jjc
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Post by jjc on Oct 30, 2018 20:37:32 GMT
There are lots of types of cars. Big ones, small ones, new ones, old ones, kinda in between ones, shiny ones, slightly scratched ones & totally battered ones. High ones, low ones, big space in the boot ones. And all of them can have many or less things inside. Each of us will attach a different value to all these different things (that might change over time). A fixed price SM is like saying all these different types of cars can only be sold at a price set by the government, & can never change ( even when the car gets older). If anyone can show me where this type of system works, creates a thriving market where manufacturers, dealers, fleet operators, garages, car-knackerers, consumers etc all compete with each other to get as near as dammit a “fair price” for what they’re buying/selling I’ll give the fixed price SM idea some serious thought. As to which type of variable priced SM, whilst I appreciate some folk will find the simplest is best idea seductive, a discounts only SM doesn’t allow the market to discover what the fair price (or “true value”, perceived though it may be) for your car is. It might help you sell your car a little quicker ( depending on how big the rush to sell is & how low you can go to stay ahead of this rush) but it doesn’t really have very much to do with you selling your car at the price you should (& could) be getting for it. For those of more ethical/fair-play persuasions, another way of looking at things. One of the saddest (& ironic, given the folk at MT I think genuinely try hard to make things as fair as possible) aspects of the current SM is that it rewards lenders for eminently non-virtuous behaviour. If we define non-virtuous as taking something for yourself & extracting it from others (whilst paying no price for this) we start to go down a slippery slope very few of us will emerge unscathed from (& for those that do it will be more a question of their speed, ruthlessness & the depth of their pockets). Invest & list (irrespective of what you think of the loan). That’s a sad state of affairs. Places that reward non-virtuous behaviour ultimately never thrive (sooner or later people catch on). Places that oblige (otherwise reasonably virtuous) people to behave in a way that harms others simply in order to protect their investments tend to fare even worse. On the (important) question of what the max-min range allowed for premiums & discounts should be, happy to hear from those with experience on Abl/other variable-priced SMs or finance pros such as samford71 . No strong views on this, though I suspect the range might ultimately need to reflect the perceived quality of the loans in the current live book if we are to have true price discovery. Last point, & I mean this in the gentlest of ways, whilst a variable priced SM will not solve all MT’s (or any platform’s) issues, ultimately the main difference I see between voting to keep things as they are or allowing only discounts is the speed at which you might be sentencing MT to death. This is not a wild over-dramatic statement (& certainly not intended that way), but simply my personal reflection on how hard it is for any company to genuinely thrive (long-term) in p2p. Bringing better quality loans on at attractive rates, attracting new lenders, turning a profit, attracting (& keeping) good quality staff, being resilient enough to ride thru changes in lender sentiment, defending yourself against legal claims, surviving the bad (warranted or not) press stories, whilst adapting to a possibly more restrictive regulatory environment & so forth, these are just some of the challenges we’re seeing as p2p matures. And we’re in a benign credit environment.. If we consider that default rates, for some or many platforms, might quite reasonably climb to anywhere between 20-50%+ (if not more) in certain conditions, maybe we’ve been fooling ourselves as to the prospects our beloved (& less loved) platforms genuinely have. Give them a chance please folks. Premiums & discounts are a necessary (if not sufficient) element of a healthy platform, give MT this & they just might have the legs to ride thru all adversity.
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jjc
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Post by jjc on Oct 30, 2018 23:21:52 GMT
Argument for discounts, but not premiums:
Premiums encourage lenders to buy more than they really want of what they perceive as a ‘popular’ loan and then sell at a profit to another lender, which would make the system unfair.
MoneyThing – the above is taken from your survey. Can you please explain the unfair bit?
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Post by lendinglawyer on Oct 31, 2018 16:07:54 GMT
I have voted for variable pricing because I don't think a par only model is sustainable and allowing the flexibility should ultimately help to fill new loans as people feel they have more flex to get out if they want to. I would NOT put caps and collars on the variation allowed as I think that is also false, see e.g. the 1% cap on FS which is essentially nonsense. That said, I believe it needs to be combined with a sophisticated system for allocating loan parts up front to avoid games being played at the outset. I'd propose something like the below (numbers and time period are indicative and likely would need to be tweaked (including for factors like individual loan size, current demand etc. - all of which MT should be able to judge loan by loan), it's the model I'm pitching): - For the first 5 days of a loan, each investor can invest a maximum of £1k per day. Thereafter, bid limits are removed. - Advance bidding system where each investor can say they want £x. If they say £1k, they get that on day one (unless all bids within the daily limit exceed the loan size, in which case pro rata scale-back is applied). If they say they want £5k, that keeps applying each day until the loan is filled. If they say they want £10k, it plays out exactly that way except on day six it's essentially a free for all. - Investors can only bid what they have on account (i.e. all bids must be cash-backed). - My aim is to allow all investors to ultimately get roughly what they want to hold (at least for a time) and not distort the market by applying for more in the hope of flipping. This also protects investors from their own greed should the SM seize up at any price in future. You'll never be able to eliminate all issues, but this should help as the current criticism of low bid limits is people can't get what they want while no bid limit is that BHs hoover up huge parts. The graduated system SHOULD allow a decent spread. - However, a key is to ensure that the limits put in place apply on an aggregated basis across "linked" accounts. To establish this MT would need to get an AI to scan all existing accounts and for example deem those at the same address to be linked unless the account holders could prove no link (this should be very straightforward to do). Also individual accounts where the same KYC docs/name and adress have been used as for the UBO of a company account. And accounts with "sufficiently similar" investment activity in terms of loans invested in, sold out of, etc. where at least some other evidence of nexus exists. This is to stop those with spouse/partner/company accounts getting around the limits. Just an idea anyway .
