Good evening, everyone. Thank you. Whoa. Sound check. I'm John Tabacco, co-founder of tZERO.com. I want to thank everyone for coming tonight. The summer's tough. People have come from all parts of the planet to join us tonight. We appreciate it.
Before we get started, I want to thank a whole gamut of companies from Wall Street who are represented in the room tonight: NTREX, who is our Tiger Cub partner. First New York, the first-ever crypto bond buyer. Other friends who have given us advice, guidance, counsel. DriveWealth Securities. Alexander Capital. ICBC. SpeedRoute. Goldman Sachs. Morgan Stanley. ICAP. And Tullett Prebon.
The gamut of Wall Street is here. Some of you have already been great strategic partners. Many have offered us guidance, advice. Many of you are hearing about tZERO for the first time. On behalf of our whole team, we appreciate you being here to listen.
Before we get to the program, I want to talk for a minute about my dear friend, Dr. Patrick Byrne. It's long been said that it's bad to work with friends and family, but when I look up, see a room full of friends and family together in the interest of exploring innovative capitalism, I respectfully disagree.
Many people have asked me over the last 10 years, "How the hell are you friends with that guy?" Well, the way we became friends, if you're asking or if you care, and have remained as friends in what he likes to call comrades at arms, we were just two friends from day one when we met. He's personally been a leader. He calls himself my sensei. He's been sensationally prophetic throughout my career in helping me in a number of areas.
He's actually forbidden me tonight to refer to him as my mentor, but he's been that and much more. I didn't say it. Gandhi said, "First they ignore you, then they laugh at you, then they fight you, then you win." Let's break that down in the anatomy of Patrick Byrne. Ignore you. When your studies include a BA from Dartmouth in philosophy, a master's from Cambridge in mathematical logic, and a PhD from Stanford, no one should be ignoring you. Laugh at you.
You speak Mandarin and four other languages. Translated, Lao Tzu's way of virtue. Practiced that all day. Beat cancer and biked across America numerous times. No one should be laughing at this guy. If they are, the odds are joke's on them. Fight you.
When you're working with great people, like the people I mentioned before, the team at Overstock, which Patrick and Stormy make sure is really one big family. My two brothers are here tonight, and your new partner's a pro boxer and has a black belt in taekwondo. I'm willing to go into any fight with that team, then you win.
I asked Patrick to hold this event in New York tonight so Overstock could be introduced to the New York audience. In his career, my friend, he says my twin, he's been ignored. He's been laughed at. He's been pulled into and started plenty of fights, but through it all, he perseveres. He stays to his principles, which is one of the greatest things that I've learned and continue to learn from him.
Patrick, my friend, I believe with your vision and our team, now's the time for you to win. Thank you. Now, when the boss man lays down the constitutional principles of his vision, the team snaps to attention. And one of those from the very beginning was that if you think about cryptocurrencies and Bitcoin, digital securities, people are worried about it.
And there's a whole bunch of companies out there trying to explore the area by circumventing regulation, trying to find cute ways to get around existing regulations. And Patrick's number one initiative that he told me, thankfully, into the SEC and others and show them exactly what we're doing. And I want you to get us some of the best law firms on the planet, like Perkins Coie and Jones Day, to lead us through this effort.
To talk a little bit more about the legal side and our developments there, what we've done so far, what I think one of the finest law firms on the planet, partner Lee Armstrong from Jones Day.
Thank you, everyone. As John mentioned, I'm a partner with the global firm Jones Day, and we are incredibly honored to have been selected to be counsel to both Overstock and Medici for this incredibly exciting project that you're going to hear more about recently. I'm worried, Dr. Byrne, that maybe, though, you received our first invoice because my name was not given downstairs, too.
Okay. Moving on. Here's the secret, guys. There's a lot of lawyers in New York. A lot of lawyers. Some are actually good. We are humbled by this selection that we were chosen to walk with you hand in glove into this new frontier. We take it very seriously. The directive that was given to us, which harmonizes exactly with what John just said, is make sure we do this right. We're not cutting corners. Get your team.
