Place/Date: British Virgin Islands - May 31st, 2019 at 1:41 pm UTC · 5 min read
Contact: AhrvoDEEX, Source: AhrvoDEEX
The history of the brokerage industry can be broken up into three periods. In the early days (pre-1960’s and 70’s), trades were done on paper and execution and settlement happened manually via mailmen and messengers. During this time period, settlement took 5 business days, and the stock market closed on Wednesday. Market inefficiencies led to high transaction costs and suboptimal trading activity.
Period two coincides with the creation of electronic accounting systems and central depositories. During this era paper was eliminated from securities trading, otherwise known as “dematerialization”. Another improvement to the industry was multilateral netting- an arrangement among multiple parties that trades be aggregated rather than settled individually. This reduced the total number of transactions, lowering transaction cost and improving settlement speed.
The groundwork for 3.0 was laid in 2008 when an unknown person(s) named Satoshi Nakamoto released the now infamous Bitcoin white paper. Since then blockchain technology and cryptocurrencies have become front and center of the next technological revolution. Blockchain technology provides an opportunity to create a more efficient brokerage experience.
Ahrvo is a platform for investors and traders to make educated investment decision using stock and ETF rankings that are updated daily. AhrvoDEEX enables real-time execution, clearing, and settlement of equity transactions in a transparent manner without the needs of an intermediary.
Wall Street brokerage analysts are not objective and often produce inaccurate equity ratings and price targets. A recent study found, from 1981 to 2016, the top 10% of stocks analysts were bullish on (liked) generally performed worse than the 10% of stocks analyst were bearish on. Stocks analysts were bearish on (disliked) gained 15% in excess return over the following year relative to stocks analysts were bullish on.
According to Factset, only 5% of S&P 500 stocks were rated sell in 2017 and 2018. It’s not hard to see why- a large portion of an analysts compensation is tied to their ability to develop, nurture, and maintain c-suite relationships.
AhrvoDEEX brokerage use objective stock scores instead of subjective analysts. AhrvoScores look at over four dozen subfactors that are highly correlated with price performance, grouping them into four main factors — Quality, Value, Growth, and Momentum. For the past ten years, the system has consistently outperformed the stock market (benchmark Russell 3000 w/dividends).
The systems performance report was generated by a third-party firm, EQM Capital LLC. Stock price targets are generated using neural networks that learn over time, improving the accuracy of results. AhrvoDEEX also uses neural networks to predict future AhrvoScores, allowing investors and traders to position their portfolios ahead of time.
Transactions conducted by traditional brokerages lack transparency. It is nearly impossible for a retail investor to view the order book (bid/ask prices) when trading without using 3rd party systems. As a result, there is no way to ensure an order is being filled at the best price.
Furthermore, order flows are sold to high-frequency traders who front run (jump) trades, costing investors and traders money. Lastly, clearinghouses are bottlenecks that limit settlement speed. On average, it takes two to three days for an equity transaction to settle.
AhrvoDEEX has onchain order-matching engine and settlement, providing network participants with transparency. The network also provides near real-time execution and settlement of equities. AhrvoDEEX transaction speed (3-5 seconds) is comparable to centralized exchanges (1-3 seconds) and much faster than Ethereum DEX (~3 minutes) and Bitcoin (~10 minutes). The fact that trades settle in a matter of seconds instead of days drastically improves post-trade liquidity.
The number of US brokers that support non-US resident has diminished substantially and only a select number of US brokers are interested and willing to work with expatriates. The Foreign Account Tax Compliance (FACTA), which was passed in 2010, imposes new self-reporting requirements and compliance on financial institutions.
The law requires foreign financial institutions to inform the IRS of “U.S. Persons” and report the clients’ accounts to them. However, US financial institutions adopted the practice. Fidelity, Wells Fargo, and Morgan Stanley are among some of the large financial institutions closing accounts due to the impact the law has on other aspects of their complex businesses.
This barrier to entry limits the number of non-US self-directed investors participating in US equity markets. In addition, indirect exposure to US markets is also severely limited. Most U.S. mutual fund companies prevent their funds from being purchased by non-US residents and Americans abroad.
AhrvoDEEX brokerage will support foreign investors and ex-pats in compliance with the law in order to provide to self-directed investors with access to US equities.
The AhrvoDEEX trading ecosystem (brokerage) will be powered by Ahrvo coin. Participants will be rewarded in Ahrvo coin for trading (creating liquidity).
Other use cases include: