A New York-based hedge fund has reportedly used the blockchain-based platform created by e-tailer Overstock.com to borrow $10 million worth of stock.
According to Wired, Clique Fund borrowed shares of the 30 stocks that comprise the Dow Jones Industrial Average.
Traders can borrow shares and then sell them (short selling) if they believe that their value will decline, and buy them back later at a lower price. They may also borrow shares for hedging purposes.
Overstock.com was one of the highest-profile companies to accept bitcoin for payment when it did so in early 2014. Its CEO, Patrick Byrne, has long been a vocal critic of Wall Street. He has criticized the practice of naked short selling, whereby a firm sells shares short without first borrowing them.
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Similarly, he has taken issue with how the fungibility of securities allows dealers to skim more money off of them when their ownership status is in transition. He has argued that two-thirds of the money made on Wall Street can be disrupted.
To improve upon this and other perceived malpractices on Wall Street, and to make the trading process more efficient, Byrne embarked upon the Medici project. The initiative seeks to leverage Bitcoin’s blockchain technology, creating a platform called TØ (T-zero) whose motto is “The Trade is the Settlement.”
TØ has been used thus far to issue a bond to Byrne himself, and later a $5 million bond to an affiliate of FNY Capital.
John Tabacco, who founded TØ with Byrne, said that the previous sales were more symbolic, while the transaction with Clique “is a real trade.” He added that TØ has been facilitating stock loans for two weeks, and 5 different customers have done so thus far. The loan to Clique is the largest of the five.
The Wired article did not delve into Clique’s business. The cliquefundlp.com domain currently redirects to a business called Bulls on Wall Street, which states that it is a group of traders offering education and mentorship on trading strategies. An inquiry to the business was not returned by press time.