7 ms·

> There is no reason, with all the identities attached, and auditing procedures, and digital signing, and protocols we have today, that we shouldn't be able to

by soared 6y ago

> There is no reason, with all the identities attached, and auditing procedures, and digital signing, and protocols we have today, that we shouldn't be able to know who owns the stock at any given point, and not have to rely on these super-slow resolutions. Trillions of dollars are moved in these markets - you can't just hop in and do a quick rebuild with crypto, launch it, and call it good. Imagine rebuilding ythe core infrastructure at Microsoft - that takes years and years. But now you also have the entirety of the global economy dependent on your software. You also need to meet heavy government regulation and comply with oversight. There is a whole shit ton of reasons this process hasn't been updated to T+0. It was t+3, now t+2, and I've heard (from the CEO of Webull on bezinga power hour yesterday) wanting t+1 this year. Edit - to be clear I'm not saying dropping the current system for a new one is the only option. I'm saying improving the system at all (or rebuilding it) is arguably one of the most challenging software tasks one could undertake and there are serious reasons financial markets are not anywhere near what is "technically possible".

syshum 6y ago
>>Imagine rebuilding the core infrastructure at Microsoft - that takes years and years. But now you also have the entirety of the global economy dependent on your software. That is a bad analogy, MS takes years to change the core because it require INSANE levels of backwards compatibility. Apps written for windows 2000 still work and need to work today... This would not need to be the case with this type of system, there are a whole host of political reasons why the system is built the way it is, part of it is the desire to control it (and in this case the wrong people where doing things they were not suppose to) I am sure you will call that "conspiracy", but the reality is that the investment system is setup to be slow and opaque not because of the need for backwards compatibility, or security it is that way so the "correct people" control it plain and simple
- SilasX 6y ago
  In fairness, stock exchanges care even more about backward compatibility and so it would be at least as much an issue for them. Edit: Sorry, I say it way too much, but this merits a repeat of the one-liner: "The reason God was able to finish the earth in only six days is that He didn't have to worry about backward compatibility [or legacy system integration, or satisfying an installed userbase]."
  - splintercell 6y ago
    Sure, but there's no real reason why ALL companies need to have their stocks compatible with each other on the same exchange.
    - the_local_host 6y ago
      > [T]here's no real reason why ALL companies need to have their stocks compatible I think it would be way harder to trade a basket of stocks (e.g. pairs trading, going long one and short the other) if you had to worry about mismatched settlement dates across the different stocks; it would be like trading spot against a one-day forward.
      - Out_of_Characte 6y ago
        You've just defined exactly what high frequency traders do to make money. They balance all stock exchanges in order to make tiny profits on the stock differences.
    - andylynch 6y ago
      They don't, there are hundreds of exchanges and plenty of competitors for listings - CSDs & clearing are a pinch point. But in some ways exchanges also function as a natural monopoly; especially for primary issuance. e.g. look at AMEX's IPO slate compared to the big two, where the market is right now - it's insignificant, and they are the #3 exchange in the US. People want to list to make money, and that means going where the liquidity is until there's a really good reason not to, like with NASDAQ's move to electronic trading in the '70s.
- oblio 6y ago
