[LTC-GLOBAL] The Litecoin Global Virtual Stock Exchange - Public Beta

[markm]

An approach I am thinking of using is simply to make sure you have plenty of collateral of theirs on hand to confiscate in the event they default/scam.

That is, only allow people who have significant holdings on your server already to issue assets.

In a way this kind of comes back to the underwriter idea since if the person who wishes to issue and asset lacks collateral themselves they can find themselves an "underwriter" who is willing to put up the collateral...

-MarkM-

[burnside]

An approach I am thinking of using is simply to make sure you have plenty of collateral of theirs on hand to confiscate in the event they default/scam.

That is, only allow people who have significant holdings on your server already to issue assets.

In a way this kind of comes back to the underwriter idea since if the person who wishes to issue and asset lacks collateral themselves they can find themselves an "underwriter" who is willing to put up the collateral...

-MarkM-

I like the idea of collateral on the exchange.  Unfortunately it works against the core function that the public offering is a mechanism to raise funds for the asset issuer to accomplish some goal that they couldn't accomplish on their own.

What ratio would you use?  10 to 1?  They have to have 1 LTC worth of collateral for every 10 LTC they raise?

What else could people put down as collateral?  I have a feeling that most of what someone could put down isn't going to translate well into international internet operations.

[markm]

TL;DR if you cannot get professional / qualified investor capital to get your operation off the ground and profitable, you ought not be offered to the public on a stock exchange. On a crowdfunding site sure, go begging there, but public offerings should be proven successful companies looking to expand, not the latest scam someone made up and is starting from nothing.

The idea evidently still needs work, but basically I was thinking along the lines of margin accounts initially.

Certain of the assets on the system would be acceptable for use as collateral, and borrowed against.

This way an entity could build up a lot of collateral since each time they buy some they can immediately borrow again half the value of what they just bought. Assuming the things they buy actually go up in value this could grow quite nicely.

Eventually some huge holders of collateral would be in a position to consider branching out into doing the underwriting thing. They would find corps they consider creditworthy, and back them. Obviously they would be able to charge half as much interest if they simply loaned capital to the candidate company, so there would have to be really good reason to "go public" in order to justify also loaning them capital to act as surety to the exchange so they can "go public".

Hopefully this will keep many corps out of public trading entirely at their initial startup; which seems to me to make sense. Think about it, when facebook did their IPO were they a startup or had they already "proven" themselves? When google did their IPO were they a startup or had they already "proven" themselves? Etcetera. It seems a good idea to make it actually cheaper and easier to simply get a commercial loan to do your startup than to additionally borrow more to do an IPO. This way hopefully companies will first get themselves profitable before doing an IPO.

For startuip entrepeneurs there is crowdfunding. A stock exchange ought to be a more sober matter, not just another crowdfunding setup.

Let people get funded and get profitable then worry about whether to go public.

-MarkM-

[burnside]

That's a great argument.  I find myself wanting to agree.

The LTC exchange project in a lot of ways is very similar to a crowdfunding project though.  So with that in mind, I am thinking of maybe dividing things into two markets.

Market A:

A lower risk, higher profile collateral backed 'premium' market, where the asset issuers are required to have X shares in a 'COLLATERAL' fund on the exchange for every X amount of LTC they want to raise.  Funds deposited into this system would be shifted into an offsite cold wallet at regular intervals.

Market B:

A crowdfund (call it pink, to steal GLBSE's example) market, where the assets issued are considered extremely high risk, there is a funding cap, and the trades themselves are more expensive.  (Eg, 2% instead of 0.2%)  The difference in fees (1.8%) would feed an escrow fund dedicated to each asset.  If that asset goes poof, the escrow fund gets distributed to the shareholders.  If the dedicated escrow fund over time is traded enough to surpass the requirements for the collateral backed market, then the asset moves to the higher profile Market A.

Such a system in combination with some basic verification (as a stumbling block for scammers) could be fairly effective.

What might I be missing?  There's always a gotcha. 

[markm]

It seems evident that identification isn't worth much, it might deter some scammers but serious offenders will either not give a damn (like pirate, possibly, if he is really Trendon Shavers as he is thought to be) or will have professionally forged ID.

So it seems much more important to be able to seize assets of theirs than to know or even care who they are.

