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Post by batchoy on Nov 27, 2013 12:38:28 GMT
I meant that only loan units bought after public launch could be resold at a premiumSo I leap in at public launch time and buy half the remaining loan to sell on later at a profit? Its a free market to buy or not to buy .... so I'd like the freedom to buy at public launch, not be pushed out within a minute by the rich boys who will sell to me later at a profit.... I fail to understand ....
We are trying to explain
One option would be to restrict the proportion of the loan one could bid on in inverse proportion to the time left to run on the auction thus ensuring small bidders get chance to bid at launch with large bidders coming in as the auction progresses.
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TFTO
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Post by TFTO on Nov 27, 2013 12:49:14 GMT
Yes
However, I don't like the idea of the Gold Club members making a killing but if it only applies to loan parts bought after the public auction starts then it gives everyone a chance. Of course, it will result in flipping!
Chris.
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oldgrumpy
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Post by oldgrumpy on Nov 27, 2013 12:51:13 GMT
There could certainly be a proviso that if an auction is struggling in its last few days, it could be cost effective for Assetz and fair to investors, to announce and allow all subsequent loan parts purchased a x% markup facility in the aftermarket - a kind of internal undertaker...I mean underwriter. Probably easier to implement than a sliding bidding thingy that batchoy suggests.
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Post by batchoy on Nov 27, 2013 12:59:48 GMT
Yes However, I don't like the idea of the Gold Club members making a killing but if it only applies to loan parts bought after the public auction starts then it gives everyone a chance. Of course, it will result in flipping! Chris. l don't particularly like the idea of the Gold Club getting pre-bidding rights nor pre-filling (however l understand the reasoning behind it) but I also don't like the idea of penalising pre-bids by not allowing them to charge a premium later on. I am however not averse to restricting total bid amounts based auction time.
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Post by batchoy on Nov 27, 2013 13:25:22 GMT
One question that comes up with regard to prohibiting premiums on pre-bid loan parts is when does the prohibition end. If it is never then it is unfair to the aftermarket buyer, if it is after the first sale then the process is open to collusion.
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Post by jevans4949 on Nov 27, 2013 13:42:26 GMT
Another approach would be to say that no loan parts (irrespective of how acquired) may be sold at a premium for, say, 3 months after the auction closes. This would discourage speculative buying to some extent, while allowing lenders to profit from a medium-term drop in interest rates.
Or you could say no loan part may be sold at a higher price than the buyer paid for 3 months after he acquired it - slowing speculative buying throughout the term. This could then limit speculative buying of loan parts offered at a discount.
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Post by mrclondon on Nov 27, 2013 13:58:05 GMT
Voted no on princple, but be under no illusion if a premium is allowed on here I'll be looking at how best to use that to manipulate the market to my own advantage with some very sizeable loan bids*. I am not a flipper on FC becuse of the effort involved and the (in general) unsecured loans, but on here it would be a no brainer. It will get very interesting as I expect most of the FC flippers bidding 5 figure sums on every loan to immediately resell at a premium will move across. The message to small investors will be "thanks for helping us reach our first £10m, we no longer need you. You may find some crumbs from the flippers on the aftermarket."
* e.g. virtually all of yesterday's loan that hadn't been pre-bid would have gone to just one or two flippers.
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oldgrumpy
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Post by oldgrumpy on Nov 27, 2013 14:12:19 GMT
"...most of the FC flippers bidding 5 figure sums on every loan to immediately resell at a premium will move across...."
With only a couple of loans a week on Assetz these days it won't take many flippers to take over... each one will also become a Gold Club member after their first deposit .... meaning even more reductions on pre-launch bids ..."to be fair" .... a single click can add £20,000 conveniently split into 200 resaleable pieces.
I somehow doubt that Andrew and colleagues really want this scenario .... so whatever system is adopted, please be sure it does not play into the "quick buck" club's hands.
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merlin
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Post by merlin on Nov 27, 2013 14:25:54 GMT
Chris, even if resale at a premium is limited to post launch that doesn't prevent wealthy investors, who've managed to corner the market by pre-bidding, from drip feeding to hungry small investors. It rather reminds me of the way tickets get sold for entertainment events at inflated prices because ordinary punters are shouldered out of the queue by ticket agencies. It might guarantee that the product is shifted but it distorts the market nonetheless. I think you misunderstand what I was trying to describe - I meant that only loan units bought after public launch could be resold at a premium. Those bought through pre-bidding could be restricted from selling above par value for the lifetime of that loan unit. I don't agree. If you do this you will create a situation where the big players will just go elsewhere and then you may have difficulty filling loans. I am basically against any premium being added but not against a discount of up to say up to 3% to help sales when speed is important. Overall I am very cautious about making any changes due to the dreadful situation that now exists on FC. I am aware that they are no longer allowing the flippers to make hundreds of bids within seconds but in my opinion the premium idea distorts the market.
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pikestaff
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Post by pikestaff on Nov 27, 2013 14:50:14 GMT
Concerns about flipping are easily dealt with by restricting the premium so that sellers can do no better than breakeven after a reasonable return for their dead time. This is sufficient to prevent the creation of a two tier market, and avoid giving gold members an unfair advantage.
