Why a stepchange is needed in the global equity market

By Sascha Ragtschaa, CEO and Co-Founder of Chainium

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[1]. However, pulling the trigger to invest in a global business is a whole different ball game.

Sascha Ragtscha
Sascha Ragtscha

Whilst the FTSE in London hit a record high of 7,778.64 on the 12th January[2], this is masking a wider problem. 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. 

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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. 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 country-specific stock exchanges made sense at the time, today the world has got a lot smaller and the equity market needs to take advantage of a global investment pool.

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 promote continued digital transformation within the industry, rather than resisting against it. 

Changing markets

The solution 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 private enough to protect businesses and investors alike. The technology is an enabling force to being able to remove 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, without the need for middlemen.

To become truly transformative in 2018, any new equity market solution needs to be built with security 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. 

Removing the shackles

A modern equity network needs to be built with the interests of both investors and business owners at its core. 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 completely removed from the shackles of traditional stock exchanges, government regulation and the institutional and corporate stranglehold.

By using blockchain to revolutionise the way we all buy and sell shares, a global equity market worth US$76 trillion[3] can truly be unlocked. Not only that, but the 400 million private companies that there are worldwide – representing 99% of total global businesses – can begin to seek potentially transformative investment for the first time.

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 crypto-currency 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

A transformation of the global equity market is needed to promote innovation and reinvent the processes involved in trading shares. No more stock exchanges. No more trading through banks, brokers and intermediaries. No more expensive fees and slow clearing processes. No more share registrars, transfer agents or middlemen.

We have seen AirBNB, Ethereum and Uber all become the pinnacle of digital transformation in their industries, we are now seeing the same beginning to happen in the global equity market too. A step change was needed to ensure investment in the best ideas continues for decades to come. 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.

[1] http://www.internetlivestats.com/google-search-statistics/

[2] http://www.bbc.co.uk/news/business/markets/europe/lse_ukx

[3] https://www.thestreet.com/story/14229200/1/global-stocks-are-now-worth-more-than-the-global-economy-and-that-s-worrying.html

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