Inside the Centralized Database Holding Trillions of Dollars

Sri Misra: The fourth dimension is probably all around disintermediation, the whole plumbing. Let's talk about native issuance of, uh, equity. Let's talk about IPOs on chain and how on chain disintermediation completely compresses, uh, uh, that stack.

Guest: Yeah, yeah. So, um, lots of impact there. So I'd say for the US Financial markets, stack, like you literally have, like, at the core of the US capital markets, a vault that effectively has, you know, trillions of dollars, hundreds of trillions of dollars just sitting as, you know, the real ownership of a particular security, uh, what's called the dtcc. And so you have this, you know, very, very centralized database, effectively of every asset on the planet.

Sri Misra: That's pretty much the structure, uh, in every other market where there's a custodian sitting on.

Guest: Exactly. Euro clears the same way, right? Yeah, 100%. So you look at pretty much all major regions and, you know, largely it's because there's a lot of efficiency that's gained from that. So it's not a negative thing at all. Um, but. But it's true, right? The fundamental bedrock is, is built on like a centralized database. Um, and then you have like, broker dealers that sit on top of it. And then you have, you know, maybe exchanges that people trade on or you've got, you know, just even retail or holders. And so that's simplifying, I think, a lot of the stack. But, you know, it's helpful, I think, as you think about, you know, when you manufacture an asset and then you distribute an asset, um, a lot of those pieces exist for a reason, but they also extract fees or they, you know, have certain settlement windows or times, um, that just creates some operational friction. Again, not entirely a negative thing, just a fact. Um, so when it comes to an IPO and you think about how this all takes place, they're oversimplifying again here, but you have, call it one or two lead investment banks that are really close to the company that are underwriting the deal and that are pricing and helping that company through, you know, the decision to go public. You have like, a number of other participants in that that are also called, you know, the syndicate or selling group members, which are not the lead underwriters, you know, taking a lot of the balance sheet risk, but they are participants in telling the story and drumming up investor demand and, you know, being a distribution, um, channel for that issue or to sell their securities, again, massive benefit for any company.