December 16, 2022
Programable securities are coming. Everyone is saying it and most major financial institutions are tinkering, and some are investing significantly. Much of the tokenization of securities happening right now is like building a website of old. Internet commerce and what we now know of as e-commerce did not come about until logistics, accounting, and inventory management were tied together. Amazon has built amazing capabilities here (see picture below) and the middle function of shipping/logistics, and the last mile are being improved upon and worked out by new competitors every day.
This is an extremely helpful analogy for tokenization. We see manual tokenization with individual issuances with shorter maturities and referenceable data for public products. This is the early days of manual ‘pick and pack’ e-commerce. When tokenization will take off is when that compute function, or programable security, can pull data real time, from multiple data sources, recreate every calculation through time (fully auditable), and do so at scale, then we will have the trading of private market assets globally in a digital form. This demands an operating system for data management – this is Inveniam.
Inveniam is the logistics mechanism for private market data, being delivered to compute functions, 1) off chain, in legacy systems, and 2) on chain, to smart contract, where large asset managers can manage the data for their private market assets at scale with out that data becoming public. This includes ownership based access control to data at the edge (i.e. token based access control) and removing the middle ware of ‘ten finger automation’ of a junior accountant and a spread sheet to connect back office, asset data, into a true digital middle office. This opens the door to all sorts of new front office uses for alts around primary and secondary trading and distribution, indices, derivatives, collateralization, securitization, etc.
This is based on 1) connecting data from the asset owners own systems – where the data sits at rest, 2) commuting trust in that verified data (it is the original – think digital notarization – a statement on completeness of data not truth of data), 3) delivering it real time to many different computational systems, such as valuation, waterfall, carry calculations, risk books, etc., and 4) doing so with out a data lake in the middle. This federated data room is needed infrastructure for the promise of private market assets trading globally, and for the alts market to move from defined benefit to defined contribution. This will happen when the performance data is auditable, marks can be set by third parties, and you can scale the administration of these funds.
Private Market assets will trade digitally globally when the data is available, trusted, and market places grow up for the liquidity to be aggregated across silos and regions. These trades will clear and settle in the regulated market they are owned/custudied.