Well blockchain is a very valid case for tracking assets like stocks. I guess the implementation and backwards compatibility is a big issue, also other banks don't want to hop on the hype train etc.
Basically you can't force everyone to do transactions on chain. The benefit you mentioned only exists if everyone is on chain.
You can create derivatives of whatever you want, it does not matter how the underlying is delivered or settled.
And the settlement price could not be faked but you need an exchange that offers bid/ask prices and that matches the transactions and that could clearly be faked.
A blockchain solution can make settlements faster, final and prevent the current issues. It also means you no longer need a broker to hold your stocks/assets. More sophisticated users can run their own "wallet".
how blockchain would block theft without blocking valid transfer? This requires checking real-world data so all blockchain stuff does not help at all.
(the same transfer may be considered as valid or as a theft by different groups of people! See various stories about evacuated gold reserves of countries that were taken over.)
No wonder exchanges and consultancy firms are getting away with baffling the public and businesses with bullshit.
Your scenario is you can’t trust your stock exchange to correctly known who owns what stock, and you cannot trust their data feeds, given the heavy and necessary regulation of stock markets, given the very goal of them allowing ordinary people to invest in the largest companies without DD in a fungible way.
In that scenario a stock exchange becomes useless regardless of the technology.
Blockchain has other problems too. It is slow! It can’t keep up with the source of truth. And it cannot be the source of truth without slowing operations down massively.
For blockchain to be worth it you would need different validation nodes operated by different entities and consensus. This will mean the end of fast fulfilment of trades most likely.
If your point was about simple api bugs then that is an interesting point. Decent operations and monitoring should prevent this. I would put data loss or accuracy bugs with stock exchange data from the source in the same bucket as “making the exchange useless” as it is not providing a fair system.
Even in the US, there's a lot of bs that goes on related to high frequency trading. With a trustless, decentralized system, the playing field could be evened (instead of favoring those with LAN connections to the datacenter). And who knows in general how much order book bs is happening behind our backs.
And the blockchain being slow isn't really that much of an issue. Stock trading is already settled at a later time, so stocks being settled to blockchains at a later time, batched, wouldn't be a problem (and real time trading would happen with L2 or L3s).
“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, one by one.” - Charles MacKay, Extraordinary Popular Delusions and the Madness of Crowds