:
🧠 VC is likely an investment into EARLY stage company (think startups).
🧠 PE targets more MATURE companies that may be close to listing on a stock exchange or are large in size.
Particularly for PEs, these investments are not as easily accessed by the average investor because they are usually very large in size (tens if not hundreds of millions of US$) and not listed in public markets.
VCs/PEs may also lock your money up for multiple years.
Here's 5 stages from VC to PE investing and what they mean:
🚀 Angel (pre-VC): "Angel" investors give early stage support to startup level type companies when institutional investors are not ready to invest yet.
This involves a company which may have an 'idea' but has not properly validated it yet and built it into a business.
To raise funds these companies will ask friends or family to financial back them.
Investment size: US$10K - US$250K
🚀 Seed (VC): These companies have now at least have somewhat validated their product/service with customers or convincing research.
The money is typically used for product development and business expansion and this is when the first full time Sales & Marketing people get hired.
Investment size: US$250K - US$2M
🚀 Growth (VC/PE): At this stage companies more likely has figured out where their product/service has a need in the market but may still be unprofitable 💸
The fundraising is mainly for EXPANSION both for the team and their business...like pouring oil on a fire 🔥
Investment size: US$10M - US$50M
🚀 Crossover (PE): Investors at this stage are looking for companies that have SUSTAINABLE business models & profitability.
This funding may be used to expand into new international markets or develop multiple products/services.
Listing on a stock exchange (IPO) may not be far.
Investment size: US$50M - US$100M
🚀 Late stage/buyout (PE): Investors may be most focused on making these mature companies more efficient, marking up its value then 'flipping it' for a bigger multiple (return).
The company is very close to an EXIT either listing on a stock exchange (IPO) or getting "bought out".
Investment size: Depends but could be millions into billions.
What's your view on VCs and PEs?
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#markets #wealth #venturecapital #privateequity
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Potential Challenges
kpmg-regulations-addressing-top-of-mind-capital-markets-wealth-management-issues.pdf link
KPMG - top-mind-issues-capital-markets-wealth-management.html
kpmg-regulations-addressing-top-of-mind-capital-markets-wealth-management-issues.pdf file
Crypto and US Security Laws
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Through Daml, issuers and end investors gain better, timelier access to information and greater control and confidence in their securities processing. After a successful prototype, ASX announced that Daml-driven distributed ledger technology (DLT) would replace CHESS. Its ability to support the stable, orderly function of this high volume market was confirmed by third party security reviews
ASX has also recently launched Synfini, a “DLT as a Service” platform that allows customers to build their own enterprise DLT applications and solutions on the same VMware Blockchain and Daml technology that the ASX is using for its CHESS Replacement project.
The “DLT as a Service” solution includes three elements:
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