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Post by Butch Cassidy on Aug 24, 2017 10:56:51 GMT
I like the simplicity of par SM's & personally don't like the ability of sellers adding premiums, although accept there are arguments in favour, however for simplicity I would just propose allowing investors to discount parts to encourage & enable sales. This would admittedly add complexity to MT's nice & easy to understand SM but the ability to discount in steps of say 0.5% would enable lenders in unpopular or impaired loans to exit where par only sales effectively never would.
I understand that potential buyers would also need some protection so perhaps a large warning disclaimer would need to be acknowledged before any purchase was authorised or these parts would only be visible to self verified sophisticated investors but the exact mechanics are not impossible to work out, especially when the Shaung is on the case - what does everyone think of the idea in principle?
Disclaimer: I only have a small holding in B****d B tranche so am not driven by personal benefit.
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archie
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Post by archie on Aug 24, 2017 11:08:00 GMT
Definitely not. Simplicity is why I have most of my funds here. It's usually not difficult to sell.
Why should lenders use discounts to queue jump? First queued, first sold.
MT would have difficulty selling a new tranche if earlier tranches on the sm are cheaper.
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r00lish67
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Post by r00lish67 on Aug 24, 2017 11:15:24 GMT
There was a very good post by yangmills a while back on this same debate over on the Lendy sub-section. The basic gist was that with the nature of much of P2P lending, the risk curve heads upwards the further in you are. There is therefore (in most cases) much less value in taking a 12% property loan with 1 month to run than at the outset. The result of this, which is demonstrated very clearly by the FS marketplace, is that loans in general begin to be discounted the more aged they become. Or, as Lendy has demonstrated, with a par-only marketplace loan parts pile up in the corner impeding liquidity. Because of this, I believe discounting would be appropriate, and a good thing for all.
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Post by Butch Cassidy on Aug 24, 2017 11:16:56 GMT
Definitely not. Simplicity is why I have most of my funds here. It's usually not difficult to sell. Why should lenders use discounts to queue jump? First queued, first sold. MT would have difficulty selling a new tranche if earlier tranches on the sm are cheaper. Whilst simplicity is a strong argument so is Adam Smith's invisible hand of the market; B***d is clearly overpriced at par, so allowing discounting would shift the price downwards to allow market equilibrium liquidity where selling would match buying. Sellers are then allowed an exit & buyers get a fair price - no one is forced to use the system, should they prefer to stick with par pricing then that option remains.
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mary
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Post by mary on Aug 24, 2017 11:22:13 GMT
Keep it simple!
However I do like the addition of bonus interest that Lendy have introduced, a significant incentive to buy and hold overdue loans if you think there is a reasonable chance of recovery!
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archie
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Post by archie on Aug 24, 2017 11:30:14 GMT
Definitely not. Simplicity is why I have most of my funds here. It's usually not difficult to sell. Why should lenders use discounts to queue jump? First queued, first sold. MT would have difficulty selling a new tranche if earlier tranches on the sm are cheaper. Whilst simplicity is a strong argument so is Adam Smith's invisible hand of the market; B***d is clearly overpriced at par, so allowing discounting would shift the price downwards to allow market equilibrium liquidity where selling would match buying. Sellers are then allowed an exit & buyers get a fair price - no one is forced to use the system, should they prefer to stick with par pricing then that option remains. If people are discounting to queue jump you would be forced to use it or never be able to sell.
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ben
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Post by ben on Aug 24, 2017 11:31:54 GMT
I am all for discounting, not so keen on premiums as that only attracts flippers in the better loans.
Selling at a discount gives everyone a fair chance to sell out if needed. If they are not willing to sell at a discount then they do not need to sell. They are just using it as a way to reduce the risk. So personally am not that bothered if that person can't sell, I would much rather someone that needs to sell can. Also for some it works out better buying at a discount for tax purposes which is probably the main reason FS can still launch loans.
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Post by wiseclerk on Aug 24, 2017 11:36:19 GMT
Selling at discount is prone to flipping too. You buy at a larger discount with the intention to resell at a smaller discount
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Post by Butch Cassidy on Aug 24, 2017 11:47:08 GMT
Whilst simplicity is a strong argument so is Adam Smith's invisible hand of the market; B***d is clearly overpriced at par, so allowing discounting would shift the price downwards to allow market equilibrium liquidity where selling would match buying. Sellers are then allowed an exit & buyers get a fair price - no one is forced to use the system, should they prefer to stick with par pricing then that option remains. If people are discounting to queue jump you would be forced to use it or never be able to sell. The counter argument is that the first B****d tranche, for example has £130k currently queued & <£400 sold over the last 3 days, so you are never going to sell or at least not in any reasonable timeframe, as par is too high a price to attract buyers. You can try to sell an asset for £1000 for the rest of you life in the hope of finding a buyer but if the market believes it is only worth £750 you can hardly blame realistic sellers of queue jumping when they advertise identical ones for £750.
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Post by beeje13 on Aug 24, 2017 12:06:32 GMT
No thank you. If anything add a sale fee!
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jlend
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Post by jlend on Aug 24, 2017 12:24:30 GMT
I think it is just fine as is.
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copacetic
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Post by copacetic on Aug 24, 2017 13:14:26 GMT
I'm of the opinion MT should could continue as is. There's no point in platforms trying to become clones of one another. For those that prefer the FS or ABL model then they can invest there but personally I like MT the way it is.
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Post by pedz14 on Aug 24, 2017 15:20:53 GMT
Not sure of the need for discounting as there is pretty much nothing on the SM at any given time (with the current exception of of course).
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registerme
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Post by registerme on Aug 24, 2017 15:25:33 GMT
Can you manage your risk without variable pricing (ie discounts / premiums on a secondary market)? No. Therefore this is required. Would it change the platform in ways that some lenders, and the platform, may not like? Possibly.
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littleoldlady
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Post by littleoldlady on Aug 24, 2017 15:56:16 GMT
I voted Don't Know because it all depends how it was implemented. If anything like Abl then no thanks, but if it can be kept really simple then yes. If implemented then some help in setting the market discount would be useful. Eg some data about recent sales. (OK I have just made it more complicated!)
Another issue is moving loans into one's ISA. It seems that MT plan to let us sell loans in our regular account and buy the same amounts of the same loans in our ISA account, (provided that the SM is open to all.) Allowing loans to be sold at a discount would enable us to effectively exceed the annual limit, so would be a problem.
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