  I think even Win95 apps work on Windows 10, not just Windows 2000 :-) Think about all the flak they're getting for Settings/Control Panel. It's a multi-decade process to rewrite all of Control Panel, because Control Panel supports custom integrations plus it's such a central piece of software that looking at the code the wrong way probably breaks some client doing some crazy stuff with it :-)
splintercell 6y ago
> Trillions of dollars are moved in these markets - you can't just hop in and do a quick rebuild with crypto, launch it, and call it good. OP talked about how 'this is absolutely possible', but you're responding to him by saying "but we can't just drop everything and move to the new system". You're right but that doesn't make OP's point any less correct. Generally in a legacy system we migrate by building all new features onto the new system. For instance, if the company wants to move their legacy jQuery based banking app to Vue.js, they can start by building a more orthogonal component in the new technology, so it doesn't affect the other thing. Eventually once enough things have migrated (possibly years later), the benefits of the new system justify the cost of migration even more. Stock of an existing company like GE is different than a company which is yet to launch (say Coinbase). The best way (perhaps the only way) to migrate is to start launching new IPOs on this new system. We did migrate from being on paper to computers, I'm sure we can do it again (and hopefully with better technologies in the future...again).
SilasX 6y ago
>Trillions of dollars are moved in these markets - you can't just hop in and do a quick rebuild with crypto, launch it, and call it good. Which is why I didn't say anything like that. Just, that settlement time should have improved with our protocols for validating ownership, not been frozen in time.
- sokoloff 6y ago
  It has. It used to be T+5 [business day] settlement until 2004, then T+3 until 2017, and is now T+2.
  - Out_of_Characte 6y ago
    To be fair, That's nothing. High frequency traders have been on the order of microseconds for years. everyone trades under the assumption that the system is faster than it is. This is going to be an unpopulair opinion but wall street is esentially a government-like entity built by the elite. troughout history any scheme that destroyed market assumptions have been met by the SEC under the guise of protecting the fair, orderly and efficient market. No thought is given to actually fix design flaws in the open market. Just prosecute anyone who manipulates it incorrectly.
  - SilasX 6y ago
    I meant, improved proportionally.
colllectorof 6y ago
>Trillions of dollars are moved in these markets ...and they jammed when a single subreddit decided to buy GameStop shares. Just think about what that means.
- nemothekid 6y ago
  The market was not jammed, only Robinhood was jammed. I could still buy GME on Schwab if I wanted
  - NovemberWhiskey 6y ago
    ... or Fidelity or Vanguard or Wells Fargo or Citibank or ...
  - throwawayboise 6y ago
    I had heard that Schwab and TD Ameritrade suspended GME trades as well, was that not true?
    - londons_explore 6y ago
      Theres a site for that: https://www.wherecanibuygme.com/ https://www.wherecanibuygme.com/
    - mcguire 6y ago
      I was unable to look up the GME quote on TDA Thursday. In their UI, the quote is the place with the Buy button.
      - saratogacx 6y ago
        I used TDA via the ThinkorSwim app and it had no issues on Thursday. If you are at a PC and using the site, I'd suggest getting the TOS desktop app as it seems to be a lot more stable. It is NOT user friendly though so it may take a tad to get used to.
    - pc86 6y ago
divbzero 6y ago
What are the “whole shit ton of reasons” why shorter settlement periods are so difficult? In particular, I’m curious why we didn’t jump straight from T+3 to T+1. Even if T+0 is especially challenging, what would make T+1 substantially harder than T+2?
- eej71 6y ago
  As with all these changes, it's mostly about coordination and legacy systems. Just as Y2K was a challenge and just as the 2038 date will be a challenge, it's all about pushing changes through legacy systems. ascii->unicode, ip4->ip6, python 2->3. We all know the drill. We've all lived through these things. It's rarely a technical problem. It's about coordination across firms, domains, people, and systems that may not be known ... until they break.