A compelling reason for allowing sales on these terms is that, if underwriters are able to recover their costs, including dead time, from resales this should reduce the cost of underwriting and hence improve the terms and/or flow of new loans, for the benefit of all.
As posted elsewhere I think 50% of the the loan rate would be a reasonable return for the dead time. This would give a maximum premium of:
0.35% + R*t/2
where 0.35% is AC's fee, R is the loan rate and t is the dead time. Ideally the dead time would be calculated from when the seller's bid is funded, which would encourage early bidding.
In my earlier post I suggested that the dead time should be calculated from the time of the seller's bid. On reflection this would give an undue advantage to those HNW lenders who are permitted to bid on credit. Hence the suggestion above.
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Post by westcountryfunder on Nov 27, 2013 14:52:24 GMT
Voted no on princple, but be under no illusion if a premium is allowed on here I'll be looking at how best to use that to manipulate the market to my own advantage with some very sizeable loan bids*. I am not a flipper on FC becuse of the effort involved and the (in general) unsecured loans, but on here it would be a no brainer. It will get very interesting as I expect most of the FC flippers bidding 5 figure sums on every loan to immediately resell at a premium will move across. The message to small investors will be "thanks for helping us reach our first £10m, we no longer need you. You may find some crumbs from the flippers on the aftermarket." * e.g. virtually all of yesterday's loan that hadn't been pre-bid would have gone to just one or two flippers. Well, that really says it all! I object most strongly to any large investor being able to manipulate the market, and there really should be no question of tickling the tummies of the Gold Club fat cats - they already have significant advantages. The unwashed would like a share of the action and I do not expect the income I would otherwise earn on these loans to be diluted by rewarding speculators. Just puzzled as to how you can vote against in principle, but nevertheless admit you would take advantage, given the opportunity. I suppose its all part of the general attitude these days - anything's ok provided it's legal.
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pikestaff
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Post by pikestaff on Nov 27, 2013 15:05:38 GMT
... I am not a flipper on FC becuse of the effort involved and the (in general) unsecured loans, but on here it would be a no brainer. It will get very interesting as I expect most of the FC flippers bidding 5 figure sums on every loan to immediately resell at a premium will move across. The message to small investors will be "thanks for helping us reach our first £10m, we no longer need you. You may find some crumbs from the flippers on the aftermarket."... I don't think this should happen if premiums are capped at a level that flipping is not profitable. There is, of course, room for debate about what that level should be. I have suggested capping the return for dead time at 50% of the loan rate, the rationale being that the money is not on risk until it is lent, and this is akin to a commitment fee. If it turned out that this was not (in practice) a sufficient deterrent to flippers, the return for dead time could be further capped at a low absolute level (say 3%). But I'd not start there.
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Post by andrewholgate on Nov 27, 2013 15:12:12 GMT
<wonders why the can he opened didn't say "worms" on the front>
OK. Food for thought from this. Let me consider and we will come back to you.
A
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andy2001
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Post by andy2001 on Nov 27, 2013 15:25:21 GMT
Like I said in another thread I don't want there to be premiums. I like being able to buy at par on the aftermarket. But if it does happen I may end up flipping if it looks like it will be profitable.
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Post by bracknellboy on Nov 27, 2013 19:26:03 GMT
Voted no on princple, but be under no illusion if a premium is allowed on here I'll be looking at how best to use that to manipulate the market to my own advantage with some very sizeable loan bids*. I am not a flipper on FC becuse of the effort involved and the (in general) unsecured loans, but on here it would be a no brainer. It will get very interesting as I expect most of the FC flippers bidding 5 figure sums on every loan to immediately resell at a premium will move across. The message to small investors will be "thanks for helping us reach our first £10m, we no longer need you. You may find some crumbs from the flippers on the aftermarket." * e.g. virtually all of yesterday's loan that hadn't been pre-bid would have gone to just one or two flippers. For me MRC's posts pretty much somes up my view as far as Assetz is concerned, except perhaps for the bit about 'on principle'. On principle in a differently structured market I don't have too much problem with premium selling. However FC has some hinderances built in (not necessarily deliberately) which currently puts some brake on the impact. With Assetz, per mine and other's posts, it would almost certainly be a very different outcome. Those things being: a) dominance of fixed rate loans b) automatic chunking into bite size = resaleable pieces. Tweaking the rights for gold card pre-bidding won't get around that. Like some others I would probably support small premium to cover costs (which could include lost opportunity cost of dead money). On FC ability to resale at premium can help to provide an "underwriting" function under some market conditions. With Assetz structure, not really required, and with your structure the market will get cornered and push out involvement of smaller players. Since the poll is currently by necessity a simple one, I will vote No in case the wrong message is given. I would vote yes to something which constrained the premium to resale cost recovery. The latter can certainly help with people who like taking a larger initial position and then perhaps sell and re-invest for greater divesification. Edit: I and others have also mentioned that the lack of vibrant secondary market @ Assetz could be a constraint for the business in future. The "limited premiums" model would help to get that I feel.
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