webwiz
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Post by webwiz on Feb 24, 2016 18:07:53 GMT
There is absolutely no way that the excess you were allocated by gaming would have ended up going to the BHs instead. It would go to smaller investors who weren't gaming... as indeed would a good chunk of what the BHs actually received under the present system. Unproven. It wouldn't have gone to me .. someone else would have got it. Anyone else overgaming would not have got or wanted it. I think we need savingstream to actually say how it would have worked out under both systems. I don't see how SS could do that as they don't know what you and the other gamers would have bid if it was being allocated on a bottom up basis. A possible improvement would be that all loans over, say, £2m the first £1m is filled bottom up and the rest proportionately. This would discourage over bidding because you would risk missing any allocation in the first £1m.
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mikes1531
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Post by mikes1531 on Feb 24, 2016 18:34:33 GMT
A possible improvement would be that all loans over, say, £2m the first £1m is filled bottom up and the rest proportionately. This would discourage over bidding because you would risk missing any allocation in the first £1m. : I don't understand. Please explain why this would discourage overbidding. If someone wanted £10k, what would be the disadvantage of pre-funding £30k if they thought the loan would be overfunded? If there were, say, 1500 pre-funders, wouldn't the £30k pre-funder still get about £800 (being roughly £1M/1500, boosted a bit by the pre-funders who didn't want as much as that) from the £1M plus a proportion of the second million?
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webwiz
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Post by webwiz on Feb 24, 2016 19:02:33 GMT
A possible improvement would be that all loans over, say, £2m the first £1m is filled bottom up and the rest proportionately. This would discourage over bidding because you would risk missing any allocation in the first £1m. : I don't understand. Please explain why this would discourage overbidding. If someone wanted £10k, what would be the disadvantage of pre-funding £30k if they thought the loan would be overfunded? If there were, say, 1500 pre-funders, wouldn't the £30k pre-funder still get about £800 (being roughly £1M/1500, boosted a bit the pre-funders who didn't want as much as that) from the £1M plus a proportion of the second million? Well I suppose that if someone bid £30k and the first £1m was all used up, bottom up, to any lower figure then he would get nothing from that million. But I don't really follow your example so I may not be answering your point. If SS were to adopt this idea the simplest approach might be to split larger loans into two tranches, one of £1m bottom up and the other of the remainder, proportionate. This would avoid the need for any reprogramming. Edit: As mikes1531 points out some recoding would actually be required or otherwise the allocation process in the first £1m would stop too early.
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mikes1531
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Post by mikes1531 on Feb 24, 2016 22:03:05 GMT
webwiz : I don't understand. Please explain why this would discourage overbidding. If someone wanted £10k, what would be the disadvantage of pre-funding £30k if they thought the loan would be overfunded? If there were, say, 1500 pre-funders, wouldn't the £30k pre-funder still get about £800 (being roughly £1M/1500, boosted a bit the pre-funders who didn't want as much as that) from the £1M plus a proportion of the second million? Well I suppose that if someone bid £30k and the first £1m was all used up, bottom up, to any lower figure then he would get nothing from that million. But I don't really follow your example so I may not be answering your point. If SS were to adopt this idea the simplest approach might be to split larger loans into two tranches, one of £1m bottom up and the other of the remainder, proportionate. This would avoid the need for any reprogramming. The way I was interpreting the suggestion that the first £1M might be allocated bottom-up and the remainder based on an allocation percentage was (using the example of a £2.5M loan) ... Start by dealing with the first £1M and allocate it to all pre-funds as if it was a £1M loan being allocated using the bottom-up method. Based on the £730 maximum allocation for PBL082, which was a £845k loan, I expect the maximum allocation of a £1M loan would be about £900. So everyone who pre-funded £900 or less would receive exactly what they asked for, and those who pre-funded more than £900 would receive £900. Deal with the remaining £1.5M to be allocated next. Everyone who pre-funded £900 or less has already received what they asked for, so they would not be involved in this step. Add up all the remaining investors' unfilled pre-funding, i.e the excess of their pre-funding requests over £900. Compare that total to £1.5M. If the total is more than £1.5M, the loan is oversubscribed and the allocation factor would be £1.5M divided by the unfilled pre-funding total. If the unfilled pre-funding total is less than £1.5M, the loan is undersubscribed. In that case, everyone would receive all they asked for and the remainder would go onto the SM for anyone who wants it. Based on that process, I don't think there'd be any disadvantage to overbidding other than the usual one... Can you handle an excessive allocation?
