Decentralized markets

[jrlichtman]

I'm not sure if this is of interest (I spotted some posts on this topic elsewhere here, but can't reply directly yet).

Just posted a lengthy description of how a fairly sophisticated peer to peer equity market (with minimal chokepoints) could operate. Not completely new, I know. I had some ideas for trading mechanisms though that might be useful to somebody.

http://lichtman.ca/business/open-peer-to-peer-markets

I'm interested to hear feedback / comments / criticism. I already know some of the points won't be some people's cup of tea (i.e. need for at least some voluntary regulation).

[Lea Calot]

I read your post. I would come from the other end. Instead of making centralized somehow P2P, build a simple distributed system that acts as a market.

For price-discovery you could just use a simple call-market: http://www.investopedia.com/terms/c/callmarket.asp#axzz1Q4BdJydP
and slowly grow that into a continuous market (NASDAQ-like bid-ask matching). I did some research with distributed pub-sub frameworks and DHTs in the past. I find that feasible.

Regulation is going to be a pain. But as long as you keep it simple, you won't have to worry about it. For example if you make all bids final for a period, you may avoid front-running. If you do not allow derivatives being part of the market itself, you also save yourself a lot of trouble there.

Think like the old Mercedes-Diesel Engineers (like the guys pre-1990s not the guys who engineer the junk today): "Everything that is excluded from the design, cannot break."