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Discount Retailer Overstock Has a New Target: Upending Wall St – Bloomberg

OverstockOverstock.com Inc., which is aiming to radically change how stocks and bonds are bought and sold, is close to unveiling the first securities-trading system using the blockchain technology that makes bitcoin possible. FULL ARTICLE

Comments
  • Cougar
    CougarJanuary 23, 2016"Bonds on the blockchain as a panacea to our liquidity problems is a misnomer. All-to-all trading will fair no better in a native blockchain bond infrastructure that it does now. Knowing who holds bonds would allow us to trade much better but that's not something the buyside wants now nor will they then. Primary issuance buyers won't be published either for the same reason. It will be kept private still. It's not the technology that needs to change to solve this proble…"
  • Cougar
    CougarJanuary 23, 2016"Blockchain is merely a new form of database that has both downsides and benefits. The current hype we see ignores this truth. Many of its proponents should use a traditional centralized database – but they are blinded. However this hype has uses. Its creating new implementations of technology, which are skipping current, legacy infrastructure. Guess what: if you similarly re-architected the financial system’s architecture using centralized databases we’d be settling T…"
  • Merlin
    MerlinJanuary 17, 2016"my understanding is that issuance on the blockchain would be critical, another reason why a transformation will take so long. i dont get the short offer comnent. just because you may be able to message holders of a security (assuming that is part of the developed protocol) doesnt mean you can borrow bonds. it will be difficult enough to rebuild acceptable trading protocols (do you try and rebuild the rfq within the blockchain?), rebuilding a sophisticated and acceptab…"
  • samuel dalyJanuary 17, 2016"In my mind the only way to achieve something meaningful w.r.t to bonds and blockchains is to actually issue the bonds from the start on the chain. Simply bolting on blockchain technology to existing stack may have some benefits (back office tech has been in need of change for decades!) but it wont be the stuff of legend. So..... Fix the issuance process. Issue bonds on the chain. Traders can query the chain to see who owns the bonds. (sorts out the short offer issue m…"

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13 Comments on "Discount Retailer Overstock Has a New Target: Upending Wall St – Bloomberg"

