sam b

Austin, TX (USA)
Role(s):
C-Level Executive (CEO, CFO, etc.)

Deep Liquidity, Inc.

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Location: Austin
Industry: Finance
Year Founded: 2004
Number Employees: 1-10 people
Description: We are seeking assistance in locating appropriate investment capital so we can fund the commercial launch of our Company. We are seeking up to $25,000,000 to reach our key goals. The Company currently has 26 angel investors, all of whom invested healthy seed capital in 2008 and 2009. We have maintained a low operating cost, are in good shape, continue to meet all of our milestones and are in a great position to grow. We are now pursuing this major A-Round type of capital raise to fund our business plan and become profitable. Our opportunity is enormous. We seek to reform the U.S. equity markets by introducing a new economic principle to price and trade securities. Our Company trading platform provides a new way for large quantities of securities to be quietly auctioned off without driving prices down. Our invention moves the price impact of these distressed sales out of the publicly traded markets to a private peer-to-peer market, thereby reducing the volatility of the public markets and supporting equity prices in general. We already have the infrastructure built and approval from the SEC to launch. Problem Today’s Stock Exchanges dynamically list all buy orders and sell orders and match the orders that have the best prices. This is the current price discovery model used for all financial instruments around the world for over the last 100 years. This model is inherently flawed and is primitive to what modern technology could offer. It works well for small orders that are readily executable at the bid or ask prices. When larger orders need to be bought or sold in today’s marketplace, they tend to sit on the sidelines spitting out little pieces of themselves to the stock exchanges until they are filled. This is called algorithmic trading. At first glance this seems to be an efficient process, but in truth, it is very dangerous for the overall health of the market because it creates distortions in the supply and demand which result in wild swings in prices. When these supply and demand imbalances occur, the unexecuted large sell orders accumulate on the sidelines without any counter-balancing large buy orders. The market cannot see these “dark” sell orders because they sit on the sidelines, but the market knows they are there. The market estimates how much the price of the security will drop once all the sell orders sitting on the sidelines are ultimately matched with contra buy orders. This is why large buyers sit on the sidelines when markets are crashing because they know once the overhang of sell orders get worked into the market the prices will be much lower than the current prices. Another way of looking at it, in many cases when the market is dropping fast only inflated distorted prices of securities are offered to large investors. Instead of buying in a falling market, big investors simply sit on their hands and do nothing until these supply and demand imbalances are work out of the market. Example: Citigroup is trading at $4.00 and is down 20% for the day. Although the market does not provide this type of price discovery (as Company does), let us say hypothetically an indication of interest to trade a 100,000,000 shares to trade Citigroup goes to a group of dealers and investors. After sorting all of their bids and offers, it turns out there is a party willing to sell 100,000,000 shares at $4.02 cents and a party willing to buy 100,000,000 at $3.82, but the current bid price is $4.00/300k shares and the ask price is $4.01/500k shares. Although the market provides efficient price discovery for orders less than 500k, it becomes increasingly distorted as orders become larger and larger relative to their readily executable size. In this case, why should an investor step up and buy 100,000,000 of Citigroup at $4.01 when he knows the intrinsic value of a 100,000,000 shares is $3.82? What happens in the real world is the investor does nothing until he feels the pent-up selling pressure has abated. This leads to intense downward spikes in prices. This example illustrates how the current market prevents supply and demand from meeting each other for larger orders in real time. This market inefficiency has exaggerated the losses in our markets of today. The current stock exchange model, because of its inefficient design, has done long term damage to financial institutions by forcing additional deleveraging of financial systems that took many years to accumulate. Algorithmic trading was first thought to be the cure to the markets, but in reality it has become the poison and our markets are probably down 5% to 10% greater due to this practice. Current market structure complicates investors’ ability to execute large orders. This is why institutional investors, such as mutual funds, generally rely on brokers to handle their buy and sell orders. They see brokers as experts in understanding this market inefficiency and it is a BIG business. In fact, according to a Bloomberg article dated Feb. 19 entitled “Equity Trades Defy Economy”, firms Bear Stearns, Merrill Lynch, Goldman Sachs, Lehman Brothers and Morgan Stanley all made an outrageous $36.7 billion from trading stocks in 2007, of which 25% was from commissions and 75% was from proprietary trading. Solution The Company trading platform corrects the supply and demand imbalances for large orders in real time. With the Company trading model, buyers are given new incentives to participate in a distressed market at a time when the market really needs them the most. How is this done? Simply put, our trading platform gives investors new powers to price and protect their large buy orders. We grant new powers to investors that they did not even know could be possible until now. Liquidnet was the pioneer in this space with a simple peer-to-peer market structure that allows peer-to-peer negotiations by way of chat boxes between institutions. Our Company takes peer-to-peer trading to a new level with 14 new innovations recognized by the U.S. PTO. Our platform provides a brand new set of peer-to-peer tools for investors. We believe all investors should trade directly between one another. The current model is an indirect hub and spoke model that is outdated. The Company provides a new way investors can assemble a market on their desktops for each of their orders which makes them, in essence, their own stock exchange and provides a new way to buy securities in bulk below the market and sell in bulk above the market. Never before have investors had this opportunity. Conclusion This project is unique because it will not only make a tremendous amount of money for its investors… but it also allows it supporters to participate in the restructuring the world’s equity, currency, bond and derivative markets. Our Company’s trading platforms will use a new mathematical principle that corrects the imbalances of supply and demand in the marketplace that has dogged the world’s largest investors. The Company gives the markets a new level of transparency and automation. In short, this project truly has the potential to be a game-changer, and we strongly believe that it will make a real difference in the world. We are highly confident upon completing this primary capital raise, that we can and will successfully launch our trading platform in 3-4 months. The design, regulatory and infrastructure build out of the trading system has been going on for over 5 years and is ready to launch. We have developed our technology at Lab49 in downtown New York City. I travel often to meet with investors and demonstrate our system as well as developing video demonstrations accessible via the internet.