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FINRA, the Self-Regulatory Organization (SRO) for Wall Street, has finally approved a blockchain-powered platform for trading securities. FINRA announced that it had given its approval for the platform to proceed. With this green light, IOI Capital and Markets will be able to execute its plans of becoming a placement agent for digital securities that are placed privately. This will be done via a permissioned Hyperledger Fabric that runs on the blockchain.
What the Top Leadership Had to Stay
Hamid Gayibov and Rashad Kurbanov have been working on this platform since July 2017. The platform is called iownit and the approval means that this firm will be able to issue securities and it could even join the secondary trading market.
The approval is even more notable since there are so many other projects on the queue waiting for approval from FINRA. Some of the firms have been waiting for over a year to know their fate. According to a co-founder of the project, it took the company 18 months to win approval from FINRA. In comparison, broker-dealers usually need to wait for around 9 months to gain approval. The reason for this is that they had to prove their business was compliant with all aspects of the law.
According to an official of the company, most of the issues that FINRA was looking for clarification revolved around post-trade processing for the secondary markets. The official said they needed to ensure that they had all the necessary protections for investors. For instance, they needed to ensure there were proper reporting and recording measures, the flow of money was secure, and that issuers have the tools to manage cap tables.
A Platform for the Blockchain
IOI will not deal with crypto. Instead, it digitizes the process of issuing securities, the secondary trading process, as well as lifecycle management of the asset. It ensures that the private securities market for accredited and institutional investors is more efficient.
This platform is different for public securities, such as those, which tZERO wants to tokenize. Private securities are negotiated between issuers and investors. According to an IOI official, the private securities market is characterized by a diverse array of instruments as well as infrequent transactions. He further expounded that the distributed ledger was the perfect tool for the nature of this market. This was because it would make it possible to implement smart contracts that can be modeled after existing financial instruments. This would all be possible without the need for a complex database, which is what happens for the normal OTC derivatives.
IOI would not comment on how much market share it was targeting with its platform. However, it said that it had a target in mind in the next three years. The company says that this platform will come with very low fees and it will be easier to find data compared to existing platforms.
The firm made it clear they would not pick a name with blockchain in it. A co-founder said that this was because it reminded him of the dot com tech hype which ended badly for all those involved.