Deep Liquidity plans to launch a website that will provide investors, traders and security dealers a secure network to negotiate trades that are larger than what can be easily executed at the stock exchanges.  The website will be a cross between a social network and a stock exchange. 

It is similar to a social network because members will join the website, create a profile, post messages, wait for replies and be able to form their own private groups or attempt to join other groups.    It is similar to a stock exchange because it facilitates trading among its members and collects fees from trading.

It is different from a social network because its members will post request for quotes (RFQs) instead of discussions. Members will have the opportunity to offer quotes to members that request them. Members can execute trades against quotes offered to them.  

It is also different from a stock exchange because a stock exchange has a central order book for all of their orders.  This website will have independent order books operated by each of its members.

The website will offer two new patented limit orders types that cannot be gamed.   These new innovations solve long standing structural problems that caused the Flash Crash of May 6, 2010.

Could Deep Liquidity be the Next Big Internet Success?

The answer is Yes.  It will be a success because the website will have an exclusive patented communication protocol that will allow investors to communicate and negotiate trades between each other in a way that no competitor in the market will have.  Investors currently cannot negotiate with each other effectively due to the fear of information leakage.   The current method to trade mainly algorithmic trading is flawed and lead to a total breakdown of the markets during the Flash Crash of May 6.  It could happen again.

Investors will be attracted to the website because it will be the only place in the world where investors can obtain live quotes for their buy and sell orders that are larger than what they can easily execute at the stock exchanges.  It will also be the only place where investors can buy stocks at a discount to the prices offered at the stock exchanges.   Bargain hunter investors will flock to the website to buy their favorite stocks at below market prices. 

Market makers and high frequency traders will be attracted to the website because they will have direct access to bid on order flow coming from institutional investors, similar to how online brokers feed their orders to wholesalers but different.  Market makers and high frequency traders will be able to name their own price for their liquidity providing services. They currently cannot do this and must dart in and out of the stock exchanges to make money.  Our website will allow investors to auction off their transaction costs to the lowest cost liquidity providers.  This is impossible in today’s markets.  

The market will benefit because investors will be incented to participate in the price discovery process that is currently only represented primarily by short term traders.  The Flash Crash of May 6, 2010 could not have happened if Deep's technology was in place.  

The market will be given "transaction cost" transparency which will allow inventors the ability to make better informed decisions before they invest which will allow them to consider more illiquid stocks. This will pump liquidity into illiquid stocks which will result in higher valuations which will encourage more IPOs.   

How can Deep Liquidity generate revenue?

Although we will have other means to make money such as advertising, our primary business will be that of a broker.  Some crossing networks earn up to $.02 a share for matching orders.  We anticipate in a 2-3 year time period we could be crossing 100-400M shares a day or more.  We also plan to add currency, options, futures and bond trading to our network once our equity trading unit is up and running.  The website will be a licensed broker dealer and could provide multiple investment products, online trading accounts, stock lending and a whole host of financial services offered by traditional brokers and banks.

What is Deep Liquidity’s potential?

Dominant websites can be very valuable:

Google - $190B Web Search  

Amazon - $80B Retail Goods

Priceline - $20B Travel

Facebook - $50B Social Networking

Yahoo - $20B Web Search

Ebay - $30B Retail Goods

Deep Liquidity - ?? Financial Services

Great things could happen for Deep Liquidity because it possesses a patented business model.  Google, Amazon and Priceline all started with a patent and an idea, Deep Liquidity starts with the same.  The market is ripe for a single dominant financial services website.  Could Deep Liquidity be it?  

Price discovery for stocks was originally determined by an open outcry system that occurred on the floor of stock exchanges.  This was later replaced by centralized electronic order book operated by stock exchanges. We predict in time that centralized electronic order book business model will be replaced too by a smart peer to peer business model which allows traders to have their own electronic order books thus creating thousands, possibly millions of private exchanges.  A smart peer to peer business model provides the market: 

• Lower transaction costs
• Flexible inside quotes based on the size of the order 
• Less information leakage
• Reduced overall market volatility

Deep Liquidity possesses a superior patented business model that is well positioned to succeed.