  - throwawayboise 6y ago
    Yes. I used to work at an investment bank. When the market moved from T+5 to T+3 it was a major project for all internal systems to be adjusted. It wasn't just a matter of changing a SETTLEMENT_DAYS macro in a header file. And even afterwards, it wasn't that, because there were different systems written in different eras and in different languages. Multiply this by however many thousands of firms, all with their bespoke back-office systems. and it takes time.
    - adamredwoods 6y ago
      What language was this written in? Did it stay in the same language? If it's say, FORTRAN, I wonder if there's value in learning it soon.
      - IsoldesKnight 6y ago
        Back office system in the financial sector? You're probably looking at COBOL, although I know Caché gets used as well.
  - incongruity 6y ago
ericbarrett 6y ago
When one realizes that in January 2021, some major financial institutions are still settling transactions via CSV files sent on basic FTP, the scope of the problem becomes clear!
- austinheap 6y ago
  It's actually TSV via SFTP and well over 50% of American wealth operates this way.
  - takeda 6y ago
    So they do move with times. /s
  - zikzak 6y ago
    Tons of businesses exchange data like this (e.g. drop ship product availability, etc). Platform independent and easy to read over if things go wrong. I don't see the issue.
  - ericbarrett 6y ago
    SFTP if they're "compliant." FTP is still in the wild.
  - orwin 6y ago
    I'm pretty sure we broke one of our bank client by telling them that data import will be exclusively with SFTP. We ended up allowing FTP (and thus our security certification was voided). It was a Euro bank though, but it was barely two years ago.
- not_knuth 6y ago
  << laughs with tears and a devilish look in eyes >> Regardless of the fact that most of the banking sector is still stuck on IBM mainframes from the 60s-80s running COBOL: I have seen accountants who's only job it was to come in every day and do the same sums on Excel. I've seen people insisting on a calculator and a printout so that they could sum up columns of an Excel table and send the results back via email. There are valid reasons to move slowly. Transition costs to new systems are usually immense and the process is a nightmare for banks, but none of what I described fell into that category. It was just people refusing to change their ways. A report for treasury could've been instantaneous with a super simple live updating dashboard. But no. Instead, the CEO got an Excel file emailed to them every week that was put together by 40 people – many of whom entered the numbers manually. In the industry we have come to call people involved in these tedious processes "hamsters", because they might as well be going up and down the escalator all day. I don't think many people understand how excruciatingly slow banks move and how inefficient they are. /cathartic rant over Edit: (I should add for context that this was a fairly large bank in continental Europe)
astrange 6y ago
Russia called it a modernization when they moved off T+0 to T+2 because people wanted more slack to complete their payments.
- JAlexoid 6y ago
  To be fair - the issue with demanding immediate settlement is that fund transfer settlements aren't instantaneous.
- blueblisters 6y ago
  I mean you can still offer credit in T+0 settlements but the real challenge (I think) is setting up an industry-standard margin pledge facility for trades to happen without immediate availability of liquidity. Here's DTC's whitepaper from 2018 discussing some issues with real-time gross settlement: https://www.dtcc.com/~/media/Files/downloads/Thought-leadership/modernizing-the-u-s-equity-markets-post-trade-infrastructure.pdf https://www.dtcc.com/~/media/Files/downloads/Thought-leaders... TL;DR: Market makers using a netting mechanism to settle trades at the end of the day, and they often don't have the funds necessary to settle trades in real-time.

