somthing occured to me today that inverts a week of this classes enthusiasm.... instant settlement DESTROYS somthing institutions quietly love. float.
heres the machinery nobody defends publicly but everyone uses. in t+2 world, money in transit is money inlimbo, and limbo is profitable. a fund that sold securities monday knows cash arrives wednesday.... so treasury lends against the incoming, invests the gap, runs intraday positions on money that exists in two places at once, legaly. multiply across every institution and float isnt a bug of slow settlement, its an asset class. banks earn billions on it. treasury desks are STAFFED for it.
now run kshfis atomic trade through that world. dvp settles in one transaction, deterministic finality.... the limbo closes. cash and asset swap in the same instant, and theres no "incoming" to lend against, no gap to invest, no two-places-at-once. every efficiency dusk delivers to the market is a revenue line quietly deleted from somones treasury desk.
why does this matter for adoption, and this is the institutional point.... the people evaluating settlement infrastructure include the people float feeds. a cfo weighing migration sees the risk reduction AND the float income vanishing, and only one of those appears in the vendors slide deck. instant settlement is unambiguosly better for the SYSTEM.... its ambiguous for specific desks inside it, and desks have voices in procurement.
the counterweight, becuase there is one. the same instant finality releases the collateral mountains held against settlement risk, capital that was frozen as insurance comes home.... for most institutions the freed collateral outweighs the lost float. but the two effects land on DIFFERENT desks, and internal politics doesnt net positions the way clearinghouses do.
the lesson i keep relearning this course, technology adoption isnt a features contest.... its a map of whose revenue the improvement deletes. more tommorow.
@Dusk #dusk $DUSK
heres the machinery nobody defends publicly but everyone uses. in t+2 world, money in transit is money inlimbo, and limbo is profitable. a fund that sold securities monday knows cash arrives wednesday.... so treasury lends against the incoming, invests the gap, runs intraday positions on money that exists in two places at once, legaly. multiply across every institution and float isnt a bug of slow settlement, its an asset class. banks earn billions on it. treasury desks are STAFFED for it.
now run kshfis atomic trade through that world. dvp settles in one transaction, deterministic finality.... the limbo closes. cash and asset swap in the same instant, and theres no "incoming" to lend against, no gap to invest, no two-places-at-once. every efficiency dusk delivers to the market is a revenue line quietly deleted from somones treasury desk.
why does this matter for adoption, and this is the institutional point.... the people evaluating settlement infrastructure include the people float feeds. a cfo weighing migration sees the risk reduction AND the float income vanishing, and only one of those appears in the vendors slide deck. instant settlement is unambiguosly better for the SYSTEM.... its ambiguous for specific desks inside it, and desks have voices in procurement.
the counterweight, becuase there is one. the same instant finality releases the collateral mountains held against settlement risk, capital that was frozen as insurance comes home.... for most institutions the freed collateral outweighs the lost float. but the two effects land on DIFFERENT desks, and internal politics doesnt net positions the way clearinghouses do.
the lesson i keep relearning this course, technology adoption isnt a features contest.... its a map of whose revenue the improvement deletes. more tommorow.
@Dusk #dusk $DUSK