sl75
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Post by sl75 on Jun 26, 2020 19:13:35 GMT
The largest discount on any individual loan in the MLA (with no PF protection, and significant risk of large loss) is 5.5% at time of writing, and several loans are already trading at par again, so it seems unlikely that share of a diverse portfolio of loans protected by a PF where the risk of loss is effectively pooled across the entire loan book should attract a discount even close to the levels we've seen on the MLA.
However, it occurs to me that, with so much pent-up demand for withdrawals, there's likely to be a surge of "panic selling" when the ability to discount is introduced, with some sellers persuaded to select any discount practically without limit if buying capacity is temporarily overwhelmed. This seems likely to result in some customers being treated unfairly, as they falsely believe they need to set a very large discount in order to sell at all, when lower discounts would likely still clear within a reasonable time frame after the initial surge has passed.
Much as I'll be quite happy for a portion of such excess discounts to end up in my back pocket, it hardly seems fair...
In order to avoid excessive discounts being set, what about limiting the maximum discount to (say) 1% more than the largest discount that has not cleared within the last 7 days. That would initially limit AA discounts to 1%. Assuming there's a large amount of pent-up demand to withdraw, sellers would then be able to select 2% a week later, and 3% a week after that.
I bet that the market would discovered a "fair price" considerably below 5% discount within a month, without any individual panic-selling Access Account investor having been fleeced, and allowing any subsequent seller to choose between near-instant sale by undercutting the current maximum discount by one point, a slightly less-rapid sale with a slightly lower discount, or to hold out for an indefinite period for an even lower discount (or even a sale at par)... and even the most desperate to sell would only need to wait about a month for the discount to reach a level where the market is practically biting their hands off...
Those investors who want to profit from buying at the largest discounts and then reselling once the backlog has cleared would certainly still be able to do so (and I'll probably be joining in too), but the profits would be limited to the actual market level difference, rather than an excessive discount selected by someone who has no idea what the fair value should be...
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Post by davee39 on Jun 26, 2020 19:44:01 GMT
The provision fund does not help here.
To allow cash to be released from a bad loan the pf has to pay out. My observations suggest that loans can be 'waiting for all recovery avenues to be explored' for several years. No one will get back anything from 227 any time soon.
The provision fund is therefore a fig leaf allowing pass the parcel to be played with the bad loans as new money is invested.
Now the music has stopped we are left with about 10% suspended loans and 20% monitoring event loans.
Without liquidity these loans cannot be passed on and cash could be tied up for years.
The MLA is different, only tradeable loans can be sold and these can benefit from DD.
There may therefore be valid reasons for offering a high discount and as long as the selling options and trading arrangements are understood, and there is more clarity as to how the market will operate for a non discounted exit this should be acceptable.
I would like to leave things well alone, once the market is available I will try to work out whether to buy, sell or just stand by and watch.
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ceejay
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Post by ceejay on Jun 27, 2020 8:48:03 GMT
...
In order to avoid excessive discounts being set, what about limiting the maximum discount to (say) 1% more than the largest discount that has not cleared within the last 7 days. That would initially limit AA discounts to 1%. Assuming there's a large amount of pent-up demand to withdraw, sellers would then be able to select 2% a week later, and 3% a week after that.
...
An interesting idea, and one I have some sympathy with. My main concern with it is that it doesn't account for the few people who really, really need their cash out asap. Sure, they should never have been here in the first place, but we are where we are. Could that be addressed simply by speeding up (considerably) the timescales you suggest?
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cb25
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Post by cb25 on Jun 27, 2020 8:59:17 GMT
...
In order to avoid excessive discounts being set, what about limiting the maximum discount to (say) 1% more than the largest discount that has not cleared within the last 7 days. That would initially limit AA discounts to 1%. Assuming there's a large amount of pent-up demand to withdraw, sellers would then be able to select 2% a week later, and 3% a week after that.
...