by soared 6y ago

syshum 6y ago

>>Imagine rebuilding the core infrastructure at Microsoft - that takes years and years. But now you also have the entirety of the global economy dependent on your software. That is a bad analogy, MS takes years to change the core because it require INSANE levels of backwards compatibility. Apps written for windows 2000 still work and need to work today... This would not need to be the case with this type of system, there are a whole host of political reasons why the system is built the way it is, part of it is the desire to control it (and in this case the wrong people where doing things they were not suppose to) I am sure you will call that "conspiracy", but the reality is that the investment system is setup to be slow and opaque not because of the need for backwards compatibility, or security it is that way so the "correct people" control it plain and simple

SilasX 6y ago
In fairness, stock exchanges care even more about backward compatibility and so it would be at least as much an issue for them. Edit: Sorry, I say it way too much, but this merits a repeat of the one-liner: "The reason God was able to finish the earth in only six days is that He didn't have to worry about backward compatibility [or legacy system integration, or satisfying an installed userbase]."
- splintercell 6y ago
  Sure, but there's no real reason why ALL companies need to have their stocks compatible with each other on the same exchange.
  - the_local_host 6y ago
    > [T]here's no real reason why ALL companies need to have their stocks compatible I think it would be way harder to trade a basket of stocks (e.g. pairs trading, going long one and short the other) if you had to worry about mismatched settlement dates across the different stocks; it would be like trading spot against a one-day forward.
    - Out_of_Characte 6y ago
      You've just defined exactly what high frequency traders do to make money. They balance all stock exchanges in order to make tiny profits on the stock differences.
  - andylynch 6y ago
    They don't, there are hundreds of exchanges and plenty of competitors for listings - CSDs & clearing are a pinch point. But in some ways exchanges also function as a natural monopoly; especially for primary issuance. e.g. look at AMEX's IPO slate compared to the big two, where the market is right now - it's insignificant, and they are the #3 exchange in the US. People want to list to make money, and that means going where the liquidity is until there's a really good reason not to, like with NASDAQ's move to electronic trading in the '70s.
oblio 6y ago
I think even Win95 apps work on Windows 10, not just Windows 2000 :-) Think about all the flak they're getting for Settings/Control Panel. It's a multi-decade process to rewrite all of Control Panel, because Control Panel supports custom integrations plus it's such a central piece of software that looking at the code the wrong way probably breaks some client doing some crazy stuff with it :-)

splintercell 6y ago

> Trillions of dollars are moved in these markets - you can't just hop in and do a quick rebuild with crypto, launch it, and call it good. OP talked about how 'this is absolutely possible', but you're responding to him by saying "but we can't just drop everything and move to the new system". You're right but that doesn't make OP's point any less correct. Generally in a legacy system we migrate by building all new features onto the new system. For instance, if the company wants to move their legacy jQuery based banking app to Vue.js, they can start by building a more orthogonal component in the new technology, so it doesn't affect the other thing. Eventually once enough things have migrated (possibly years later), the benefits of the new system justify the cost of migration even more. Stock of an existing company like GE is different than a company which is yet to launch (say Coinbase). The best way (perhaps the only way) to migrate is to start launching new IPOs on this new system. We did migrate from being on paper to computers, I'm sure we can do it again (and hopefully with better technologies in the future...again).

SilasX 6y ago

>Trillions of dollars are moved in these markets - you can't just hop in and do a quick rebuild with crypto, launch it, and call it good. Which is why I didn't say anything like that. Just, that settlement time should have improved with our protocols for validating ownership, not been frozen in time.

sokoloff 6y ago
It has. It used to be T+5 [business day] settlement until 2004, then T+3 until 2017, and is now T+2.
- Out_of_Characte 6y ago
  To be fair, That's nothing. High frequency traders have been on the order of microseconds for years. everyone trades under the assumption that the system is faster than it is. This is going to be an unpopulair opinion but wall street is esentially a government-like entity built by the elite. troughout history any scheme that destroyed market assumptions have been met by the SEC under the guise of protecting the fair, orderly and efficient market. No thought is given to actually fix design flaws in the open market. Just prosecute anyone who manipulates it incorrectly.
- SilasX 6y ago
  I meant, improved proportionally.

colllectorof 6y ago

>Trillions of dollars are moved in these markets ...and they jammed when a single subreddit decided to buy GameStop shares. Just think about what that means.

nemothekid 6y ago
The market was not jammed, only Robinhood was jammed. I could still buy GME on Schwab if I wanted
- NovemberWhiskey 6y ago
  ... or Fidelity or Vanguard or Wells Fargo or Citibank or ...
- throwawayboise 6y ago
  I had heard that Schwab and TD Ameritrade suspended GME trades as well, was that not true?
  - londons_explore 6y ago
    Theres a site for that: https://www.wherecanibuygme.com/ https://www.wherecanibuygme.com/
  - mcguire 6y ago
    I was unable to look up the GME quote on TDA Thursday. In their UI, the quote is the place with the Buy button.
    - saratogacx 6y ago
      I used TDA via the ThinkorSwim app and it had no issues on Thursday. If you are at a PC and using the site, I'd suggest getting the TOS desktop app as it seems to be a lot more stable. It is NOT user friendly though so it may take a tad to get used to.
  - pc86 6y ago

divbzero 6y ago

What are the “whole shit ton of reasons” why shorter settlement periods are so difficult? In particular, I’m curious why we didn’t jump straight from T+3 to T+1. Even if T+0 is especially challenging, what would make T+1 substantially harder than T+2?