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Voodoo3
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Every initiative lately has branded itself as ‘disruptive’ and it makes me cringe. Every new initiative is somehow linked to Uber, Spotify and Ebay and if you don’t understand or appreciate what they’re doing then you’re seen as the ‘idiot’ who still uses a cab or buys a record or goes into a shop. Whatever. This really is … different. How can it not affect the whole chain and how can it not affect the way things are traded? Because it’s all done in microseconds? Because it’s all done seemlessly (STP!)? Because it’s cheap (should be quasi-free no)? How quickly… Read more »
Wolfman
Guest
Chain, chain, chain…..chain of fooooools….. The frenzy that has erupted around block chain technology reminds of the promise in the 90s that weblogs would replace websites. That promise remained mostly unrealized until a company called facebook figured out how to leverage the strength of a blog and devise a business plan around it. I’m certain, certain I tell you, that block chain will play a central role in the financial markets going forward. I don’t think I will live to see bitcoins replacing every currency on the planet. Technology has a tendency to create monopolies until a government steps in… Read more »
Charlie
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Isn’t upending Wall Street everybody’s dream? Presumably getting in the middle of billions of dollars of transactions and becoming the next Mark Zuckerberg / Bill Gates. That said, it has to be admitted that 3 days to settle an equities trade given the advancements in today’s technology is ludicrous. The present system is costly, inefficient, and creaking every time the wind blows. The idea of throwing it all away and moving to a new shiny slick technology is appealing. Eradicating costs, reducing settlement risk etc etc. The big difference between other markets and financial services are these nasty people called… Read more »
Michael Ross
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Enjoying the comments here – and 100% agree that completely dis-intermediating Wall Street is a pipedream – just as the “promise of the internet” in the 90’s was that we would not need media companies and newspapers and books would not be printed anymore… Simply not true. That said, the hyperbole of the 90’s was not completely off, either. Businesses of all kinds have had to adapt and continue to transform into the digital age. That it has taken longer for that mega-trend to reach Wall Street is not surprising, right? The Equities business has under-gone dramatic changes already, while… Read more »
Goose
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I feel like Unfrozen Caveman Trader today, “I am just a simple caveman, the world of blockchain confuses and frightens me”. I am sure the blockchain concept can save a lot of money in payments and settlement processing, which is good. It just seems an undertaking of this scale amongst competitors with huge complex heterogeneous legacy systems….will take a bit of time. When the two ends of the trade cycle, securities registration and settlement are in place, we can discuss the complex ecosystem between them and do see if blockchain “radically change how stocks and bonds are bought and sold.”… Read more »
Iceman
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I have spent a few weeks over xmas asking some fairly intelligent technologists about Blockchain and after hours of discussion I have realized 1 thing. Maybe 10 people in the world really understand what it is in relation to the financial markets. The last part is key…… I have heard so many catch phrases and buzz words I actually started dreaming about it (not pretty). And then you get a whole bunch of people who have not worked in technology in their life start Blockchain a company (what is that anyway)and going on the road looking for money…. So here… Read more »
Charlie
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That is a great question and one for which I have yet to hear a reasonable answer. Blockchain is built around the premise that you exchange what you have. One guess at how this might work is that you borrow the bonds before you offer them, but that is a ridiculous notion as the cost could get horrendous. A more reasonable approach is that the quotation / trading and settlement are split and you quickly arrange to borrow the bonds after the trade and the trade is not included in the chain until you have borrowed and can deliver. The… Read more »
Merlin
Guest
Sorry if repeating anything as cannot see any of the 6 comments that were already posted. I will simply say that from what I have learned about blockchain to date, it has A LOT of potential to make a huge impact on the markets. If it were to play out like some think (hope?), it seems to me that there would no longer be a need for transfer agents, payment agents, settlement orgs (such as DTCC) and perhaps not even custodians. Trades would settle in real time and the industry would eliminate tens of billions in costs. However, I think… Read more »
Iceman
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samuel daly
Guest

In my mind the only way to achieve something meaningful w.r.t to bonds and blockchains is to actually issue the bonds from the start on the chain. Simply bolting on blockchain technology to existing stack may have some benefits (back office tech has been in need of change for decades!) but it wont be the stuff of legend. So…..

Fix the issuance process. Issue bonds on the chain. Traders can query the chain to see who owns the bonds. (sorts out the short offer issue mentioned below).

SD

Merlin
Guest
my understanding is that issuance on the blockchain would be critical, another reason why a transformation will take so long. i dont get the short offer comnent. just because you may be able to message holders of a security (assuming that is part of the developed protocol) doesnt mean you can borrow bonds. it will be difficult enough to rebuild acceptable trading protocols (do you try and rebuild the rfq within the blockchain?), rebuilding a sophisticated and acceptable repo mechanism seems even more daunting, or perhaps other solutions will evolve. and what happebs if multiple blockchains are created each hosting… Read more »
Cougar
Guest
Blockchain is merely a new form of database that has both downsides and benefits. The current hype we see ignores this truth. Many of its proponents should use a traditional centralized database – but they are blinded. However this hype has uses. Its creating new implementations of technology, which are skipping current, legacy infrastructure. Guess what: if you similarly re-architected the financial system’s architecture using centralized databases we’d be settling T+0 and near eliminating various counterparty risk and everything else blockchain allegedly solves too. We will soon see disillusionment with blockchain as it can’t deliver this hype. This will distil… Read more »
Cougar
Guest
Bonds on the blockchain as a panacea to our liquidity problems is a misnomer. All-to-all trading will fair no better in a native blockchain bond infrastructure that it does now. Knowing who holds bonds would allow us to trade much better but that’s not something the buyside wants now nor will they then. Primary issuance buyers won’t be published either for the same reason. It will be kept private still. It’s not the technology that needs to change to solve this problem but mindsets. Algomi, Project Neptune pretty much any platform would do tremendously well if each buyside account posted… Read more »
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