This is actually all part of why I like to be able to set things within a virtual universe in which the assets of the players are where I can grab them and where the players who have invested in armies and fleets and so on can grab them. Seeing how much scamming happens in EVE Online I wanted to find a way to create a game universe in which not all investments would be scams. That is I wanted to finds ways to create non-scam investments. I figure that will be a good start toward eventually being able to compete with EVE Online; obviously I also will need to make enough capital with it to be able to also deploy art assets if I ever want to attract the folk to whom eyecandy is more important than fundamentals but if the fundamentals of finance are unsound raising that capital seems unlikely thus the starting with the financial fundamentals before worrying about the eyecandy.

You gotta make the potential scammers risk something, basically. Even then that will merely force them to plan their scam at a large enough scale for it to pay for that risk plus also make them a profit. For example if you require one bitcoin per share to be in escrow they will aim to pump their shares up to more than a bitcoin each in price so they can run with more than a bitcoin per leaving you holding the one bitcoin per to mollify their victims with.

Maybe you should just call the pink section "scams" and if any ever make it out of there explain "ha ha that one fooled us, the scam was that it was not a scam!"

(It is already clear there are sheetloads of coins out there urgently wishing to invest in scams so this should in no way be an obstacle to their raising vast sums of coins. )

-MarkM-

[EMIF]

I think seperation of securities according to their business type is more suitable rahter than just risk evaluation. After these seperation you can ask different requirements for different sectors. There also may exist such a scam market after some proof.

Possible markets:
Mining: Companies , Bonds
Commodity : Silver , Gold , Platinum
Investment Funds:
Pass Through Funds:
Real World Companies:

Possible Requirements:
Mining :
a) Proof of mining equipment (photos or mining performance)
b) Electricity bill( to understand really mines or not)

Commodities:
a) Photos of commodities periodically
b) Feedbacks from physically sold commodities

Investment Funds:
a) Maybe some api link for

Pass Through Funds:
a) ? Can be added

Real World Companies:
a) ? Can be added

Also please keep in mind that if you put so much regulation to the system , this can prevent people to issue new securities.

@markm: I dont know google's IPO , but I can talk about fb's one. Someone who bought shares from fb's IPO is either dont know economics or -dont offense- stupid. FB or companies like these ones are going to public just for being richer. They dont care public's benefits.
Also, there are ~10 million LTC around(~equals $400 k). Even as you said securities should go public after some good profit performance in past  , then I dont think $400k is not enough for 10 that kind of companies. So you cannot compare these companies with /litecoins ones. But I agree with you , their should be some mechanisms to prevent scams or at least decreasing them

[burnside]

Busy night of coding.

- Your own orders are now highlighted on the order book.
- The number of your shares that are reserved now show up next to the quantity on the ticker.
- All ask orders now get cancelled if your share balance is insufficient to cover them.
- Bid orders are now cancelled if your LTC balance is insufficient.  It cancels them starting with the lowest bid and works it's way up.  Thus leaving the orders most likely to be filled.

Cheers.

[burnside]

Bug causing multiple trade notification emails has been fixed.

[killerstorm]

I think it's better when trading platform is separate from verification/insurance/rating stuff.

When exchange is separate from these things you have a separate market for verification/insurance/ratings. Market means competition. So if one rating agency fucks up, another will replace it.

But if it is done for everybody by exchange, there is no big incentive for an exchange to offer best services because it already has monopolist position by being an exchange.

Also, insurance always cuts from profit, and so it should be investors/issuer's choice whether to use insurance. Again, if exchange enforces that, it would be like bundling a service nobody wants.

The idea with keeping collateral is simply bullshit. If 10% of money is reserved for compensation in case of failure, it would be just easier for investors to invest 90% of money they wanted to invest and keep 10% in their wallets. It's the safest.

Insurance implies existence of insurance pool. Which means that successful companies will subsidize failed ones. Do I need to explain why not everybody wants this?

It would be cool if equipment, land and other property could be used as collateral, but realistically that would require lawyers.

[burnside]

Announcing -- Google Authenticator 2-Factor Authentication Support!

- You can now turn on and manage Google Authenticator support on the account page.
- I have also added the ability to edit your email address on the account page.

Be careful not to lock yourself out!  However, if you do, you can get back in by going through the lost password process, which will also reset your Google Authenticator settings.

