james
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Post by james on Oct 3, 2015 22:22:53 GMT
james, in the abstract I agree with you, but there are examples, in maturer markets, of people buying negative yielding products. So, whilst I agree with you that there should be blocks in place to prevent this on ablrate (and any other p2p platform), I don't equate that with a blanket "it be wrong" position. I agree that in the broader world there are negative yield transactions that can make sense, For example in some government bonds and deposits with central banks quite recently. In those transactions, though, those doing the transaction were making money in other ways that just don't exist here. What lawful reason would there be to buy at a negative yield? I can think of only one: a desire to give the seller money. I can think of several reasons that are illegal that I won't enumerate in this post but in general here I think that negative yields are a sign that something fishy may be going on that needs to be investigated and perhaps reported through the money laundering reporting mechanism that handles all sorts of financial crime, not just laundering. So what legal reason here do you think would cause it to make sense for the buyer to purchase at negative yield?
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blender
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Post by blender on Oct 3, 2015 22:52:54 GMT
I won't cancel a bid or offer at a negative yield (or unusually high yield). However if I saw a trade occur that I felt was at completely the wrong price I would almost certainly contact the buyer or seller to ensure that they were happy with what they have done. There can be reasons to buy at a negative rate or to sell at an unusually high yield in some cases. I don't want the secondary market to be a place where people prey upon those less experienced. Small arbitrages are fine, but that's about it. We do have the right to cancel trades but it is for very extreme cases. As it is, I have spoken to three or four users where I think they were putting up a "bad price" and talked them through how things work. This is a much better policy than Andy's previous post. The contracts are person to person and the operator should be very careful about interfering (by cancelling trades) without a full knowledge of the circumstances and the wishes of the parties. There are times when connected persons may wish to move assets between them, and to do so in such a way that those assets are not going to be snapped up by a third party on the SM. This can be reasonably and legally done for tax management (of the interest) - and it certainly has been done through the SM of another operator at low buyer rates. Offering guidance to users who seem not to understand the system is a valuable service.
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james
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Post by james on Oct 3, 2015 23:34:09 GMT
There are times when connected persons may wish to move assets between them, and to do so in such a way that those assets are not going to be snapped up by a third party on the SM. This can be reasonably and legally done for tax management (of the interest) How can it be done just for tax management of the interest when the sale price premium is greater than the amount of interest that is going to be paid? That's what makes the yield negative. Secondary market transactions can be done for tax management at anything down to 0% buyer yield, when the whole anticipated amount of interest is being paid to the seller by the buyer.
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blender
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Post by blender on Oct 4, 2015 8:27:17 GMT
If transferring between spouses the size of the premium does not matter, especially if they use a joint bank account. It is only the interest which is taxable to income, and it can be beneficial and perfectly legal to transfer loans between spouses to make full use of tax allowances and lower rate bands. Of course it is not necessary to take the return down to zero or below to make the transfer through the SM, but that marks the right parts and avoids others purchasing. Since there is no fee or tax on the transfer, it is possible to make the return negative without any net loss to the two parties. p.s On FC there is a minimum buyer rate of 4% for any loan part listed for sale. If there is a concern on ABLrate about people offering negative returns on sale offers, then it would be better to build in an automatic limit than to allow it to happen, monitor all the trades, and have to intervene and call in the authorities in cases of fraud etc. Life is too short for that and it is not good PR.
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james
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Post by james on Oct 4, 2015 10:31:11 GMT
Yes, it can be perfectly legal to do that to transfer between spouses but that doesn't really explain why the loan amount remains on sale today, when the spousal transfer would presumably have completed long ago.
The spouses could presumably as readily transfer money into and out of their shared bank account to carry out the transaction given that the premium in this case is 4%, so the buying spouse has to have approximately the same amount of money available as with no premium.
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james
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Post by james on Oct 4, 2015 10:39:01 GMT
If there is a concern on ABLrate about people offering negative returns on sale offers, then it would be better to build in an automatic limit than to allow it to happen, monitor all the trades, and have to intervene and call in the authorities in cases of fraud etc. Life is too short for that and it is not good PR. Whether it's good PR doesn't matter, Ablrate has to investigate and/or report suspicious transactions. Sales where the buyer takes a guaranteed loss are inherently suspicious, with the potential to be used for anything from pension liberation to run of the mill money laundering.
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registerme
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Post by registerme on Oct 4, 2015 10:57:52 GMT
So what legal reason here do you think would cause it to make sense for the buyer to purchase at negative yield? Well one reason might be deflation related ie that that the negative yield is better than the rate of deflation. Note though that I am not suggesting it's the case here .
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james
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Post by james on Oct 4, 2015 11:08:49 GMT
So what legal reason here do you think would cause it to make sense for the buyer to purchase at negative yield? Well one reason might be deflation related ie that that the negative yield is better than the rate of deflation. Note though that I am not suggesting it's the case here . Yes, that's another case where it could make sense, though given that offers with positive yield are available that really wouldn't explain this particular offer.
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blender
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Post by blender on Oct 4, 2015 11:23:55 GMT
Well one reason might be deflation related ie that that the negative yield is better than the rate of deflation. Note though that I am not suggesting it's the case here . Yes, that's another case where it could make sense, though given that offers with positive yield are available that really wouldn't explain this particular offer. I was responding to your theoretical challenge about legally valid sales at a negative yield rather than any particular existing offer. FC have always used 4% yield (assuming the loan runs to term) as the minimum buyer rate of transactions - that supposed to be the absolute minimum rate of a true loan contract, with risk. They protect both the buyers and themselves by this. ABLrate could do something similar if it suits the platform.
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oldgrumpy
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Post by oldgrumpy on Oct 8, 2015 9:54:09 GMT
I had a go at this today. Someone had a bid on of £1000 at 100%. I registered my offer of £1000 at 100%. thus matching it. I expected an immediate sale, but a few minutes later it seems I have sold £56 and the bidder won't e able to have his £1K now. Hmmmm!
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Post by ablrateandy on Oct 8, 2015 9:58:39 GMT
Trades don't auto-match. If you want to buy an offer you need to enter the amount to buy in the box under the offers. Ditto for selling.
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oldgrumpy
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Post by oldgrumpy on Oct 8, 2015 10:00:01 GMT
OK, thank you. PS It's all sold now, and the original bid maker is still bidding.
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Post by ablrateandy on Oct 8, 2015 19:00:36 GMT
Liquidity. - it's real on Ablrate ?
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ablender
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Post by ablender on Nov 1, 2015 22:44:35 GMT
I was going to create a thread like this one but found that someone has already done so. I am probably dumb but I am finding the way the SM is presented here confusing. I did view the videos and at that point I think that I have understood how it works but when I get to try it somehow I loose my grasp on what I am seeing. The problems are bid vs offer, and the Yield. How those the yield relate to the interest rate, the principal I buy and the rate I paid for it? I seem to remember something from when I was at school many years ago.
Also what is the difference between AER and yield if any?
I would be grateful for anyone who can explain this in very simple terms.
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SteveT
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Post by SteveT on Nov 1, 2015 23:14:12 GMT
Just focus on the AER (buy high, sell low) and you won't go far wrong.
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