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sl75
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Post by sl75 on Feb 24, 2016 22:26:02 GMT
There is absolutely no way that the excess you were allocated by gaming would have ended up going to the BHs instead. It would go to smaller investors who weren't gaming... as indeed would a good chunk of what the BHs actually received under the present system. Unproven. It wouldn't have gone to me .. someone else would have got it... In a bottom-up allocation system, BHs would be the very last in the queue to have got it. It is you who is making the extraordinary claim (demanding the burden of proof), that none of the small or medium investors would have had any capacity to soak up your excess. Given the activity on the secondary market afterwards, there seem to have been plenty of investors who needed to "top up", which makes your suggestion that a bottom-up allocation somehow favours BHs even less plausible.
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webwiz
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Post by webwiz on Feb 24, 2016 23:14:07 GMT
Well I suppose that if someone bid £30k and the first £1m was all used up, bottom up, to any lower figure then he would get nothing from that million. But I don't really follow your example so I may not be answering your point. OK I now see your point. When it is just the one loan SS have to allocate it the way you describe otherwise high bidders would get nothing. But if the loan was split into two tranches the first one could be allocated bottom up until it is all gone. Anyone who bid more than the biggest allocation in tranche 1 would then participate in tranche 2. The £1m and £2m figures are just examples and could even be varied by loan.
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mikes1531
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Post by mikes1531 on Feb 25, 2016 3:35:51 GMT
When it is just the one loan SS have to allocate it the way you describe otherwise high bidders would get nothing. But if the loan was split into two tranches the first one could be allocated bottom up until it is all gone. Anyone who bid more than the biggest allocation in tranche 1 would then participate in tranche 2. The £1m and £2m figures are just examples and could even be varied by loan. That's an unusual approach, but nothing is impossible. Then again, I can imagine situations where results between the two sub-loans would be inconsistent and that by increasing your pre-funding request you could end up with a smaller allocation. Consider the case of 1500 investors pre-funding a £2M loan with, where £1M is allocated bottom-up and the other £1M is allocated to those placing the bigger pre-funding requests. If there are 1000 people with pre-funds of £2000 or less, and the average pre-fund in that group was £1000, that would take care of the first £1M, and everyone in that group would be allocated exactly what they asked for. The second £1M would go to the other 500 investors who pre-funded £2500 or more. That would include some BH's with £100k pre-funds. If the average pre-fund in this group were to be £10k, that would be a total of £5M of pre-funding for the £1M of the loan, so everyone would get 20% of their request. The BH's would get 20% of £100k, or £20k. They might not be too happy, but they can take some comfort in being allocated more than anyone else. But pity the unfortunate investor who pre-funded £2500 and was allocated 20% of that, or £500! A system where a £2000 pre-fund is allocated £2000 and a £2500 pre-fund is allocated £500 doesn't strike me as very reasonable. Yes, this is just one set of assumptions, and there are a zillion other possible scenarios, but I think the nature of this particular allocation scheme would produce a discontinuity/imbalance/inconsistency between the allocations at the top end of the pre-funds for the first £1M and the bottom end of the pre-funds for the second £1M under any set of assumptions. It's inherent in the idea that pre-funds up to a certain size get 100% allocation, but a pre-fund that's one step larger but in the next £1M is allocated a percentage of the pre-fund amount.
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jonah
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Post by jonah on Feb 25, 2016 5:48:58 GMT
This is already arguably the most complex part of SS.... Please don't make it more complicated still!