An interesting idea, and one I have some sympathy with. My main concern with it is that it doesn't account for the few people who really, really need their cash out asap. Sure, they should never have been here in the first place, but we are where we are. Could that be addressed simply by speeding up (considerably) the timescales you suggest? If I was in the position I wanted my money out in a hurry and had decided on a (large-ish) discount that I believed would achieve that, I'd consider myself to have been treated unfairly if the system dictated I could only offer a lower discount which - most likely - would cause me to have to wait longer for my money.
Lenders in P2P are supposed to be sophisticated investors, they should be treated as such - let them set any discount they choose.
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SteveT
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Post by SteveT on Jun 27, 2020 9:12:00 GMT
In order to avoid excessive discounts being set, what about limiting the maximum discount to (say) 1% more than the largest discount that has not cleared within the last 7 days. That would initially limit AA discounts to 1%. Assuming there's a large amount of pent-up demand to withdraw, sellers would then be able to select 2% a week later, and 3% a week after that. It simply wouldn't work, ignoring the basic economics principle of supply and demand. If discounting was limited to 1% initially, a huge queue of sellers immediately would build at 1%. There'd be very little buying since any buyer with an ounce of common sense would realise that the current "market rate" must be rather lower than 1%. A week later, many / most of the 1% sellers would switch their offers to 2%, and then 3% a week later... The only effect would be to put the whole market in dramatic "slow motion", taking weeks (not hours) for the "best available" discount to reach a point where demand starts to balance supply and discounts find their fair level. (But, if sellers are sensible, they'll do something similar all by themselves, starting at a modest discount initially and then adjusting their offer as necessary as the market finds its level. The obvious plus being that they can make such adjustments whenever they like, not over a period of weeks!)
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dave4
Member of DD Central
Cynical is a hobby not a lifestyle
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Post by dave4 on Jun 27, 2020 9:52:41 GMT
Personally i believe that no limits on the % discount offered is correct. Leaving it up to the seller to sell as they see fit, same as buyers to purchase as they see fit.
What would be good and more important would be the SM start time and date. This crucial bit of info would allow financial planning on both sides of the market.
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jlend
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Post by jlend on Jun 27, 2020 9:54:53 GMT
I have not kept up.
Are there plans for reinvestments of capital and interest also allowing discounts to be set?
Or will these need to be withdrawn and then reinvested to allow discounts to be set?
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sl75
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Post by sl75 on Jun 27, 2020 12:59:12 GMT
In order to avoid excessive discounts being set, what about limiting the maximum discount to (say) 1% more than the largest discount that has not cleared within the last 7 days. That would initially limit AA discounts to 1%. Assuming there's a large amount of pent-up demand to withdraw, sellers would then be able to select 2% a week later, and 3% a week after that. It simply wouldn't work, ignoring the basic economics principle of supply and demand. If discounting was limited to 1% initially, a huge queue of sellers immediately would build at 1%. There'd be very little buying since any buyer with an ounce of common sense would realise that the current "market rate" must be rather lower than 1%. A week later, many / most of the 1% sellers would switch their offers to 2%, and then 3% a week later... The only effect would be to put the whole market in dramatic "slow motion", taking weeks (not hours) for the "best available" discount to reach a point where demand starts to balance supply and discounts find their fair level. (But, if sellers are sensible, they'll do something similar all by themselves, starting at a modest discount initially and then adjusting their offer as necessary as the market finds its level. The obvious plus being that they can make such adjustments whenever they like, not over a period of weeks!) If the experience on the MLA is anything to go by, the limiting factor is how fast buyers can get cash into their account, not how large the discount is.
1 week at each 1% step in discount level allows buyers time to arrange funds to help clear some of the queues, and avoids the perceived "need" to offer 20% discounts, when the "problem" isn't the lack of discount, but simply the lack of potential buyers.
An (probably better) alternative would be, for example, to pool all buying requests and selling requests in any given day (or hour, etc.), or to create a proper two-sided market, so that sellers who say "up to 20% discount" would actually only have it discounted by 5% if that was the market clearing price. i.e. the way every other financial market outside P2P-land works.
However, I'd be concerned this would still lead to short-term spikes in discounts apparently demanded by the market, and thus to actual financial losses from those who are desperate to sell at all costs, and to whom it hasn't occurred they could get (say) an effective 10% return in a few days by waiting a bit...
