From: rah@TIAC.net (Robert Hettinga, Shipwright Development Corp.)
Date: Tue, 3 May 94 18:01:15 PDT
To: perry@imsi.com
Subject: Re: Digital Cash
Message-ID: <199405040100.VAA02674@zork.tiac.net>
MIME-Version: 1.0
Content-Type: text/plain





>Robert Hettinga, Shipwright Development Corp. said:
>> Is it possible to see instantaneous settlement happen in the financial
>> markets with digital cash?
>
and "Perry E. Metzger" <perry@snark.imsi.com> said:

>In theory, yes, although one would also need to move all securities
>being traded to book entry or "digital bearer certificates".
>Presumably the current securities laws would require some changes.
>
>This of course has the potential to dramatically lower transaction
>costs in these markets.

I'm trying to remember the name of the guys who "buy" trades from large
institutions like Fidelity.  Their transaction clearing costs are supposed
to be radically lower because of the automation they use. . . Something
about making their money in the bid/asked spread.

I'm sure the tax man will want to trace things like this (they might worry
about bearer securities after they killed them off already), but there's
probably a way to cut them in enough to keep them and the other regulators
happy.  It might be a way to institutionalize (so to speak ;-)) strong
crypto somewhere with enough clout to keep the other Feds out of normal
people's business.

Your reference to book entry reminded me about the book value for some
reason, and the flap about FASB mark-to-market initiatives.  That kind of
ratcheting down of the time horizon might make the financial markets try to
reduce their costs, and be more open to a reduction of transaction costs.
Perry, how would some one go about demonstrating the "potential to
dramatically lower transaction
costs in these markets"?

cheers,
Bob


-----------------
Robert Hettinga                       "There is no difference between someone
Shipwright Development Corporation      eats too little and sees Heaven and
44 Farquhar Street                      someone who drinks too much and sees
Boston, MA 02313 USA                    snakes." -- Bertrand Russell
(617) 323-7923