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Post by slender on Oct 31, 2018 20:59:16 GMT
Seems slightly surreal to be discussing rationing when new loans are filling so slowly (across many platforms) but if premia are to be introduced, then it would be a prudent step take and a "bottom up" model akin to Lendy's wouldn't be a bad starting point, IMO.
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Post by df on Oct 31, 2018 22:00:44 GMT
Discounting would kill MT. They're struggling to fund new loans as it is. If investors have the choice of buying discounted SM parts or new loans at par, the new loans just wouldn't fill. I would go for new loans at par. That's what I do on Abl and FS. True, new property loans are not filling, but that's a wider issue across the board. I don't think discounting would kill MT. It would help investors to rebalance their investments to meet their personal risk/return appetite and help those who wants to exit. I think it will create better outlook. If I was a new investor looking at MT to put my money in, the current state of SM would put me off.
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dovap
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Post by dovap on Oct 31, 2018 23:40:18 GMT
but you'd be encouraged by lots of discounted loans from those desperate (or well informed enough)to be heading for the exits ? Seems odd but each to their own.
fwiw I'd be more encouraged if recent loan offerings weren't largely dismal and recovery efforts were better.
ho hum
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Post by mrclondon on Nov 1, 2018 1:00:39 GMT
I voted discounts only, but I do wonder whether historically being denied access to D & E loans on the FC PM by the flippers who bought up virtually the entire lot to resell at 3% premium has clouded my judgement for longer than it perhaps should have. p2p is in a very different place these days.
If premiums are to be allowed (and one reading of the current FCA consultation is that they will have to be allowed at some future point) then there MUST be some mechanism to minimize the effect of flippers on the PM. Lendy's pre-bidding then bottom up allocation of the loan vs demand seems the fairest way to me.
However, I'd go further. Most variable priced SM's get clogged up with people listing at unreaslistic premiums on the off chance that a buyer might appear. A loan that is genuinely fairly valued with a premium could be considered to represent a value add success for the platform, and hence it may be appropriate that the platform shares in that success. Hence, I would introduce a fee for selling at a premium (perhaps a % of the premium achieved).
Someone referred to the +/- 1% premium/discount limits on the FS SM in as earlier post as being daft. Yes, they are daft, esp. as the discount representing fair value varies depending on the buyer and sellers marginal tax rate. However my understanding was that the tightening of the limits to +/- 1% was a direct result of compliance advice for operating the IFISA to prevent transfers into the ISA at non-market rates (i.e. listing on the SM in one browser window, and attempting to buyback the same part in another browser window in the ISA). Any introduction of discounts at MT will need to simultaneously address this issue.
The AC model of a minimum discount of 1%, then 0.5% steps prevents the continual undercutting of each other that was prevelent on the FC SM, and the minimum prevents the marginal undercutting of those who wish to attempt to sell at par.
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elliotn
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Post by elliotn on Nov 1, 2018 3:51:57 GMT
Agree with all MrCL points. One way to prevent tax avoidance abuse would be to prevent sellers buying their own loan parts for a predetermined amount of time (flagged by loan part ID). It would be a shame to limit discounts because of market abuse, 1% then 0.5% steps also reduces the other types of gaming MrCL/AC identified.
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IFISAcava
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Post by IFISAcava on Nov 1, 2018 8:05:20 GMT
I voted discounts only, but I do wonder whether historically being denied access to D & E loans on the FC PM by the flippers who bought up virtually the entire lot to resell at 3% premium has clouded my judgement for longer than it perhaps should have. p2p is in a very different place these days.
If premiums are to be allowed (and one reading of the current FCA consultation is that they will have to be allowed at some future point) then there MUST be some mechanism to minimize the effect of flippers on the PM. Lendy's pre-bidding then bottom up allocation of the loan vs demand seems the fairest way to me.