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blender
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Post by blender on Jun 27, 2020 13:23:54 GMT
We must remember that this cash has been locked up for over three months, and those who were desperate for cash will have made other arrangements to cover that period, perhaps at some cost. After such a long wait, few will be desperate to sell immediately at an unreasonably high discount, unless they believe that those discounts will continue to be required or will increase. I speak as a potential seller - not a buyer. We are sophisticated investors, we sometimes make errors, that's our problem. There is a fine line between treating customers fairly and treating customers like children - nanny knows best. That's for protected investors. The purpose of this suggestion is appreciated, but keep it quick and simple, please.
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cb25
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Post by cb25 on Jun 27, 2020 13:44:48 GMT
We must remember that this cash has been locked up for over three months, and those who were desperate for cash will have made other arrangements to cover that period, perhaps at some cost. After such a long wait, few will be desperate to sell immediately at an unreasonably high discount, unless they believe that those discounts will continue to be required or will increase. I speak as a potential seller - not a buyer. We are sophisticated investors, we sometimes make errors, that's our problem. There is a fine line between treating customers fairly and treating customers like children - nanny knows best. That's for protected investors. The purpose of this suggestion is appreciated, but keep it quick and simple, please. Certainly going to be entertaining in the opening period.
If I could get out of the access accounts at a low discount, say 2%, I'd probably do it, putting some of the money in the MLA and withdrawing the rest (now seems a good time to be a wuss). Of course, if lenders like myself put all their AA money up for sale at 2% discount, that would mean lenders who wanted to get out in a hurry would have to offer higher discounts.
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gmitz
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Post by gmitz on Jun 27, 2020 14:46:18 GMT
I couldn't find any information anywhere how exactly one can buy and sell on that QAA's secondary market. Individual loans or blocks/parts of QAA holdings where one doesn't know what exactly is buying or selling?
In the first instance, who will buy the defaulted or monitored loans? Ergo, that is not the proper solution for sorting the liquidity in the Quick Access Accounts unless AC again lift two fingers to all of us and turn the QAA into the next GBBA3 and we all know how that tuned out for us. If AC plans to go on that path, I would humbly suggest to them to transfer all good loans to MLA to be traded and where at least one can benefit from higher rates. Then start using that "mythical" PF to clear the defaulted loans left in the QAA to avoid claims for mis-selling financial products and retain some credibility.
In the second instance....well, no one in the right mind will be buying. The liquidity problem will remain the same.
As I said before when the suggestion for the QAA secondary market first appear, I am against it because it will allow AC to wriggle out of their commitment and responsibility in regards to the QAA's. Problem is, when the the Market is back to normal sooner or later, the QAA liquidity problem will still be there. No one will put their money there.
And before the AC cheerleaders (we all know them) shoot me down in flames, just consider this, the pandemic was not the cause, it had just revealed AC's heavy reliance on QAA for covering the holes in their overstretched loan book, lack of adequate planning for extreme events, inadequate reaction in such events as "panic" selling, etc., etc..
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blender
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Post by blender on Jun 27, 2020 16:49:32 GMT
It is believed that the SM will work upon the AA holdings which have been 'withdrawn' , which have served any notice period, and are in the withdrawal queue awaiting cash. Effectively the discounting allows your queued withdrawals to jump the queue according to the value of discount offered (though the actual queue position is maintained if you remove the discount). Presumably they apply your highest discounts to your holdings nearest to the front of the queue. You don't get to choose what loans are sold, you just withdrawal a value, and the good people at Assetz then work their magic, black (box) magic. You don't get to choose what to buy, you just buy at best. On the subject of what visibility of the available discounts should or will be available, opinion is divided. We shall see, or not.