I know what you're thinking right now. The lawyer's talking. I promise. I have like a minute left, so get together that team. Our team, with the exception of me, is fantastic. They are brilliant. They are incredibly decades and decades of experience, seriously, in securities law and regulation.
They walked the halls for years of the same agencies with which they have to deal now. So we feel very confident, Dr. Byrne, that we have the right team in place. These are innovators. John Tabacco, who's a friend of mine for a very long time, I've gotten that same question, "How are you friends with him?" Let's move on. But they're cut from a different cloth. These are true innovators. I'm a trial lawyer. I remember years ago an expression that I keep thinking about lately.
I was involved in a trial against a very seasoned, very eloquent older attorney, and I wanted to move things along, and I was very impatient, and I wanted the schedule to move along in front of the judge, and he didn't. And so we had a battle over that, and he completely floored me. He used this expression. He said, "We can only dance as fast as the music will allow." I'm still charmed by it. We can only dance as fast as the—and then I got destroyed. And the judge got charmed, and I was intoxicated, and I lost.
But it occurred to me in dealing with Dr. Byrne and his team, they hate that expression. That's an opening bid. The response that they would have to that is, "What are you talking about? Are you sure that's how fast we can dance? Is there no other music?
Can't we write new music?" Personally, just as sexy. But the principles persist, don't they? And that is when you see that there can be more efficiency, when you see that you could do something better, you can build a better mousetrap, you do it. That's what these guys are doing. Dr. Byrne, the Overstock team, Medici team, I want to congratulate you on your success thus far. There's going to be many more to come, and we look forward to creating beautiful music together.
When people ask me, "How are you friends with Lee?" I say, "I'm not." Patrick is an imposing figure, physically, mentally, philosophically, on many levels. And his vision in many areas is unsurpassed, in my view. But you can have vision, but if you don't have the team to put that vision into operation and execution, you're just a daydreamer.
And when you're a visionary and part of a public company, you need to pay guys like Lee probably $1,000 to talk 45 seconds. There's a lot of pomp and circumstance involved with getting to your vision. And when the public company has to roll with the punches and be aware of every single regulatory obligation and mandate that they have, you need absolutely strong, committed leadership.
And one of the finest leaders that I've seen, and one of the best comrades in arms with my friend Patrick, who made way to the board and the company and the shareholders, is our President, one of the most alpha bosses I've ever had, man, woman, or otherwise. Stormy Simon, President of Overstock.com.
Gosh, I was getting all teary-eyed, and then he said alpha boss, and I was like, "Really? I thought it was so nice. I thought it was so nice." Wow. I just need to drink this in for one second. This is pretty powerful. I'm going to talk a little bit about Patrick, but to do that, I have to talk about where I've been with him.
Overstock was founded in 1999, and I joined the company in 2001. We were all temps when we joined that company, and we were all there believing in one vision, and it was his vision. We had a few things going on at the internet at that time. That was Amazon selling books, eBay letting consumers interact with their products, and Patrick just wasn't ready. Nobody was ready, but we took the time to figure it out.
By February of that, three months into it, I thought, "I'm in. I get this guy's vision. I really think he will revolutionize the way people interact with home goods right here in our little office in Salt Lake City." And that's what we did. And in that sense, he began pioneering in my world back then because he pioneered how retail would be done. 15 years later, it seems old hat.
He's like, "Oh, everybody does that." But I remember the days where we were developing and struggling and working with UPS to get UPS to believe they have to build a system big enough to ship the amount of packages going back and forth. They have to build the system that allows couches to be hand-delivered in a box. And back then, that was a hard conversation.
It was really convincing them to change the way they thought of how their business would be in the future. And it took Patrick's vision to get us there. Today, shipping couches is institutionalized across the world. It doesn't even feel like a big deal. Back then, it was a huge deal, and you had to believe. So even back then, it was leveraging tech to consolidate a fragmented market. I don't think that stopped.
