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Post by geoffrey on Jul 18, 2014 8:19:29 GMT
This isn't meant to be accusatory -- all the P2Ps and P2Bs to some extent attempt to manage the market to get the best balance between lender supply and loan demand, including the injection of institutional funds or, in the case of ZP, outright setting of the rate. However, RS still purports to be a market, and uses market terminology. But I wonder to what extent it actively manages the setting of the daily market rate, now that significant funds flow in at that rate due to repayments.
So, for example, the demand yesterday (17th July) was such that during most of the day matches were at 6.2%, yet late last night a fairly large lender offer (£10K+) was made available at 6.1%, followed by a match at this rate just past midnight. Sure enough, today, the market rate has been set at 6.1% presumably because at or shortly after midnight, the first percentile of funds on the market (around £800K) was in the 6.1% range (supply above £8,000). Significant repayment funds seem to be coming in at 6.1%, although again, demand is such that it looks as if the majority of matches will be at 6.2%.
It seems that there is, let us say, a significant "temptation" towards shall we call it "massaging" the market?... Clearly significant market forces would (and currently are) overriding such behaviour, but if RS does engage in managing rates, it should perhaps be clear about it (maybe it does reserve this right, I haven't checked T&Cs). On the other hand, this might just have been a coincidence... Again, this isn't an accusation -- savvy investors can still pick the rate they want.
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Post by yorkshireman on Jul 18, 2014 8:49:28 GMT
At last, someone else is enquiring about the operation of the market! 
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Post by davee39 on Jul 18, 2014 9:08:01 GMT
GCHQ control the brain waves of RS executives while they sleep and send them instructions relating to desired market rates.
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Post by geoffrey on Jul 18, 2014 9:38:22 GMT
You don't need GCHQ involvement. A simple bot could do it, and the bot wouldn't even need to be operated by RS. Heck, if we know the time of the "fix" for the market rate, with such low volume of lender funds on the 4/5-year market (£772K) an offer of £10K (split, say, into 10 different-sized offers to mask the origin, or even just split into two offers) would be enough to set the market rate for the day (though it could only be lowered, not easily raised). The offer could be withdrawn shortly after the "fix" time. Here is how RS currently explain the system:
The Market Rate is automatically calculated in each market every day. The rate is set at the level of the Lowest Lender Order, after discounting a small percentage (typically set at 1%) of all the offers by volume. This is done to ensure that the Market Rate is not adversely affected by outlying orders.
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Post by yorkshireman on Jul 18, 2014 10:25:10 GMT
If the city boys can manipulate Libor etc. who knows what else they have their fingers in?
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oldgrumpy
Member of DD Central
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Post by oldgrumpy on Jul 18, 2014 10:47:24 GMT
If the city boys can manipulate Libor etc. who knows what else they have their fingers in? Aaaaaaaaaaahhh!Mmmmmmmmmmmmmmmmmm!! Who knows, indeed? I know Mrs Boycott (senior) had her fingers on the rhubarb from time to time!
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Post by westonkevRS on Jul 18, 2014 12:14:45 GMT
Arh jeeez. This thread is one of the most depressing I've read for a long time. Really, secret market manipulating bots or late night employee lenders? Really?
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Post by geoffrey on Jul 18, 2014 13:37:39 GMT
Arh jeeez. This thread is one of the most depressing I've read for a long time. Really, secret market manipulating bots or late night employee lenders? Really?
Well, I didn't really expect a straight answer, and I wasn't the one mentioning conspiracy theories. I simply questioned how the Market Rate gets set and whether the "fix" (in the legitimate sense of that word) is susceptible to decisions taken by RS on the overall balance of supply and demand. I wasn't accusing.
I see that right now the advertised Market Rate is 6.2%, whereas it was 6.1% this morning. I thought there was a single, daily Market Rate as per the downloadable data, but it seems not. If in fact it is variable during the day, then of course that is a much more transparent system, effectively a tracker.
Apologies if the title of the thread (which was meant to be vaguely amusing) set off a conspiracy diversion: after all ZP now just "fixes" the market rate as it sees fit, as I mentioned in the OP. But I think that on RS there is still some mystery surrounding the way repaid funds that are auto-lent "track" the market, daily, hourly or how?
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jonbvn
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Post by jonbvn on Jul 18, 2014 14:21:00 GMT
If anyone believes there is manipulation of market rates should just turn off auto-lend.
With 6.3% on the horizon, I wonder how high rates will go this weekend?
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Investor
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Post by Investor on Jul 18, 2014 14:56:53 GMT
Quick question for the mathematicians/statisticians.
I make two simultaneous offers in RS 5 year term. First offer at 6.2%, second one at 6.3%. The first offer is matched same day, the second offer at 6.3% is eventually matched after x days in the market. Where is the break even point for x that would have made originally loaning the 6.3% at 6.2 % with the initial offer return the same total value. Basically for a 0.1% increase, how long can an offer stay on the market before the increase rate return is exceeded by the draw-down delay loss?
Have done the maths but would appreciate a double check.
Thanks
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pikestaff
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Post by pikestaff on Jul 18, 2014 15:37:35 GMT
It depends on your view of prepayment risk (the risk of loans repaying early either voluntarily or because they have defaulted and been repaid by the provision fund), but I think it is between 12 and 14 days.
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Post by GSV3MIaC on Jul 18, 2014 16:16:24 GMT
Sounds about right ... Simplistically you are losing .25% of the original sum (0.1 * 5 /2), which is about 1/25 Th of 6.2%, so 1/25 of a year. If they repay early, you lost less, so fewer days would cover it.
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Post by westonkevRS on Jul 18, 2014 18:05:23 GMT
Game theory, that's more like it. Of course the converse is that the higher rate could be lost altogether. For example a month back when rates were 6.5% or more, some got greedy and expected even higher. When the rates dropped they had to settle for 6.0 to 6.2%, or give up.
Personally, if I like a rate I take it and don't try to eek out the marginal extra (and arguably I know the short term pipeline and could make an informed decision, but don't. And please no more accusations or "city boy" rubbish).
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Post by jackpease on Jul 19, 2014 6:03:41 GMT
Westonkev said: >>>Personally, if I like a rate I take it
Without instant top up you have to bacs it by which time the rate is lost so i have parked some money..... waiting ..... but as per earlier posts have mentioned if these monthly spikes are to disappear because big pocket investors are lurking then it'd be good to know
Jack P
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Post by goldservice on Jul 19, 2014 7:36:05 GMT
Game theory, that's more like it. Of course the converse is that the higher rate could be lost altogether. For example a month back when rates were 6.5% or more, some got greedy and expected even higher. When the rates dropped they had to settle for 6.0 to 6.2%, or give up. Personally, if I like a rate I take it and don't try to eek out the marginal extra (and arguably I know the short term pipeline and could make an informed decision, but don't. And please no more accusations or "city boy" rubbish). Why do you say 'got greedy', please? Why not just 'covered a higher position'?
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