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Post by contangoandcash on Sept 29, 2015 11:37:11 GMT
Just a question for Kev or anyone else more knowledgeable...
This situation just occurred -
I have my 5 year rate set at 6.5%, anything re-payed gets relent out at this rate. I have just had a load re-payed early (but it may as well have been some ordinary repayments/interest), and this has been lent out at 6.5%... but there's a problem, the front of the queue for borrowers was 6.6%, not 6.5%. And yet, I'm lending at 6.5%.
Why? Is this how the system is set up (please say it isn't so...)?
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arbster
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Post by arbster on Sept 29, 2015 11:45:02 GMT
That's how it works.
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Investor
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Post by Investor on Sept 29, 2015 11:49:46 GMT
It is so. You need to become an 'expert' lender, whatever that might be
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Post by contangoandcash on Sept 29, 2015 12:34:59 GMT
Who is pocketing the 0.1% ? This is actually outrageous if it works like that. So, there's a request to borrow at 6.6%, and yet I'm getting 6.5% ? Honestly I'm fairly incensed if that's the case. You get away from checking the site for a day and not updating the rates you have set and then they screw you over by not giving best execution ? Kev really ?
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bigfoot12
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Post by bigfoot12 on Sept 29, 2015 12:44:14 GMT
Who is pocketing the 0.1% ? This is actually outrageous if it works like that. So, there's a request to borrow at 6.6%, and yet I'm getting 6.5% ? Honestly I'm fairly incensed if that's the case. You get away from checking the site for a day and not updating the rates you have set and then they screw you over by not giving best execution ? Kev really ? You made a request to lend at 6.5% and you have lent at 6.5%, why are you incensed?
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Investor
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Post by Investor on Sept 29, 2015 12:51:49 GMT
That's my understanding. You lent 1k at 6.5%, I chose 1k at 6.6%. Borrower was happy with a blended rate of 2k at 6.55%. Everyone is happy. If borrower would have only accepted 6.5% you would have matched and I (through my own greed) would have uninvested money.
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Post by contangoandcash on Sept 29, 2015 12:52:32 GMT
Because someone is asking for a higher rate, the trade should be executed at the higher rate. Where's the 0.1% gone ? Presumably not into a black hole. It's really poor service, markets must offer best execution. It's not cross platform, it's same platform, there's no excuse.
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Post by contangoandcash on Sept 29, 2015 12:54:41 GMT
That's my understanding. You lent 1k at 6.5%, I chose 1k at 6.6%. Borrower was happy with a blended rate of 2k at 6.55%. Everyone is happy. If borrower would have only accepted 6.5% you would have matched and I (through my own greed) would have uninvested money. The borrower is asking for 6.6, not less... that's not how markets work. If they were to ask for 6.5, get 1k matched there, then move rest up to 6.6% and get a further 1k matched, then they can have their 6.55 Not if you ask for 6.6 first.
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jimbob
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Post by jimbob on Sept 29, 2015 12:55:13 GMT
I've got a small bit of cash in the 5 year market at Market rate, but I've changed the setting to reinvest at 6.6% now.
When/how does that kick in. 0.6% over 5 years will add up !
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Investor
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Post by Investor on Sept 29, 2015 12:56:47 GMT
Because someone is asking for a higher rate, the trade should be executed at the higher rate. Where's the 0.1% gone ? Presumably not into a black hole. It's really poor service, markets must offer best execution. It's not cross platform, it's same platform, there's no excuse. Best execution? Is that for the borrower or the lender? Do you believe Ratesetter should be set up so that it's lenders get 'best execution' to the detriment of its borrowers?
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Post by contangoandcash on Sept 29, 2015 13:03:25 GMT
Because someone is asking for a higher rate, the trade should be executed at the higher rate. Where's the 0.1% gone ? Presumably not into a black hole. It's really poor service, markets must offer best execution. It's not cross platform, it's same platform, there's no excuse. Best execution? Is that for the borrower or the lender? Do you believe Ratesetter should be set up so that it's lenders get 'best execution' to the detriment of its borrowers? Of course not. Everyone has a right to best execution in a market place. Lenders and borrowers. Your previous example of your money being left uninvested at 6.6 if the front of queue for borrowing is 6.5 is exactly what should happen. If a borrower came on entering an order at 7% with enough size that he can get filled at 6.6%, he should get 6.6%, not 7%. Conversely, if I am entering an order to lend at 6% and there are borrowers asking for 6.5%, I should get 6.5%, not 6%.
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Post by contangoandcash on Sept 29, 2015 13:15:48 GMT
Quoting the FCA on best execution - "Delivering best execution is fundamental to market integrity and to the delivery of good outcomes for clients who rely on agents to act in their best interests." RS have not acted in my best interest here. They've sold me 6.5% when 6.6% is available.
Obviously the RS marketplace is not regulated in the same way a stock market is, but the fundamental obligations and best practices should really still be adhered to. If you operate a market / platform, then you have to operate it responsibly.
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arbster
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Post by arbster on Sept 29, 2015 13:18:40 GMT
contangoandcash: I think you're misunderstanding how borrower rates are set. Some borrowers will request a certain rate. Others will ask what rate is available, and that rate is set by the pro-rated value of lender offers. Therefore, for the borrower to get a 6.6% RS took lender offers at a variety of rates including some lower than yours and some higher to get to an aggregate 6.6%, which the borrower accepted. You weren't diddled, you were just a number. If you'd offered 6.8% and the aggregate rate to the borrower had been 6.7% they might not have accepted it.
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Post by contangoandcash on Sept 29, 2015 13:21:14 GMT
contangoandcash: I think you're misunderstanding how borrower rates are set. Some borrowers will request a certain rate. Others will ask what rate is available, and that rate is set by the pro-rated value of lender offers. Therefore, for the borrower to get a 6.6% RS took lender offers at a variety of rates including some lower than yours and some higher to get to an aggregate 6.6%, which the borrower accepted. You weren't diddled, you were just a number. If you'd offered 6.8% and the aggregate rate to the borrower had been 6.7% they might not have accepted it. That's absolutely fine, if I'm offering first. But in this case, I don't think I was. If their request arrives on the market before mine, then I should have 6.6%.
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arbster
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Post by arbster on Sept 29, 2015 13:21:23 GMT
See this post from westonkevRS where he explains how this works, and that movements during the period between offer and acceptance are at RS's risk, and might explain why anomalies like today might occur and be visible to site users.
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