I think he changes the game every day by trimming fat from whatever supply chain we're living in. So with that, to have been alongside this guy, win-lose or draw, to have been that girl that started in the beginning and saw him as the visionary that really did redefine retail. That I introduced to you, the visionary, my mentor, the man who should never be ignored, Dr. Patrick Byrne.
Mr. Tabacco, thank you for that lovely introduction and kindly gracious. Thank you. I swear to God. What an honor. What an honor it is for me to be here on NASDAQ and speaking with you. I see friends, family, a lot of colleagues and brothers in arms, and people I don't know how to define sometimes, but friends who are, I guess, we're all in a certain battle together to try to make things better.
I was raised in the Holy Church of capital markets. A lot of people, given my history with Wall Street, some people don't know this. I was raised in the Holy Church of capital markets. I'm not going to tell you the whole catechism, but I'll tell you one. NASDAQ was built by a man named Gordon Macklin. Gordon Macklin was the CEO and Chairman from 1971 to 1987.
It was his vision of the world's first electronic exchange. When I was 13, 1976, I moved to Bethesda, Maryland, and three doors down was this guy, Mr. Macklin. And Mr. Macklin used to drive me to school in eighth and ninth grade. And he used to teach me. He used to teach me all kinds of funny things.
For the first seven years, Mr. Macklin was on our board. He was, besides my father, he and my father were the first two directors I reached out to. You're the man who built. In fact, he built this from 1971 to 1987, then he went out to San Francisco and worked with Bill Hambrecht. And later, when we went public in 2002, it was because Gordon Macklin introduced me to Bill Hambrecht, another revolutionary. So he told me a lot of things that I know about Wall Street.
I also worked here for Arthur Zankel and Sandy Gottesman. I feel like I'm coming home. I know I feel like sometimes I've been a renegade, but to me, I feel like I'm Martin Luther pounding the 95 theses on the door of the church he loves with some of the things I've been doing over the last decade about Wall Street.
I hope this, my father, who died, who passed two years ago, used to say, "Every putt makes somebody happy. Somebody's sad, somebody happy." I hope that there are some putts here that make a lot of people happy. I'll just leave it at that. Now I'm going to go on a very robust, if you know my style, I'll do a very quick 30-slide just so you can pace yourself, PowerPoint.
I'm going to start with when the world was melting down in 2008, and Alan Greenspan was told, asked to testify before Congress and to give his summation of what was going on. This is when the left, incidentally, has jumped on this and said, "Oh, Alan Greenspan says markets don't work." Listen carefully to what he says.
There are additional regulatory changes that this breakdown of the central pillar of competitive markets requires in order to return to stability, particularly in the areas of fraud, settlement, and securitization.
Oh, fraud. Bernie Madoff. Securitization, mortgage-backed securities. We know the thing he was talking about. Even people on Wall Street, people who work here, don't really seem to understand. I mean, I used to mingle a lot in hedge funds. I was always surprised how much people didn't really understand about their own back offices.
I'm going to take out a quick history lesson, some of which comes from Gordon Macklin. He taught me some of this. By the way, the rest of it I learned at Goldman Sachs. They don't know this. But in 1992, I did a deal with Goldman Sachs, who taught me a lot about short selling and the DTC and such like that. So let's just imagine settlement as a concept. Mr. Hedge Fund, grandma wants to buy some stock from the hedge fund fellow.
The process of exchanging the money for the stock, for those outsiders here, that's what settlement is. In our world, of course, we don't have hedge funds talking to grandmas. They're each represented by a broker. That's the exchange of money and stock between them is settlement. In reality, what happened here, and I came to Wall Street in 1969, and there were people on Wall Street riding around bicycles with sacks of certificates.
That's how the settlement process was running on Wall Street. There were these bicycles running around downtown and guys with burlap sacks. That's what settlement was. In the 1960s, volume on the capital markets quadrupled, and the guys on the bicycles logged in. It led to what was called the Great Wall Street Paperwork Crisis. The real old-timers here will remember this.