However, I'd go further. Most variable priced SM's get clogged up with people listing at unreaslistic premiums on the off chance that a buyer might appear. A loan that is genuinely fairly valued with a premium could be considered to represent a value add success for the platform, and hence it may be appropriate that the platform shares in that success. Hence, I would introduce a fee for selling at a premium (perhaps a % of the premium achieved).
Someone referred to the +/- 1% premium/discount limits on the FS SM in as earlier post as being daft. Yes, they are daft, esp. as the discount representing fair value varies depending on the buyer and sellers marginal tax rate. However my understanding was that the tightening of the limits to +/- 1% was a direct result of compliance advice for operating the IFISA to prevent transfers into the ISA at non-market rates (i.e. listing on the SM in one browser window, and attempting to buyback the same part in another browser window in the ISA). Any introduction of discounts at MT will need to simultaneously address this issue.
The AC model of a minimum discount of 1%, then 0.5% steps prevents the continual undercutting of each other that was prevelent on the FC SM, and the minimum prevents the marginal undercutting of those who wish to attempt to sell at par.
all a bit complex though - what's wrong with the ABL model which has none of these restrictions and just works?
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IFISAcava
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Post by IFISAcava on Nov 1, 2018 8:07:42 GMT
Agree with all MrCL points. One way to prevent tax avoidance abuse would be to prevent sellers buying their own loan parts for a predetermined amount of time (flagged by loan part ID). It would be a shame to limit discounts because of market abuse, 1% then 0.5% steps also reduces the other types of gaming MrCL/AC identified. How is it "gaming"? it's just a way of finding the true market price between buyer and seller - an artificial minimum discount prevents that.
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elliotn
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Post by elliotn on Nov 1, 2018 8:08:51 GMT
Agree with all MrCL points. One way to prevent tax avoidance abuse would be to prevent sellers buying their own loan parts for a predetermined amount of time (flagged by loan part ID). It would be a shame to limit discounts because of market abuse, 1% then 0.5% steps also reduces the other types of gaming MrCL/AC identified. How is it "gaming"? it's just a way of finding the true market price between buyer and seller - an artificial minimum discount prevents that. Read MrCLs post, he explained it very simply.
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IFISAcava
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Post by IFISAcava on Nov 1, 2018 8:24:01 GMT
How is it "gaming"? it's just a way of finding the true market price between buyer and seller - an artificial minimum discount prevents that. Read MrCLs post, he explained it very simply. I did read it, and my question still stands. "the minimum prevents the marginal undercutting of those who wish to attempt to sell at par" That's called rigging the market. What's wrong with someone offering to sell at a 0.1% lower price than par rather than 1%?
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jo
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Post by jo on Nov 1, 2018 8:26:55 GMT
Agree with all MrCL points. One way to prevent tax avoidance abuse would be to prevent sellers buying their own loan parts for a predetermined amount of time (flagged by loan part ID). It would be a shame to limit discounts because of market abuse, 1% then 0.5% steps also reduces the other types of gaming MrCL/AC identified. How is it "gaming"? it's just a way of finding the true market price between buyer and seller - an artificial minimum discount prevents that. It's going to happen or P2P will die. The idea that capital can remain 'frozen' for years when there are potentially willing buyers (with different perspectives, time frames etc.) is what will kill it.
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elliotn
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Post by elliotn on Nov 1, 2018 8:27:48 GMT
Read MrCLs post, he explained it very simply. I did read it, and my question still stands. "the minimum prevents the marginal undercutting of those who wish to attempt to sell at par" That's called rigging the market. What's wrong with someone offering to sell at a 0.1% lower price than par rather than 1%? Mr CL may be referring more to old FC practice of lenders in a beggar thy neighbour 0.001 increments (still practiceable on HC). 0.5 steps cuts out all such shenanigans with a more efficient sifting of genuine sellers from silly buggers. Just my opinion (and ACs), I will ignore yours too.
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IFISAcava
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Post by IFISAcava on Nov 1, 2018 8:35:19 GMT
I did read it, and my question still stands. "the minimum prevents the marginal undercutting of those who wish to attempt to sell at par" That's called rigging the market. What's wrong with someone offering to sell at a 0.1% lower price than par rather than 1%? Mr CL may be referring more to old FC practice of lenders in a beggar thy neighbour 0.001 increments (still practiceable on HC). 0.5 steps cuts out all such shenanigans with a more efficient sifting of genuine sellers from silly buggers. Just my opinion (and ACs), I will ignore yours too. Plenty of room for differing opinions for sure I don't get though how some sellers are genuine and some not. They all seem like sellers to me. As I said - if someone can show me how ABL's much less restricted model doesn't work I'd be grateful.
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