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1. The current market structure of the securities industry

At present, the structure of the global securities market is basically the same. There are multiple stock exchanges within a securities regulatory jurisdiction. Exchanges provide matchmaking services for securities transactions. After the securities trading order matching is completed, the exchange transmits the order to the securities clearing company. The clearing company will record the transaction data to ensure that the corresponding securities and money are recorded and transferred to the corresponding accounts. Within the same securities regulatory jurisdiction, usually only one clearing company provides clearing and settlement services for the stock exchanges within the jurisdiction. Such a company is DTCC in the United States and registered in China.

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2. The rapid development of encrypted digital currency exchanges

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3. The Fundamental Flaws of Encrypted Digital Currency Exchanges

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4. Application of blockchain technology in the securities industry

When the value of blockchain technology is recognized by the market, various industries are trying to apply it in their respective fields. The earliest consensus in the securities industry on the application of blockchain technology is to apply it in the field of post-trade clearing. For this reason, in 2016, a high-profile startup company appeared in this area. In the US it is Digital Asset Holdings. In Europe it is SETL. But the solutions of these two companies are still aimed at the traditional securities market. Their application is an application of accounting methods, and does not change the electronic representation of securities.

While blockchain technology is being applied to the existing securities industry, the ways of digitizing currency and assets are also developing rapidly. The use of tokens as a financing tool for fundraising and secondary market transactions is welcomed by the market. The rapid development of ICO on a global scale has also brought new enlightenment to the development direction of the securities market. Under the regulatory requirements of the SEC, security tokens have gradually been adopted in the market for fundraising and trading. In the U.S. securities market, various related institutions such as marketing platforms, security token customization platforms and ST exchanges have emerged, which are mainly based on security tokens and provide financing and transaction services within the scope of compliance. The business model adopted by ST Exchange is centralized matching transactions and distributed clearing. tZERO, Templum and OpenFinance Network all adopt this model. Because the certificate-type pass itself is a digital form, it can be managed by the user on the chain. Therefore, ST-based financing and trading services can support digital assets to be kept, circulated and traded on the blockchain. According to the current U.S. securities laws, the types of assets that can be supported by this method are only alternative assets, and the requirements of investors are also very high. So this method is still a very small asset field. But on a global scale, compliant digital asset exchanges have begun to be established in accordance with this model. The Swiss asset exchange SDX has been established in Switzerland. In the United States, two companies have also started to apply to the SEC to register and establish a new digital stock exchange. SDX adopts the distributed ledger technology Corda as the bottom layer of clearing and settlement of its digital securities. Among the two companies in the United States are tZERO and Templum, and the underlying technologies of both companies are using blockchain technology. Therefore, these compliant digital asset exchanges all adopt the mode of centralized matching and distributed clearing.

In terms of the technologies used to support distributed clearing, SDX uses Corda, and tZERO designs an intermediate layer that can access different blockchain technologies at the bottom.

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5. Opportunities Libra brings to improve the securities industry

The success of such an exchange is determined by multiple factors. The correct securities market structure and mode of operation is one of them, as well as the number and uniqueness of the products listed and traded on this exchange, as well as the number and trading volume of users who can participate in the transaction on this exchange. In addition, trading products and trading users affect each other. And Libra provides such an exchange with a multi-faceted advantage base.

First of all, the Libra blockchain supports smart contracts to customize financial products, so it is possible to digitally represent securities to circulate on this network. The Libra blockchain can also provide basic technical support for the clearing and settlement of securities.

Secondly, the Libra stablecoin provides the most convenient tool for global users to trade on this exchange.

Third, members of the Libra Association will bring a large number of potential trading users to this exchange on a global scale. So Libra has laid a very good foundation for such a global exchange in terms of underlying infrastructure, digital stable currency and users. Therefore, some innovators in the securities industry around the world can also consider building a more secure digital asset exchange on a global scale based on the infrastructure provided by Libra. And such a digital asset exchange will be superior to existing encrypted digital currency exchanges and individually operated digital stock exchanges in various securities jurisdictions.