There was a period where Wall Street only traded four days a week and about four hours a day in order to slow down volumes so the guys on bicycles could catch up. Now, somebody said, in 1971, the SEC called a conference, and they wanted to computerize the system.
Now, I just want you to imagine, just to put a pin in this, but imagine somebody said, "Okay." So imagine the Bicycle Messenger Union had said, "Okay, you can bring in computers, but only to schedule the bicycle guys. And by scheduling the bicycle guys, that's how we're going to unravel this." We would all sort of understand what was going on. That would be a silly way to solve the problem, right? So just put a pin in that because I'll be circling back on that point. What the SEC, what your industry, what the dealers want. Discussion.
A peer-to-peer to brokers, and that's what the industry went for. That's what your industry, and incidentally, NASDAQ was founded in 1971 and in part to fight this fight, but the SEC imposed a different solution. The different solution was central counterparty clearing, and the idea would be there would be one entity called the DTC that everything would wash through, and of course, with that comes a concept called immobilization, which was first done 150 years ago in Vienna in the exchange.
The idea that you create a nominee, and all the actual shares, both physical and electronic, would be deposited in it. From each would be generated share entitlements. These share entitlements would trade for the money that would be put in the system, and they would all trade around in the system, and if you think you own any stock in America, you don't.
You look through all the bottom of the brokerage statement, upside down, backwards, in Greek. You don't actually. All the stock in America is owned by a company most people haven't heard of. And then, of course, there aren't just two brokers. There's a number of brokers who are plumbed directly into the system, and they get the share entitlements, and those are called clearing brokers. Other brokers get plumbed into them.
They're the referring brokers. And what's trading in the market, all that's really trading in the market when people buy and sell stock are these shares. Stock. In stock, you have a contractual claim against an entity with a contractual claim against an entity with a contractual claim against an entity that has the property rights. This is suboptimal for a whole variety of reasons. One is that there's fractional reserve.
The rules allow, at various nodes, more markers to be created than there is underlying stock, and that's fractional reserve banking without a reserve requirement, which offends the Austrian instincts of some of us, the Austrian economics instincts of some of us. There's other things wrong with this. Just to give you a quick philosophical aside, and since they keep saying doctor, I can't in the Torah, and I'm not one to quote the Torah much, but back in the Torah, there's actually a passage about how moving the markers that define the property between neighbors is a sin worse than death. It's worse than murder. Why would that be?
If you think of the project of the tribe of Abraham, and they're out there, if they're all in it together trying to build this civilization out of what they perceived as unoccupied land, as they're trying to build this, if one of us is moving the markers on the other guy, it's sort of degrading our whole project. That's a deep - and to me, this system degrades what should be - we laugh at the Soviet Union for trying to run a civilization without property rights.
Here, we've taken our property rights in companies, and we have dematerialized them and securitized them and netted and pre-netted and hypothecated and re-hypothecated and sliced, diced, and circumcised, and the systems lose track. They absolutely lose track of the real ownership. So different problems arise from this. You probably know about my involvement with one.
Of course, if someone can come along and increase apparent price, there's a bunch of finance PhDs who say this is impossible. For them, I'd be happy to introduce them to some guy over there selling watches, counterfeit watches on the street, and ask him, "If you could sell an unlimited supply of fake Rolex watches, what would happen to the value of Rolex?", and he can explain to the people who, Buffett likes to say, the guys with finance PhDs are people who spent four years learning to talk to each other in Greek letters.
It leads to all kinds of these scandals that have occurred in the last six or seven years, ultimately relate back to this fuzziness in property rights. In addition, there's a real systemic vulnerability created by these. These are basically derivatives.
