LTC-ATF - LTC Denominated Pass-throughs

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INTRODUCTION

LTC-ATF is a small fund listed on LTC Global which, to date, has focussed on trading LTC and BTC-Denominated securities on the available exchanges.  LTC-ATF is now expanding its operations to include running LTC-denominated pass-throughs to BTC-denominated securities.  This thread will be used to describe and discuss these pass-throughs (as they will all have pretty much identical contracts any question or issue relating to one is likely to apply to all).

The second post in this thread will hold a typical contract for reference.

Further information about LTC-ATF can be found at:

The listing for the fund at https://www.litecoinglobal.com/security/LTC-ATF
The LitecoinTalk thread for the fund at http://forum.litecoin.net/index.php/topic,657.0.html
The Bitcoin forums thread for the fund at https://bitcointalk.org/index.php?topic=112876.0

The threads in the last two links contain pretty much identical information (I post all significant updates to both) so there's no need to read both.


RATIONALE

The idea behind running these pass-throughs is straight-forward : to make additional profit for LTC-ATF by making available to LTC investors investment opportunites that are otherwise unavailable or uneconomical for them.  As well as the direct profit from operating the pass-throughs it is my hope that these pass-throughs may attract some new investors to LTC-GLobal - stimulating the market there which is also to the benefit of the fund (as the fund trades there - so increased investors/activity means more opportunity for the fund).

Clearly for pass-throughs to be profitable to operate they must be attractive to potential investors.  The following are the key points that I will be looking for when choosing securities to operate pass-throughs to:

1.  A clearly defined business.
2.  A clear means by which profit can be delivered - no pipe-dreams lacking any description of how return for investors will be achieved.
3.  Indisputable evidence that the business described is actually occurring.
4.  Some specific reason why it is not practical (or economical) for small investors to directly invest in that business.  The pass-throughs will NOT be targetted at larger investors - those should invest direct.
5.  The business is of a type and/or scale not already available for investment in on LTC-Global.  Don't expect to see mining companies or precious metal funds.

Point 4 pretty much rules out pass-throughs to securities on BTC.CO, CryptoStocks and Bitfunder (there's no barrier to entry).


OPERATIONAL DETAILS

Shares will only be sold in pass-throughs when LTC-ATF already holds shares of the underlieing asset.

Rather than selling in large blocks at a fixed price, our pass-throughs will attempt to more closely mirror the price of the underlieing asset - avoiding the situation where shares sit unsold due to having become grossly over-priced.  This also removes the hidden fee charged on some pass-throughs - where the price sold at represents a much greater markup than the fee claimed to be charged.

We charge a 2.5% fee on sales/repurchases and a 1% fee on dividends.  These fees cover all transaction/currency conversion/currency movement/subscription fees whilst leaving a small profit for the fund.  This works out to be competitive compared to alternative pass-throughs - especially for those intending to hold shares and receive dividends.  It also works out much cheaper than investing directly for small to medium investors.

Unlike some other operators, LTC-ATF offers the ability to sell back - just put them up at 2.5% below lowest bid on MPEx and we'll fill the order.  All LTC-ATF securities (including the parent fund) offer this type of liquidity.


PASS-THROUGHS OPERATED

Satoshi Dice.  Would assume everyone knows what this is.  Most BTC exchanges have pass-throughs to it - well here's an LTC denominated one.  Full details in the listing at https://www.litecoinglobal.com/security/S.DICE-PT

BitBet.  A website for betting on Yes/No propositions.  All betting is done by transparent Bitcoin transactions (no user accounts needed).  Bets are seeded with  small amount of capital by the house.  Full details in the listing at https://www.litecoinglobal.com/security/S.BBET-PT

MPOE.  The share representing ownership of the MPEX stock-exchange and the MPOE Options exchange.  Full details in the listing at https://www.litecoinglobal.com/security/S.MPOE-PT

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Below is the contract for S.DICE-PT.  Contracts for all other pass-throughs to MPEx-listed securities will be identical other than in the introduction where the underlieing asset is defined and relevant links provided.

INTRODUCTION

This security ('the asset') is a pass-through to the S.DICE security on MPEx
('the underlieing asset').

The underlieing asset is a share giving ownership of a portion of the business
known as Satoshi Dice which has the website http://satoshidice.com/ and is
listed on MPEx at http://mpex.co/?mpsic=S.DICE

Each share in this security represents ownership of one share of the underlieing
asset held by LTC-ATF.


HOLDING OF UNDERLIEING ASSET

LTC-ATF will purchase shares of the underlieing asset and then sell shares of
this asset on LTC-Global.  No shares of this asset will be sold unless they are
already backed by shares of the underlieing asset held by LTC-ATF.

LTC-ATF is trading on MPEx through the CoinBR brokerage (operated by
Jurov/Rini17).  All shares in the underlieing asset will be held in LTC-ATF's
CoinBR account.


SALE OF SHARES

LTC-ATF will place shares for sale at a price of around 2.5% above the lowest
Ask on MPEx converted into LTC at the highest Bid on BTC-E.

