Race to the bottom

We’re witnessing a Financial innovation breakthrough. Robihood has presented a project to tokenize securities, mostly stocks and ETFs. In its simplest form, this implies taking an asset, in this case a stock and record it on the blockchain as a digital representation of the actual asset. Once it’s there, you can buy and sell it within the blockchain technology which is much more efficient. So much so, that RobinHood has attached the zero commission sign to this project. Which prompts 2 thoughts: (1) what’s going to happen to traditional exchanges, and (2) how do they make money if there are no commissions. For the second done, the answer is though a business model that RobinHood already had, Pay -for-Flow. When you’re a big hedge fund or an institutional investor, one of your problems is liquidity. But you can pay to receive the flow from retail investors to buy or sell your securities, minimizing overall transaction costs. For the first one, it’s not that simple; it’s not only the exchanges that may differ if they don’t adopt the new technology, the whole brokerage industry is built on trading commissions. If the value of a trade is zero, what is the value of brokerage services? A race to the bottom has just started.

Want to know more? You can find all our posts at https://www.myfundamental.net/insights

#iamfundamental #soyfundamental #wealthmanagement #familyoffice #financialadvisor #financialplanning

#policymistake #ratecut #stagflation