They're a contract for difference, but with an unusual property, the property that Soros called reflexivity, as I recall, that it's an especially pernicious form of derivative. And if you know, back in January, I just learned the FBI arrested some foreign spies here who were looking at how to crater our system using ETFs. And the original sin of this all, in my mind, is something called net settlement. If I buy something for you, if I'm buying something from you, I expect to give money and get that thing you were offering.
The way our system works, everything is netted. And if my client sells 100 of some shares to you, and you have another client that's selling 40 back to another client of mine, everything gets netted, and it's just 60 IOU 60.
But what that does is it takes all these rights, and it puts them in a barrel. It makes everything fungible, and it just becomes one fraction of a pile of claims against another pile of claims, and so on and so forth. True settlement would be. Let's go back to grandma and let's say her neighbor. She wants to buy his catcher's mitt. She wants to give money and exchange for his catcher's mitt. Now, imagine that could be put on a public ledger. So I'm saying true settlement as opposed to this net settlement thing.
True settlement, let's imagine a ledger, like your grandpa's hardware store, the big book he had in it, the ledger for Space Cash, which is actually South Park's term for the kind of cryptocurrencies that are emerging, Space Cash, and imagine this ledger is cryptographically protected, public, and transparent.
Grandma's money could be turned into - let's just think of these as US dollar coins, and when she buys the catcher's mitt, the settlement is, of course, the shifting of the catcher's mitt, but we're just wiping out one coin and adding one coin on the ledger to his sum, and that's what settlement would be. True settlement with a ledger. You could just have this public ledger that served that function. Now imagine we replace the neighbor with a hedge fund guy again, and we say, "Let's say grandma has some money and some stock, and so does he.
And when she goes to buy another share, we just want to wipe out one of her coins and add one to his and wipe out one of his shares of stock and add it to hers." Well, those of you who haven't fallen asleep yet to this will recognize that what this does is this, let's say, augments all that middle of the system. Everything that those other boxes did, get done on that. So this is good news. This is what NASDAQ wanted to begin with.
This is what they wanted to begin with. And I should make clear, I know I'm not coming to Wall Street like a Viking with an axe. We want to license this. We want to work with the people here. We're not trying to, we're launching things ourselves. We're also very happy to cooperate with them who want to cooperate.
We think this is a far better system, and incidentally, it's no longer just a theory. You know that as of last Friday, First New York, fine, great local company, bought our first crypto bond where we did just the transaction we just described, and that was all done on the blockchain, the terms of the contract. Everything was done right within the blockchain, in this case, the Bitcoin blockchain, so this isn't just a theory. We have built a platform, a company we're launching.
This is the launch party for tZERO.com, where the trade is the settlement, and if you really want to take one message away from this, that's the big disruptive idea. Decades ago, the trade and the settlement got divorced in our capital markets. This reunifies them.
This makes it. Think of when you write in that ledger, when you write the entries that make the changes described, that is both the trade and the settlement together. It doesn't have to be a separate process. It's back to grandma and the catcher's mitt. So we are reuniting the trade and the settlement, the advantages of which are that it's transparent. There aren't these games. The SEC can't even find when things happen like the flash crash. They spend years.
All of that is because of these layers of netting and other things. It's transparent. We think it eliminates 80%-90% involved in the whole settlement process, 80%-90% we think we can take out of it. Eliminates market rigging, front-running, and naked short-selling. Yes, you heard me say it. It's tested. It's pounded on. And we are on track for regulatory approval.
In fact, last Friday, I don't know if anyone's noticed this. Last Friday, besides the launch of this bond, we filed our third update with the SEC on our S-3. We filed, I think, back in April, an S-3 to cover we want to issue a crypto security. They came back with questions. We responded, and this is all public. If you dig through the filings, we responded, a bunch of responses. They came back with more questions. We prepared an exhaustive explanation, both of the security itself, and they want to know what's the underlying platform.
Well, the underlying platform is tZERO.com. So we bought, it's been disclosed in filings, at 24.9% interest in an ATS called Pro Securities that was already wired into the national market system and speaks FIX and speaks the language that is spoken in your industry. And we built on top of this node.