If bids are placed on the asset at above the highest bid on MPEx (converted as
above) but below the lowest ask then LTC-ATF may attempt to buy shares via bids
on MPEx to fill these orders.

The intent is for the price of this asset to more closely mirror that of the
underlieing asset than is the case with some other pass-throughs.  So the sale
price of this asset will be adjusted when the MPEx one changes - with any profit
or loss resulting from that absorbed by LTC-ATF.

This policy means that shares will be released in a piece-meal fashion rather
than in large batches at a fixed price.


REPURCHASE OF SHARES

If LTC-ATF sees Asks on this asset such that they can be cleared by selling the
underlieing asset on MPEx (into the highest Bid converted into LTC at the lowest
Ask on BTC-E with a 2.5% margin) then LTC-ATF will fill the Ask and sell the
underlieing asset on MPEx.

If you wish to sell shares but cannot calculate the Ask which would be filled
then please contact the LTC-ATF manager and I will work out the price for you.


DIVIDENDS

Dividends received on the underlieing asset will be converted into LTC at
mid-exchange-rate (the average of highest bid and lowest ask on BTC-E) and 99%
of this paid out in dividends to this asset.


VOTING

If any votes are held on the underlieing asset then (if practical) a motion will
be raised on LTC-ATF ending before the vote on the underlieing asset.  All
shares of the underlieing asset held by LTC-ATF will then vote as a bloc in the
direction with the most votes in our own motion.

At the time of writing this, there is no provision or means by which any votes
would occur on Satoshi Dice.


REPORTING REQUIREMENTS

LTC-ATF will, whenever it publishes its own accounting spreadsheet (typically
each weekend) include the number of shares of underlieing asset held by LTC-ATF
and the number of outstanding shares of this asset.

When a dividend payment is made a notification will be issued on LTC-Global
detailing how the amount paid was calculated.


CLOSURE

If LTC-ATF closes down or decides to cease operation of this pass-through then
the default would be for all shares of the underlieing asset to be sold,
converted to LTC and used to execute a forced buy-back with no management fees
deducted from the realised funds.

Alternatively, if accepted by at least 75% of all outstanding shares in a
motion, control of the pass-through could be handed to new manager who must
commit to this contract.


CHANGES TO CONTRACT

No change may be made to this contract whilst there are outstanding shares.


RISKS/DISCLOSURE

Investors in this security accept the risk of default by the underlieing asset
(Satoshi Dice), by the exchange on which it is listed (MPEx) and by the broker
holding the shares in the underlieing asset (CoinBR).  There is little that can
be done by the asset issuer to mitigate these risks.

As with any investment there is also the risk of a 'hit by a bus' (or scamming)
scenario with the manager of this asset.  This is mitigated as follows:

The manager/operator of this asset gives permission to LTC-Global to release a
list of investors (email address + shares held) to CoinBT in the event that
manager/operator ceases to operate the pass-through without notice (defined as
not logging into the management account for 2 weeks or more without prior notice
and good reason).  Jurov/rini17 (operator of CoinBR) has already offered that in
this circumstance he would endeavour to distribute proceeds from sale of the
underlieing assets to investors.

Permission is also given to CoinBR to verify on request from any concerned party
that LTC-ATF does indeed hold sufficient shares of the underlieing asset to
cover the outstanding shares of this security.

Permission is also given to CoinBR to suspend activity on LTC-ATF's account
(specifically including, but not limited to, withdrawals) if there is any
indication that LTC-ATF is not honouring its commitment to properly back shares
of this asset with shares of the underlieing asset.  Any such suspension may
(and should) be reported to investors in the LTC-ATF thread and should then be
resolved in public.

The above paragraphs only give CoinBR the RIGHT to make checks and take action.
 CoinBR has no obligation to police LTC-ATF and no liability arising from any
failure on LTC-ATF's part.

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Our first pass-through - to Satoshi Dice - is now up for moderator approval on LTC-Global.

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Last time i saw a title like this...... something bad happend bro... I've got shares with you! not many but don't steal my pennies

Heh, where was that title?

Don't think anything bad's happened to whatever securities of mine you're invested in (last bad thing that happened was when GLBSE closed - but we've recovered pretty well from that).

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Both pass-through assets have gained moderator approval and are now able to trade.

The first shares are up for sale on S.DICE-PT.  At present I'll be selling these in small batches as the price of the underlieing asset could move significantly in either direct pretty quickly.

The highest bid is at ~.0059 but falls away pretty quickly down to .005
The lowest ask is at ~,00595 but there's not much volume below .007

The bid side looks weaker than the ask side - but with multiple pass-throughs buying up shares a further rise is by no means unlikely.  I'll try to keep small batches up at whatever current price is - but with only limited BTC on CoinBR there'll be a delay in restocking if we sell out fast (will have to convert LTC in BTC and move them over there).

