Syndicate Policy Construction Standards

I need to decide whether or not to make TAD3 an inter-agent standard.

Governance Implications

What does it mean to control someone? Would you call the law of the land control, given its explicit-_ish_ scope of penalties? Or perhaps youā€™d think of the monetary system as a control mechanism?

A fear of imprisonment or worse certainly instills due fear in most people to halt physical crime. But what about the fraud so commonplace in financial intermediaries? Do we call this idem crime, or is it a more nuanced form of behavior that is much more challenging to assert?

In contemplating the Ad rules, itā€™s become abundantly clear that the relationship of trust historically stewarded by our elected representatives has geometrically deteriorated over the decades. Unfortunately, these oversight processes do not seem adept to handle todayā€™s growing market complexity. Given that much of my ambitions circle around integrating billions into capital markets, I must contemplate what could be the best option for a next generation not encumbered (or otherwise civis protectus) by a select few three-letter agencies.

Indeed, these established institutions preferentially ingrained in our market plumbing fail to adequately protect investors abroad, and vice versa for foreign governments and their own instituted inefficiencies.1 Might the cost of these often corrupted paths outweigh the historic niceties theyā€™ve instilled in markets past? I just donā€™t think a centralized solution will best serve us all.

Economic Specialization

There are already some very experienced companies offering TA services. Indeed, their range of diversity could offer issuers personalized services in specific geographies, industries, and demographics. And of course, they should be relatively-efficiently organized given their general public or otherwise shareholder-prioritized organization.

I remember the conversations with all the CFOs, discussing how the hidden costs of Wall Street were snaking away at their companies. But the costs were always on the legacy Street institutionsā€™ side, not really the TA. Indeed, it was by and large the banks, brokers, and custodians that were problematically concerning, not the TA.

Namely, such a large amount of those CFOs couldnā€™t even tell me what they paid for their agent because itā€™s by and large such a minute line item. Perhaps if we can remove the wasteful inefficiencies of the financial intermediaries, the basic recordkeeping rents will follow accordingly. More to the point, as the last point of separation between companies and their investors, the role of Agents will come much more into the executive light (as compared with the primitive commodity service offered today and generally not praetiosus).

Further community discussion found here.

Societal implications also addressed elsewhere.

See also releventaly Engelsā€™ On Authority in the traditionalist centralized viewpoint. Now is our chance to move past these traditional technical limitations of management to embrace the efficiencies of (truly) decentralized governance.

Pros (Making it an open standard)

  • This has already been addressed to some extent since itā€™s under Affero.
  • Other transfer agents (TAs) can improve upon the model.
  • Different app interfaces can be built for specific groups of users2.
  • The Syndicate issuer account could add other agents as signers to implement controls as necessary.
  • There could be a standardized process to create a new ā€œcaseā€ with the DUNA, and then the Syndicate/DUNA contract would act accordingly.
  • Itā€™s the right thing to do for the world.

Cons (Set only for the Syndicate)3

  • Different app interfaces presume that agents will work on their own apps, likely proprietary.
    • Proprietary apps that are not part of the common standard are prone to security vulnerabilities.
      • There is particular risk that these companies, trying to minimize costs, implement questionable custodial solutions.
      • If they take these shortcut implementations to speed up processes, the user cannot access the full power of Stellar.
  • Other agents might not contribute back to the ecosystem due to their profit motives.
  • Interestingly, the main nature of agent competition and income generally comes from issuers, but there are still a large number that charge transfer fees.
    • They could impose transfer fees and similar costs that disincentivize the free flow of capital.
  • Each agent would need to offer the full suite of compliance oversight.
    • Either that, or they would need to be subscribing members of some Syndicate.
    • That would then imply that perhaps the Syndicate issues the asset for every transfer agent and deals with the on-chain transaction management.
    • Different jurisdictions we havenā€™t reached yet could implement trading restrictions that fragment the market for securities into proprietary dark pools or, quite possibly, the horrific CCP regime of developed nations.
  • Less antitrust regulation and enforcement in the Republican administration would likely make it fairly simple to quickly scale into a monopolistic position while advancing policies to prevent other agents from following in our footstep$.

Call

Make it an open standard.4

  1. See, e.g., the rule that all British merger proxies must be sent as a full package through post to all investors. Policies like these are demonstrably ruinous for our environment, for no reason in modern contexts. Might we establish a better way that works for these billions of new people? ā†©

  2. For instance, interfaces in another language. ā†©

  3. Albeit the code repos and such probably shouldnā€™t move, and all that is fine as it stands for security concerns. ā†©

  4. I trust the market to work itself out with this. I believe in competition and the freedom of choice among issuers and their advocating investors. I know itā€™s been a desolate many years working TAD3 into existence, and Iā€™m grateful for the chance to share it freely with the market. From day one, itā€™s always been about participating in the most efficient system, not exploiting that infrastructure for private endsā€”as DTC so perilously slipped over the decades. We can do this. Things will get better. I just know it. Things will get better, and far we will go. šŸ“ˆ ā†©