We built all this crypto stuff. So this is ready to light up to the world. It is just a matter at this point of the SEC. Now, I have to, as a prophylactic, I have to mention that there are probably going to be other people coming along. Every other day, I see an announcement. Some financial institution is jumping on this bandwagon ever since Mr. Dimon wrote his letter about Silicon Valley is coming to eat Wall Street's lunch and stuff. There's been.
I know every other day there's an announcement, somebody getting involved. There's one question that you need to ask everybody who wants to get involved in this.
And that is, well, remember the example of the, if somebody said, "Let's introduce computers to the system," and the bicycle messenger people said, "Yes, but we can only use the computers to schedule the bike messengers." I'd say that's kind of a silly way to do it. Well, this is all about true settlement. There is no need anymore for net settlement. There's no need for net settlement.
If people come along and say they're introducing these crypto-based platforms, the question you need to ask them is, "Is the settlement, does it stay net or not?" Keeping it staying net is like saying, "Well, we're introducing computers, but just to schedule the bicycle messengers." And it's a tip of the hat to the bicycle messenger union. There's no reason anymore the American capital markets have to have settlement be net.
And if even someone's introducing that, I have to question their motives because they understand that the real power of this ledger is we can go back to true gross settlement. And if you go back to gross settlement, guess what? It makes impossible a lot of mischief that we've all been reading about in the press for seven years and some of us more.
If you go to gross settlement, a whole bunch of the mischief becomes impossible. And so while there are other people working on such systems, some of the ones I know about are working on systems that will keep settlement net. And I'm extremely suspicious of why you would even do that, why you would even introduce this technology. It's like saying I'm introducing a computer just to schedule the bike messengers.
So anyone else who stands here with a platform to talk to you about something, I hope you ask them, "Does it keep settlement net or does it go back to gross?" Well, that is what we have built. And now, that is what we have built in tZERO.com. And it's really, in my mind, the original vision of NASDAQ. It's what your industry was fighting for in 1971, a peer-to-peer settlement system.
Now, this just happens to be based on new technology that wasn't available in 1971, but this is where NASDAQ came out of the fight for this. So you want to hear some really good news? I'll stop there for it. I know. You may have heard about a little fisticuffs involving the - may I have a bottle of water or perhaps a beer or something? I'm getting - thank you, Stormy. Miss Owen.
Stormy, I should make clear, is my best friend. We built this business together. Stormy came in at basically an $8 an hour job and within six months was running about 100 people. She and I built this company together. We really did. Now she's held every job in the company all the way to President.
We're only here because of it. Okay. Here's the really good news. I know that there's a sensitive subject around here called stock loan or securities lending, but people who understand how the back office works, I'm not going to explain to you. Stock loan is the grease on which the market runs. A tremendous amount of the activity is actually related to stock loan.
And it's this weird corner of the business that people don't really know, and they don't know how profitable it is. Just to give you an example, Goldman Sachs, I looked at their financials, 2006, 2007, 2008, looked like 45% of their prime brokerage revenue came from the stock loan desk, the securities lending desk, probably two-thirds of their profit because there's very little expense associated with it.
There's been all kinds of—this is—I had Mr.—I've had this great rabbi in life. I've been lucky to have this great rabbi in life out in Omaha. It's Warren Buffett, this guy who I met when I was a kid, and he also took me. And he—a retired CEO of one of the major institutions here at once—who told me you don't know how big a corn you're stepping on when you're talking about securities lending.
My recollection is that it made a heck of a lot of money, and we knew not to look too closely at it. And I said, "You're talking about your firm?" He said, "No, up and down Wall Street." Well, what he was referring to is even if people follow the rules, there have always been problems with the securities lending. There might be, just to simplify it, an easy-to-borrow list, let's say.
And some prime brokers putting out, "We got 400,000 Lumber Liquidators in the box to short today." That's faxed out to 50 hedge funds. Each hedge fund can use that to say, "Well, I'm going to short sell 400,000, and I'm using as my proof of my good faith, reasonable belief that I found a locate on stock I could deliver to." You know how it works. I can use that.
