nw99
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Post by nw99 on Jun 22, 2018 5:08:04 GMT
Manually picked up those at 99 recently in those 2 loans . Does look like a underwriter selling as price on both was 99 and in 10k blocks . If so they should be excluded from selling in the secondary for 90 days .
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ceejay
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Post by ceejay on Jun 22, 2018 7:41:28 GMT
Manually picked up those at 99 recently in those 2 loans . Does look like a underwriter selling as price on both was 99 and in 10k blocks . If so they should be excluded from selling in the secondary for 90 days . Why?
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nw99
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Post by nw99 on Jun 22, 2018 17:32:36 GMT
why what ?
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ceejay
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Post by ceejay on Jun 22, 2018 21:56:33 GMT
Why should they be excluded from selling in the SM? The underwriters' role is to improve liquidity, which they do by taking up the rest of a loan so it can be drawn down, and then releasing gradually into the SM. Greasing the wheels, for which they doubtless get a few points. Seems fair enough to me.
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nw99
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Post by nw99 on Jun 23, 2018 6:50:02 GMT
Why should they be allowed to dump it straight away at a discount damaging the secondary market for investors that have invested from day 1. A lock up period should be introduced.
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SteveT
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Post by SteveT on Jun 23, 2018 6:55:08 GMT
Why should they be allowed to dump it straight away at a discount damaging the secondary market for investors that have invested from day 1. A lock up period should be introduced. Why does offering a discount "damage" the secondary market, and why would "investors" want to be selling from Day 1? Only scenario I can think of is someone farming Instant Returns, loading up and hoping a loan takes as long as possible to fill, before selling down immediately when it does.
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blender
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Post by blender on Jun 23, 2018 9:36:30 GMT
Why should they be allowed to dump it straight away at a discount damaging the secondary market for investors that have invested from day 1. A lock up period should be introduced. Why does offering a discount "damage" the secondary market, and why would "investors" want to be selling from Day 1? Only scenario I can think of is someone farming Instant Returns, loading up and hoping a loan takes as long as possible to fill, before selling down immediately when it does. It's not a level playing field, because some sellers have an undeclared advantage which effectively means that other sellers are shut out until who knows when. It's not transparent because when ordinary investors bid on a loan they do not know what special deals are or may be offered to other parties, and are therefore missing information. On selling from day 1 there are many possible reasons, but the ability to sell (liquidity) is compromised for some time. We might say, why should 'underwriters' want to be selling from day 1? Motivation is not the point, imo. Lack of liquidity for the ordinary punter is. 'Loading up' 'before selling down immediately', presumably to make a quick profit, is perhaps what the underwriters wish to do, rather than the ordinary punter.
Edit: Sorry to disagree with you on this rare occasion stevet. Actually I am hoping that there will be early selling on 98 at a discount when drawn down, because I have loaded up on an ordinary account and wish to transfer at market rate to an isa account.
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SteveT
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Post by SteveT on Jun 23, 2018 15:01:19 GMT
It’s much like when canny lenders would load up on Funding Circle property loans offered with 2% cashback and then, as soon as the cashback was paid, seek to sell down their holdings at a discount to free up funds for the next opportunity. But none of us used to do that, did we blender?! My comment was prompted only by the word “damage”, which struck me as nonsense. If the market price of something falls then sellers lose out and buyers get a better deal. But the market is not damaged, it’s just normal supply and demand. Ps. “other sellers” are in no way “shut out”; they just need to match / beat the market price if they want to sell quickly, or wait for the price to rise again if they don’t
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blender
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Post by blender on Jun 23, 2018 16:44:50 GMT
Yes we did buy on FC with cashback, but everyone got that cashback, not some in secret. Personally I did not sell straight away, because I had no advantage over the other sellers. I do miss FC property loans, and 98 here is the closest - but the instant returns covers the period our cash has been tied up, since late March. We had our 2% for nothing with FC. I remember that FC sometimes had to buy up the remainder of a tranche, and carry it on its balance sheet for a while, then sell quietly on the SM. One time their minion made an error and gave a 3% discount. Those were the days.
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SteveT
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Post by SteveT on Jun 23, 2018 16:53:55 GMT
They certainly were! Although the Autobiddies who generously bought our carefully pre-loved (and CB-stripped) parts mostly were oblivious to what they’d missed out on. And IIRC, many CB tranches filled so rapidly that most Autobiddies didn’t get a look in via the PM.
(IIRC, the FC listing error was as high as 4% discount; I distinctly remember trying to snag a couple of dozen £100 parts before they disappeared. I think the 3% was a genuine CB listing; High Wycombe, or Beaconsfield perhaps. That neck of the woods anyway)
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Post by samford71 on Jun 24, 2018 14:01:13 GMT
The idea of an underwriter is to ensure that a bond (or loan deal) gets originated. Without them the deal does not get printed. The get paid a fee to take on an outsize exposure. They run the risk that the deal is unpopular with other investors, so they cannot shift their exposure, tieing up their risk capital and, at worse case, resulting in them holding a deal that defaults. The return on capital is therefore a function of the fee and how often they can rotate their capital through new deals. No underwriter of sound mind should be looking to buy and hold loans. That is not their investment strategy. Their aim should be to sell their loans down at a price that secures a positive marginal return and also allows them free up enough capital to underwrite the next deal. Of course, if you disike the "unlevel playing field" this causes you can have no underwriters. But you also might find you have no deals either. Underwriting, as an investment strategy, should make more than a conventional strategy. Why would someone take concentration risk and/or liquidity risk to a loan/platform without additional return? They also provide scale and the reality in finance is that scale gets you a better deal. Sorry but David Swensen at the Yale endowment gets a better deal than a retail investors with $100k. Absolutely right. Retail investors are a PITA and expensive to manage. So either accept the underwriters need to have an edge or pony up some more capital yourself. I'm sure most of you can borrow at 1-2% so don't say you don't have the ability to. As for asking to hold the loans for 90 days; that is bonkers. That would mean they could only rotate their capital 4 times per annum. At a fee of 1-2%, that is not a worthwhile return. Note I'm not an underwriter on Ablrate. However, I have underwritten loans on AC and TC. I wouldn't ever contemplate underwriting loans at a flat margin to retail since I might aswell then just act like retail. Nor would I accept any liquidity constraints. Edit: A note to lofty. The syndicate I'm part of devised an automated algo strategy to run on SS. We ran it with between £1-2mm of our own money between 2015 and 1Q17. reCAPTCHA didn't impede that automated strategy
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