eej71 6y ago
As with all these changes, it's mostly about coordination and legacy systems. Just as Y2K was a challenge and just as the 2038 date will be a challenge, it's all about pushing changes through legacy systems. ascii->unicode, ip4->ip6, python 2->3. We all know the drill. We've all lived through these things. It's rarely a technical problem. It's about coordination across firms, domains, people, and systems that may not be known ... until they break.
- throwawayboise 6y ago
  Yes. I used to work at an investment bank. When the market moved from T+5 to T+3 it was a major project for all internal systems to be adjusted. It wasn't just a matter of changing a SETTLEMENT_DAYS macro in a header file. And even afterwards, it wasn't that, because there were different systems written in different eras and in different languages. Multiply this by however many thousands of firms, all with their bespoke back-office systems. and it takes time.
  - adamredwoods 6y ago
    What language was this written in? Did it stay in the same language? If it's say, FORTRAN, I wonder if there's value in learning it soon.
    - IsoldesKnight 6y ago
      Back office system in the financial sector? You're probably looking at COBOL, although I know Caché gets used as well.
- incongruity 6y ago

ericbarrett 6y ago

When one realizes that in January 2021, some major financial institutions are still settling transactions via CSV files sent on basic FTP, the scope of the problem becomes clear!

austinheap 6y ago
It's actually TSV via SFTP and well over 50% of American wealth operates this way.
- takeda 6y ago
  So they do move with times. /s
- zikzak 6y ago
  Tons of businesses exchange data like this (e.g. drop ship product availability, etc). Platform independent and easy to read over if things go wrong. I don't see the issue.
- ericbarrett 6y ago
  SFTP if they're "compliant." FTP is still in the wild.
- orwin 6y ago
  I'm pretty sure we broke one of our bank client by telling them that data import will be exclusively with SFTP. We ended up allowing FTP (and thus our security certification was voided). It was a Euro bank though, but it was barely two years ago.
not_knuth 6y ago
<< laughs with tears and a devilish look in eyes >> Regardless of the fact that most of the banking sector is still stuck on IBM mainframes from the 60s-80s running COBOL: I have seen accountants who's only job it was to come in every day and do the same sums on Excel. I've seen people insisting on a calculator and a printout so that they could sum up columns of an Excel table and send the results back via email. There are valid reasons to move slowly. Transition costs to new systems are usually immense and the process is a nightmare for banks, but none of what I described fell into that category. It was just people refusing to change their ways. A report for treasury could've been instantaneous with a super simple live updating dashboard. But no. Instead, the CEO got an Excel file emailed to them every week that was put together by 40 people – many of whom entered the numbers manually. In the industry we have come to call people involved in these tedious processes "hamsters", because they might as well be going up and down the escalator all day. I don't think many people understand how excruciatingly slow banks move and how inefficient they are. /cathartic rant over Edit: (I should add for context that this was a fairly large bank in continental Europe)

astrange 6y ago

Russia called it a modernization when they moved off T+0 to T+2 because people wanted more slack to complete their payments.

JAlexoid 6y ago
To be fair - the issue with demanding immediate settlement is that fund transfer settlements aren't instantaneous.
blueblisters 6y ago
I mean you can still offer credit in T+0 settlements but the real challenge (I think) is setting up an industry-standard margin pledge facility for trades to happen without immediate availability of liquidity. Here's DTC's whitepaper from 2018 discussing some issues with real-time gross settlement: https://www.dtcc.com/~/media/Files/downloads/Thought-leadership/modernizing-the-u-s-equity-markets-post-trade-infrastructure.pdf https://www.dtcc.com/~/media/Files/downloads/Thought-leaders... TL;DR: Market makers using a netting mechanism to settle trades at the end of the day, and they often don't have the funds necessary to settle trades in real-time.