Trading won't be starting on S.BBET-PT until either the range stabilises or I manage to pick some up cheap (in which case they'd be listed at well below the sell price on MPEx).  At present bids on this are at ~.001 and lowest ask at .0015.  The IPO sold out all blocks of shares up to just over .002 - now people who bought to resell are struggling to find a market that high and I don't intend the fund (or investors in the pass-through) to bail them out at a price any higher than we need to.

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Just to note, BTC is rising strongly vs USD.  As a result LTC is being arbitraged down vs BTC.  So for now blocks of S.DICE put up will be very small - as the LTC price of them is rising just due to the exchange-rate change.

Way it works is that the fund effectively holds a float of S.DICE shares.  When some are sold on LTC-GLOBAL I then convert LTC to BTC, move the BTC to CoinBR and purchase more S.DICE to replace the ones sold.  When the price is rising (whether because of exchange-rate changes - as now - or because of a rise in the underlieing price) I can't risk selling large blocks or the fund can be left unable to replace the S.DICE it sold without incurring a loss

BTC denominated pass-throughs, such as S.DICE-PT function as a way to hedge against LTC falling vs BTC as well as being a revenue generator (through dividends).  Obviously the opposite also applies - that if LTC rises vs BTC then their price (in LTC) falls.

LTC falling vs BTC when BTC rises vs USD pretty much always happens - due to arbitrage (largely done by bots) with the LTC/USD pair (When BTC rises vs USD LTC will tend to rise vs USD at a slightly slower rate whilst falling vs BTC).  BTC is the driver in this relationship due it having a much larger market cap and trading volume.

IF BTC continues its current strength vs USD then it's likely LTC will continue to fall vs BTC (unless some other reason exists increasing demand for LTC sufficiently to compensate).  That, of itself, makes pass-throughs such as S-DICE a decent hedge (as their value is effectively denominated in BTC - just transacted in LTC).

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The first small batch of S.BBET-PT are now up for sale.

Here's a link to the MPEx market:

http://mpex.co/?mpsic=S.BBET

As of right now:

Highest bid is at just over .001
Lowest ask is at .0012

But there's not much bid volume above .00083 and now many asks below .002

The price could easily move in either direction pretty severely and pretty majorly.

I've put 1k of them up at a price which reflects a listing of about .00105 BTC (I managed to get them through a buy order).  If those sell then the last ones I have will be listed at the usual reflection of the lowest Ask (unless I get more from a bid being filled).

This is absolutely NOT an investment for those want something safe and reliable.  It's a speculative investment in a new startup.

To put things in perspective, if my math is correct they'd need to turn over around 10k-12k BTC of bets per month for each ~1% dividends to investors at the price this first batch is up at (that'#s a very rough approximation and assume advertising income approximately covers costs - which may not be the case).  At present they've taken maybe 2K BTC in bets in the week they've been public.  Obviously the hope is that will grow as the site gains momentum - but there's no guarantee of that.

I think it has definite potential to do well (which would make the current price a steal) but a not insignificant risk of flopping (which would leave the shares near worthless).

[btcash]

LTC-ATF will place shares for sale at a price of around 2.5% above the lowest
Ask on MPEx converted into LTC at the highest Bid on BTC-E.

Why is the price on LTC-Global 5-10% above the lowest Ask on MPEx?

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LTC-ATF will place shares for sale at a price of around 2.5% above the lowest
Ask on MPEx converted into LTC at the highest Bid on BTC-E.

Why is the price on LTC-Global 5-10% above the lowest Ask on MPEx?

Sorry - didn't notice this until now.

Reason is simple - I have no bot that can keep the price updated all the time.  When I place orders I set them based on the lowest ask (of any significant volume) and the highest bid for LTC (of any significant volume).  The exchange-rate is often what makes the price inflated - the highest bids on BTC-E are often for tiny amounts that are irrelevant for converting hundreds/thousands of LTC.  I can't offer based on an exchange-rate which has 0.1 LTC available for example.  Similarly with Asks on MPEx - if there's a wall at .005 and then a small ask at .0045 then my price will reflect the wall : as there's no way I can have confidence that the small ask at .0045 will still be there when next shares sell on LTC-GLOBAL.

If you want to get the best price on any of my pass-throughs then work out what price you should be paying for me to be able to convert that total to BTC on BTC-E and then buy on MPEx and put up a bid at that price (including the 2.5% markup).  If there's a bid up then I can execute the whole trade no problem.

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A listing for a pass-through to S.MPOE has now been created.  The contract is essentially the same as the previous ones other than changes made to reflect this specific security and bulk spelling correction of "underlieing" to "underlying".

[Lord F(r)og]

regarding recent ltc-global s.dice-pt announcement

Sorry, but I didn't knew your shareholders have to ask for the final divs. So please don't fob us off with coblees, better LTCs. Thanks.

[DiCE1904]

regarding recent ltc-global s.dice-pt announcement

Sorry, but I didn't knew your shareholders have to ask for the final divs. So please don't fob us off with coblees, better LTCs. Thanks.

Yes, can you explain this a little more

As there have been no queries about the final payment for this I'm now doing a forced buy-back at 1 coblee per share.  That will get the shares out of everyone's portfolios so they don't mess up your valuations any more.