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Today, March 27th, 2015 the NEO Exchange officially became a part of the Canadian financial landscape. And, after three and a half decades in the financial markets, I can only shake my head and say “Finally!” when I think of the changes about to come to fruition thanks to the innovative and courageous work of Aequitas.
I’ve had the opportunity to get to know the people behind the NEO Exchange over the last 12 months, because my company, 1to1Real, was selected to be apart of the new exchange. It has been quite a journey, and everyone has worked incredibly hard. Yet this hard work has been extremely rewarding, first and foremost, because of what we’ve been working towards. The NEO Exchange presents a vision of a more equitable world. This is a world where investing is equitable for both the investor, and the investee. The NEO Exchange provides opportunity for investors, but also for companies that need financial support to operate, grow, invent and innovate.
Businesses need capital at all stages. Funding these businesses requires outside capital. This is essentially how the “stock exchange” was born. Despite its reputation today, the public market has humble origins. Historians and economists have argued that the first stock exchange dates back to Roman times. Others point to the Dutch East Indian trading company as a point of origin. But no matter the century, stock exchanges, public markets, have been an integral part of the world economy for centuries. Historically, they have presented essential resources for companies to raise capital, to trade the ownership through shares and bonds, and thus to bring new services, products and jobs, to the world.
For the investors, the people who have that much needed capital, stock exchanges present an opportunity to “recycle” capital in imaginative and productive ways. To extend the impact of capital, to invest in the ideas that people believe in – that’s what the “stock market” is truly about.
Being an entrepreneur my entire adult life, I’ve been involved in the markets from every angle. From my beginnings in the early 80’s, when I established my own Investment Banking Brokerage company and commodities trading firm (I was backed by now infamous REFCO - and Tom Ditmer, when I was the ripe old age of 21); to my trials, being a part of the early fall-out after creating (again from scratch), my own public company that was forced to fail under the weight of the now defunct and fraudulent antics of FINOVA (one of the largest bankruptcies in US History and a prescient precursor to Enron); I’ve experienced the good, the bad, and the incredibly ugly.
The financial markets, the way things really “work”, what forces are behind the way money moves and is managed, manipulated and used, from the bad, to the good, to the ugly, has directly impacted my life in countless ways. In fact, these markets impacts us all, every day, from the politics behind the products we buy, to the payroll we receive or make as business owners, ultimately, the public markets shape the very way we see and experience the world.
The public market, despite affecting everyone, is not accessible to everyone. The model of high frequency trading (HFT), that rips profits off the top hurts not only investors, but the integrity of the businesses.
Derivative activities like HFT, left unchecked in the market, prevent a fair playing ground for investors and businesses to operate, to invest capital, to get capital to operate and grow, from emerging.
The “fundamental” investor, who invests at a company because they believe in what it does, who is ready to hang in for the long haul, is damaged and discouraged by the manipulations of volumes of trades that “clip” coupons off minor fluctuations. Due to HFT, companies are not measured by financial results, or the opportunities of R&D and the future; they are measured by micro-movements, pushed to and fro by the programs that trade in Nano seconds.
How is this productive? For anyone other than the folks who own the firms that take profits for their own benefit out of the market, instead of letting the markets emerge to assist the best investments to rise and fall based on the merits of the management, to put it simply, it is not. It is not productive for our economy either, as we have seen time and time again. The markets should benefit those people who invest wisely. Warren Buffett, the famous investor of “buy and hold” didn’t have to worry about program trading back in the 50’s when he started his trek with now famous Berkshire Hathaway. He had an investment philosophy: invest in the fundamentals, invest in the management.
It is these fundamental values that made Buffett the most famous investor in the world. It is these fundamental values that the NEO Exchange, and the team behind it, are boldly seeking to bring back to the public market. Personally, my interaction with the people behind Aequitas’ NEO Exchange, true visionaries, brought back those early dreams of how the markets could work for investing and for business. It’s been exciting to be a small part of this big picture they’ve spent the last several years working tirelessly to create.
Want some financial advice? Support this exchange. Support NEO. When you do, you are bringing more than a better chance at profits into your pockets. You are supporting the autonomy of business, the creation of new opportunities for investors, businesses and entrepreneurs who also work tirelessly to imagine and realize the innovations the world needs.
Thanks to the NEO Exchange, businesses and investors can collaborate without the fear of an HFT program trading engine. So, the next time you invest, the next time you consider a company to invest in, be confident that you can evaluate it for the people and products behind it. Be confident that you are “investing in the fundamentals”.
For me, that is what NEO Exchange is all about. Making sure “equity” remains “equitable” all the way around.
As a fellow believer in the fundamentals of business, I’d like to extend my thanks to the team at Aequitas NEO Exchange. Your vision and courage to bring an equitable financial landscape to Canada and to the world, to create a new stock exchange will make Canada stronger, our economy stronger, and the world more aware than ever, of how money and markets are supposed to work. For everyone.