Well, and that's if people follow the rules. Now, we all know you can imagine a standard, a typical conversation on the stock loan desk going something like this. We've got 400,000 Martha Stewart in the box to short. We have, let's say, Rocker Partners or I shouldn't pick on him. He's retired. If some hedge fund wants to short 300,000 shares they want to locate, what do you. We've already. We got 400,000.
We already gave a locate on 350 to somebody and 250,000 to another fund and 300,000 to somebody else. Well, he does 2 million a month with this and thing. What do you want me to tell him? Okay.
Tell him he's good for 200,000 shares. He doesn't tell anybody. That is, I believe, sort of the typical looseness of the stock loan industry. And that's what powers. Well, so this is the end of a long road.
Another thing Buffett taught me was that when you take securities in the financial industry that are traded in the dark, and you take them from being over the counter and you put them on an exchange, about 80%-85% of the margin goes away. Well, I think we can do that together to that profit center I was just talking about. And by the way, you know how it also happens? This is an important point. And this is all in public documents that are available and from various, what really happens is you have, say, the Kentucky Teachers Pension Fund. This is a good way to think of it.
They're saying, "Okay, if you loan out our stock, give us a 40% rebate." And let's say a major bank on Wall Street says, "Okay, we'll do that." And they loan it from one pocket to another at $2.
They say, "Okay, here's your $0.80." They loan it from that 1,000% spreads in this exchange. That's why I believe 40%-50% of the revenue of the entire prime brokerage industry comes from these different types of loosey-goosey-ness. We just don't think that's right. We're going to make it exchange-traded. We're introducing pre-borrow assured tokens.
We have built a system within tZERO such that beneficial owners, say, large pension funds or large European and Asian institutions who know they've been ripped off, give us a file, and they tell us at 4:00 P.M. each day what their long positions are that are available to borrow. Our machine tokenizes it. Let's say if they have 500,000 long of Lumber Liquidators, it tokenizes it.
So, say the right to short sell 1,000 of those shares gets turned into one token for just tomorrow and the next day and the next day. Each of those becomes tokens. They go up online at 4:30 P.M. in the evening, at 4:30 P.M. in the afternoon, and at 8:30 P.M., and a reverse auction is held. And at 8:30 A.M. the next morning, the auction's ended, and we have auctioned off those locates.
So you're auctioning off those rights. And everybody, I'm not going to explain the whole system. There are people who know what I'm talking about with stock locates and so forth. And we're making that exchange-traded. And this isn't a pipe dream. We already have, we're swapping files with John. May I say the name, Mr. Tabacco? Okay.
ICBC, which has $250 billion of U.S. equities, is swapping files with us for us to tokenize all their long positions into stock locates. There's about five major foreign banks lined up behind them. And we want to take this whole industry. And that industry that is the 45% of the revenue of the prime brokerage industry, that is purely a rent, what economists will call a rent-seeking behavior. They've got a monopoly that buyers and sellers are in the dark, and they're just extracting enormous monopolistic rents.
And we're ready to turn that online. And actually, we don't even think we need SEC approval. But we have for this, but we'll see about that. But I want it if we need it. But we have ICBC and five more major foreign banks ready to. Well, we're ready to adopt this system or at least try it.
You may have noticed, by the way, the quick among you may have noticed that the Pre-Borrow Assured Token has a certain acronym that I find amusing, so thank you very much. Thank you for coming. And I hope this was a talk that made a lot of folks here happy. Thank you.
Thank you. Oh, really good news, the pouch with the coin.
Oh, oh, yes. You've been given a, why don't you explain this, John? I don't even, yeah, go ahead.
So in an effort who had maybe never heard of crypto or blockchain or Bitcoin, etc., he asked that we come up with a creative gift for everyone to take away. When you checked in, everyone got a little black pouch. Does everyone have those black pouches? Those of you who aren't media, so we're not accused of any bad things.
