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Friday, 17 October 2014 00:00

Reggie Middleton's Open Letter of Commoditization and Disintermediation to Wall Street: Pay Attention Jamie Dimon! Featured

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The following is a reacted letter that I just sent to a rather influential person in one of the bulge bracket banks of Wall Street.  I decided to simply be frank and tell it like it is. AFter all, why play games or beat around the bush. It is what it is, right?

 

(Name redacted for the sake of privacy and professional courtesy), this is my more fleshed out missive detailing what I see as the inevitable commoditization of your industry. Wall Street in general (and XXXXXXXXXXX in particular) is about to become “MP3’d” (disintermediated), just as the music industry did along its 75% slide in revenues over a 10 year period. Our goal is, in no uncertain terms, to expedite this disintermediation. In essence, our job is to cleave at least 75% of the revenues off of Wall Street banks!

Hopefully, I’ve gotten your attention. Let’s discuss the opportunity - and the threat - to XXXXXXXXXXX in more detail as I present a clearly laid out roadmap to either your firm’s relative failure, or resounding success.

 

The Challenge to Wall Street and XXXXXXXXXXX

 

“In the next 10-20 years, 58% of financial advisors will be replaced by software robots and AI.”Frey and Osborne, Oxford University

This is notgrandiloquence. We can show our venture alone cutting over 3-4% off of XXXXXXXXXXX’s non-interest revenues and up to 30% of net income attributable to common within 8 to 12 quarters of gaining traction. This is accomplished by removing your pricing power in your most lucrative businesses – transactions, fees and commissions.

Drilling Down On XXXXXXXXXXX’s Unique and Particular Vulnerabilities - or-  Why You Should Be Paying Attention

XXXXXXXXXXX derives more than 95% of its total revenues from non-interest earning transactions/businesses. This comprises revenues from Investment Banking, Asset Management & Investment, Brokerage Commissions & Fees. Let’s analyze the percentage of business that could be impacted the year after traction of our value transaction system by assuming a certain percentage reduction in fees. We have assessed the potential impact on the bank’s annual revenues and profitability as follows:

  1. XXXXXXXXXXX could see around 3-4% decline in its non-interest income. The bank’s net interest could fall by 7-8% off compression in its net interest margin.

  2. Now, the firm could very well see lower expenses on account of compensation benefits for employees (due to decrease in variable pay, reference the “58% of financial advisors will be replaced” quote above from Oxford), however, this impact is not going to be significant enough to offset the likely decline in revenues. On a more personal level and more to the point, it represents a ~58% chance of you getting fired. The compensation heavy Wall Street culture is ill fitted to battle the disruptors we are bringing to bear during a major technology paradigm shift!

  3. Net Income could drop by a significant percentage ~ 30%.

Who We Are and What We Are Doing

Our core product, UltraCoin, is at the intersection of the Bitcoin protocol software, robotics, and financial services. It is already recognized as a driving factor in the full scale disintermediation of Wall Street:

“The disintermediation caused by Middleton’s UltraCoin has the potential to disrupt the brokerage industry.” AlleyWatch

“… a direct threat to fiat merchant banking.” Fortune

“… the perfect storm of disruption, as it renders trading fees, brokerage fees, and those infamous Wall Street bonuses obsolete. The sheer scale of disruption this technology brings with it makes it something to watch.” The Hash Report

 

The Bitcoin blockchain threatens to dramatically reduce the ability of financial services companies to charge for transactions - all transactions. We have, through our UltraCoin wallet,  enabled synthetic versions of nearly all of the financial assets XXXXXXXXXXX deals with, and enabled them to be traded peer to peer (meaning without an exchange or broker) via the blockchain. These new age tools look very similar to what XXXXXXXXXXX currently sells to its clientele at a significant, and now, ephemeral premium. Our stuff looks no different from your stuff, yet is dramatically cheaper, more flexible and more capable. As a result of being blockchain-based, we’ve also reduced the default/counterparty/credit risk to effectively zero.

 

XXXXXXXXXXX’s Opportunity - a partnership where you benefit from our rapid development tech and we benefit from your distribution network

Let’s be frank and upfront. The banking hegemony as we know it is about to undergo a dramatic, disruptive structural change. Pretending you are immune simply guarantees you to be the one stepped on in lieu of the one doing the stepping. The same is true in taking too long to act, or acting by moving in the wrong direction. I referenced the record industry and MP3s as a prime example. The assertion that regulation will protect banks from technology where it didn’t for the record industry is a straw man’s argument, at best. Try as they may, at the end of the day - regulators cannot, should not, and probably don’t even want to regulate software and prototcols. It’s a new day and age.

One simply cannot stuff the technology genie back into the bottle. Even before critical mass in adoption is achieved, the bulge bracket banks (XXXXXXXXXXX included) will witness a structural decline in margins. Despite this margin compression, there will be a small contingent of banks who will emerge as winners because they will cannibalize the revenues of their competitors adopting and embracing the forces behind this paradigm shift. Doing this will require not only sufficient vision, dexterity and entrepreneurial expertise (the type seldom found in multi-billion dollar global institutions), but exceptional execution to be among the first movers. Money center banks can try to figure this out on their own (good luck being entrepreneurial and first movers), or they can team up with us.

We are a startup, and we’re the first movers! To maintain our advantage, and to gain traction quickly, we’re soliciting established distribution partners. Teaming with us can essentially be boiled down to whether you are the disintermediators - or the disintermediated!

 

Our Advantage

UltraCoin provides, with full transparency, universal access to any publicly traded financial instrument, on any exchange, at a fraction of the cost of bulge bracket and even many deep discount brokers.

 

Our patent-pending (we are confident that we’re the first to file, meaning the rest of the Street must come in behind us) products provide access to over 75,000 tickers in all major asset classes from exchanges and bourses from around the world in an innumerable combination of pairs and combinations – not merely just the traditional, binary, long and short. This is not an idea, or mere concept, or whitepaper. This is a tangible product that is available right now and already making significant waves in money center bank circles (download here). Below is a screenshot of my active wallet on my tablet as I type this. 

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How do we get started? 

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I offer you in gift wrapped packaging - the “first mover advantage”!

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