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Post by highlandtiger on Feb 25, 2016 7:46:28 GMT
If SS were to adopt this idea the simplest approach might be to split larger loans into two tranches, one of £1m bottom up and the other of the remainder, proportionate. This would avoid the need for any reprogramming. I was going to make the very same suggestion, but you beat me to it. This would be the best of both worlds.
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webwiz
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Post by webwiz on Feb 25, 2016 9:28:41 GMT
If SS were to adopt this idea the simplest approach might be to split larger loans into two tranches, one of £1m bottom up and the other of the remainder, proportionate. This would avoid the need for any reprogramming. I was going to make the very same suggestion, but you beat me to it. This would be the best of both worlds. I was wrong about the need for reprogramming, there would need to be some otherwise the allocation process in the first £1m would stop too early and the BHs would share in the shrapnel, but IMO this is still the best way to go.
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Post by duncandive on Feb 25, 2016 10:27:34 GMT
Surely with the two part model, every one should get a share of the first million (including the BH's) that would only be fair. Then the second part would be allocated in the usual proportional fashion for larger loans. Again surely that would be fair. Or are folks saying that you can only opt to pre-fund in one or the other?
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cooling_dude
Bye Bye's for the PPI
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Post by cooling_dude on Feb 25, 2016 10:33:25 GMT
Surely with the two part model, every one should get a share of the first million (including the BH's) that would only be fair. Then the second part would be allocated in the usual proportional fashion for larger loans. Again surely that would be fair. Or are folks saying that you can only opt to pre-fund in one or the other? I think that the others are suggesting that SS could split the loan (split as £1,000,000 and then the remainder) so that no reprogramming was required; in which case, you would have two lots of pre-funding to allocate, and receive 2 lots of investments via 2 different methods of allocations. Personally, I'm an advocate of the bottoms up to £1,000,000, % of your allocation for the rest, but only if gaming is likewise tackled. However, with the much larger pre-fund loans coming through, I think it would be sensible if SS considered a temporary "bottoms up" for the entire loan so that they can gauge whether or not they are going to have the funds to send to the borrower.
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Post by duncandive on Feb 25, 2016 10:45:12 GMT
Thanks @cooling_dude I guess that would make some sense then. I'm no 'BH' for sure, just a small fish. Still with that method I would think there is more chance to please most folks..
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cooling_dude
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Post by cooling_dude on Feb 25, 2016 10:53:23 GMT
Thanks @cooling_dude I guess that would make some sense then. I'm no 'BH' for sure, just a small fish. Still with that method I would think there is more chance to please most folks.. Absolutely; I'm no big hitter either, and there is no doubt that the "bottoms up" system for the entire loan would benefit anyone with less than £100,000 invested in SS. However, we want to keep the Big Hitters happy, as they are the guys bring stability to the platform. I'll be honest; I think if SS first looked into combating gaming before they changed the allocation methods, we might just find that the current system settles to everybody's satisfaction.
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mikes1531
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Post by mikes1531 on Feb 25, 2016 13:45:44 GMT
If SS were to adopt this idea the simplest approach might be to split larger loans into two tranches, one of £1m bottom up and the other of the remainder, proportionate. This would avoid the need for any reprogramming. I was going to make the very same suggestion, but you beat me to it. This would be the best of both worlds. That wouldn't work for loans of less than £2M, since the current rules would allocate both parts via the bottom-up method. Absolutely; I'm no big hitter either, and there is no doubt that the "bottoms up" system for the entire loan would benefit anyone with less than £100,000 invested in SS. However, we want to keep the Big Hitters happy, as they are the guys bring stability to the platform. I think the advantage/disadvantage point is a lot lower than £100k. Think about PBL081. £2.975M spread among 1500 investors is an average of £2k each, so with a range of pre-funding requests bottom-up might have resulted in a maximum allocation of £4-5k. Anyone setting their pre-fund at £10k would have been allocated that same amount based on the actual 45% allocation factor, so anyone with a pre-fund greater than £10k would be allocated more via the percentage method than they would via bottom-up.
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