In the pouch is a tZERO token, which is a token of our gratitude for coming. Also, in the pouch is a unique encrypted URL that you can go to. No one knows who you are. It's an anonymous digital wallet. And in the digital wallet is $25 worth of Bitcoin. So for those of you who are not aware of Bitcoin, you can call up our customer service. We'll have some people who can help you. For those of you who are and have just never tried it, now you can. You have the token.
You have your personal unique encrypted anonymous wallet. And that's the takeaway. There's a token of our gratitude for you coming tonight and listening. Thank you very much. I'm told if anyone would like to do a Q&A, why don't we say anyone who wants to leave, go ahead and leave.
But if anyone wants, okay. Well, oh, open bar. Okay. Are there any questions? John, feel free. And Alex, you want to come? Anyone want to ask any questions? We're ready to, what do you want to drink? Sir. How do I get a little pouch? You know what I can say? Okay. Are there any legitimate questions? Everyone will get their pouch. Okay. Everyone will get their pouch. Nothing else. Boy. Okay. Sir?
I'm just curious what you think this could cost people in shady trades in the first year of live. Is there a way to quantify?
Don't even understand the question. What would it cost in shady trades?
Well, I mean, you're talking about the sort of money that's being spent off of stock loans that's not really in the possession of people who are investing it.
We talked about what kind of corners this is going to cut by removing that option.
I believe that this is about 45% of the 40%-45% of the revenue of the prime. That if you make that exchange-traded and it follows the rules, you can do the arithmetic yourself. I think it is all of that money that's being made is being taken from somebody. To be honest, it's being taken from two groups. It's being taken first from the Kentucky Teachers Pension Union.
I mean, I'm making that name up, but it's the pension holders who own all this stock that are getting just ripped off, just absolutely ripped off. On the other side, and yes, I get the irony in saying this, it's the short-selling hedge funds.
Suppose, in that example, that the stock, they're loading it from one pocket to another two, then loading it on at 20%, and the teacher's pension is getting 80% of that. Well, suppose this all gets put on an exchange and it squeezes to 10%. What we are going to do 10% to the teachers' union in that case and we're 80%. So it's enormously better for them. And the short-selling hedge fund doesn't pay 20%, they pay 10%. So it's better for them. You know who else it's better for? It's better for the SEC.
The 1934 Securities and Exchange Act, which establishes the SEC and has amended Amendment 17A from like 1973, says the Congress finds it's in the interest of the health of the United States capital markets that the SEC provide for the prompt clearing and settlement of trades.
That's like their big main directive. Well, you don't get any more prompt than making them the same thing. So it's good for the buyer, it's good for the seller, it makes the regulator's job easy. It's just sort of good for it's not so good for one group of people, and you can figure out for yourselves who they are. Okay. Hello, Matt? The cash and securities into the system. Do you want to take Alex? Alex? Let's talk about it offline. Yeah, these are okay.
That's kind of if we want to get into the techno dolphin speak, I call it, where they talk about the TCP/IP on the NFS mount. Let's save that for, but no, there is a very fair question, and we've got you can talk to Alex offline. Any other questions? Sir?
Hi. Is the inte ntion to keep all the transactions off of any blockchain processes?
This whole system has been built to be ledger-agnostic. We've built it. It can work on blockchain. It can work on Circle, Ripple, Counterparty. Or can we announce who we're actually doing this with?
No. I think we're good.
Okay. Was that a no? We're ledger-agnostic. We're ledger-agnostic. Okay. We have selected somebody that we are doing this with, but we're not making that announcement today, evidently. But it is ledger-agnostic, and we can plug and play with anybody's ledger with a few weeks' work. Of course, I follow the Gilbert principle of nothing's too hard when you don't have to do it yourself. When he has to do it, it's a few weeks' work. Other questions? Well, again, what an honor it's been to speak to you at NASDAQ about this.
Thank you for coming.