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dead-money
Rocket to the Moon
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Post by dead-money on Jun 27, 2020 17:47:36 GMT
I couldn't find any information anywhere how exactly one can buy and sell on that QAA's secondary market. Individual loans or blocks/parts of QAA holdings where one doesn't know what exactly is buying or selling? In the first instance, who will buy the defaulted or monitored loans? Ergo, that is not the proper solution for sorting the liquidity in the Quick Access Accounts unless AC again lift two fingers to all of us and turn the QAA into the next GBBA3 and we all know how that tuned out for us. If AC plans to go on that path, I would humbly suggest to them to transfer all good loans to MLA to be traded and where at least one can benefit from higher rates. Then start using that "mythical" PF to clear the defaulted loans left in the QAA to avoid claims for mis-selling financial products and retain some credibility. In the second instance....well, no one in the right mind will be buying. The liquidity problem will remain the same. As I said before when the suggestion for the QAA secondary market first appear, I am against it because it will allow AC to wriggle out of their commitment and responsibility in regards to the QAA's. Problem is, when the the Market is back to normal sooner or later, the QAA liquidity problem will still be there. No one will put their money there. And before the AC cheerleaders (we all know them) shoot me down in flames, just consider this, the pandemic was not the cause, it had just revealed AC's heavy reliance on QAA for covering the holes in their overstretched loan book, lack of adequate planning for extreme events, inadequate reaction in such events as "panic" selling, etc., etc..
Your Access account holding is an indivisible fixed proportion of the total access accounts holdings good, bad and cash; you don't get to pick and choose which loans, defaulted or otherwise you're selling.
So determine what discounted value you place on getting out of that basket early, and others, such as myself, may buy-in at that discounted price to par.
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gmitz
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Post by gmitz on Jun 27, 2020 18:54:27 GMT
It is believed that the SM will work upon the AA holdings which have been 'withdrawn' , which have served any notice period, and are in the withdrawal queue awaiting cash. Effectively the discounting allows your queued withdrawals to jump the queue according to the value of discount offered (though the actual queue position is maintained if you remove the discount). Presumably they apply your highest discounts to your holdings nearest to the front of the queue. You don't get to choose what loans are sold, you just withdrawal a value, and the good people at Assetz then work their magic, black (box) magic. You don't get to choose what to buy, you just buy at best. On the subject of what visibility of the available discounts should or will be available, opinion is divided. We shall see, or not. So you think it will be something like that.....Investor A has £1000 to withdraw and is No69 in the queue and offers 10% discount, investor B is No1 but is looking for better deal while investor C placed 10 in the queue likes the deal and buys out Investor A. Now investor A is No10 and has £900, investor C is No69, £100 richer and investor B still waits for bigger discount....No, this is not going to work and it's wrong on so many levels.
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gmitz
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Post by gmitz on Jun 27, 2020 19:06:14 GMT
I couldn't find any information anywhere how exactly one can buy and sell on that QAA's secondary market. Individual loans or blocks/parts of QAA holdings where one doesn't know what exactly is buying or selling? In the first instance, who will buy the defaulted or monitored loans? Ergo, that is not the proper solution for sorting the liquidity in the Quick Access Accounts unless AC again lift two fingers to all of us and turn the QAA into the next GBBA3 and we all know how that tuned out for us. If AC plans to go on that path, I would humbly suggest to them to transfer all good loans to MLA to be traded and where at least one can benefit from higher rates. Then start using that "mythical" PF to clear the defaulted loans left in the QAA to avoid claims for mis-selling financial products and retain some credibility. In the second instance....well, no one in the right mind will be buying. The liquidity problem will remain the same. As I said before when the suggestion for the QAA secondary market first appear, I am against it because it will allow AC to wriggle out of their commitment and responsibility in regards to the QAA's. Problem is, when the the Market is back to normal sooner or later, the QAA liquidity problem will still be there. No one will put their money there. And before the AC cheerleaders (we all know them) shoot me down in flames, just consider this, the pandemic was not the cause, it had just revealed AC's heavy reliance on QAA for covering the holes in their overstretched loan book, lack of adequate planning for extreme events, inadequate reaction in such events as "panic" selling, etc., etc..
Your Access account holding is an indivisible fixed proportion of the total access accounts holdings good, bad and cash; you don't get to pick and choose which loans, defaulted or otherwise you're selling.
So determine what discounted value you place on getting out of that basket early, and others, such as myself, may buy-in at that discounted price to par.
Providing someone is dumb enough to buy something without knowing what it is and into what can turn really quickly into a Ponzi scheme.
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