[burnside]

We have prettier URL's now. 

eg: https://www.litecoinglobal.com/security/LTC-GLOBAL

[burnside]

Probably not super exciting nor glamorous news, but reading through various threads about GLBSE this morning I realized that a very important tool they do not have is the ability for an asset issuer to freeze trading on their assets for big announcements.  Those that have watched their investment in an asset go poof because an asset has declared some bad news while they were sleeping know what I am talking about.

  - Now in the interface an asset issuer can stop trading on their asset.  When they do all existing orders are wiped out.
  - Then the asset issuer can craft a notification to all shareholders explaining their actions.
  - After things are sorted out and everyone has been notified then the asset issuer can start trading again.

Implementing this (and the related admin override tools) was fairly in-depth in the trading code.  Please let me know if you get any unexpected "trading has been frozen" messages.   

Cheers.

[guruvan]

It doesn't seem to me that an asset issuer should have the ability to, in their sole discretion, halt trading on their issue. This seems like a recipe for disaster, fraud, and significant investor losses

The exchange should have a set policy on what will halt trading of an issue.

The issuer should be able to notify the exchange of a condition that will exist that should halt trading in the future (non-emergency halt) If the exchange deems that the halt request meets requirements, trading will be halted (and notice posted on the assets page)

If a condition should arise that meets the emergency halt requirements, trading should be halted by the exchange without the issuer's involvement

The exchange should further have a set policy for delisting assets, and once and issue no longer meets the qualifications for listing, notice is posted that trading will cease at some point in the future.

Just my 2 cobs

(cobs are the ltc equivalent of satoshis)

[burnside]

It doesn't seem to me that an asset issuer should have the ability to, in their sole discretion, halt trading on their issue. This seems like a recipe for disaster, fraud, and significant investor losses

The exchange should have a set policy on what will halt trading of an issue.

The issuer should be able to notify the exchange of a condition that will exist that should halt trading in the future (non-emergency halt) If the exchange deems that the halt request meets requirements, trading will be halted (and notice posted on the assets page)

If a condition should arise that meets the emergency halt requirements, trading should be halted by the exchange without the issuer's involvement

The exchange should further have a set policy for delisting assets, and once and issue no longer meets the qualifications for listing, notice is posted that trading will cease at some point in the future.

Just my 2 cobs

(cobs are the ltc equivalent of satoshis)

I think the problem with that argument is that a scammer/fraudster wouldn't bother to notify the exchange and wait for us to halt trading anyway.  On the other hand, we save investors a significant amount in the case of the honest asset manager that has just defaulted due to some outside publicly known influence and can't wait for us.  Eg: a fund manager that has 50% of the fund in a certain company.  The company declares bankruptcy without prior warning.  To save his investors from significant loss, that fund manager would need to log in ASAP to clear the order book and stop trading.

Plus... being brutally honest... I have a day job, family, etc.  I go on vacations where there is no internet access.  LTC-GLOBAL is a long way from being able to afford to man the outpost 24/7.  I have to build it so that 99% of it can function without me.  I truly hope that that changes down the road, but for now my goal is to give the honest asset issuers all the tools they need to operate.

I agree that we need a delisting plan and policy.  Yet another weakness that GLBSE has exposed.  I have already laid out the qualifications for listing.  It can't be illegal, you cannot lie, etc.  (in the create asset ToS)  It warns that if you violate the ToS your assets will be frozen and you will be delisted.  So in that situation, what do you think would be the best delisting course of action?  Of course first thing you do is wipe the order book, but then do you stop trading immediately?  Do you give people a week of trading?  A month?

The scammers and fraudsters... that's the hardest thing to figure out...  I don't want people to lose their money but in the real world it's the SEC that deals with that, not the NYSE.  I don't know that I'm going to have the resources to be both.  I'll happily build integration for anyone wanting to setup a business as the C-SEC!  (Crypto-SEC   You could definitely make money doing it, not just for LTC assets, but for BTC ones on the three exchanges as well.

[burnside]

Just my 2 cobs

BTW, that cracked me up!

[Deprived]

I like this in theory (I'm an asset issuer on LTC_GLOBAL) myself.

What I'd like to see is that asset issuers either include in their contract (if an IPO) or modify their contract (via motion) if it's already in the wild to include a statement of how they'll apply that change.

In the case of my fund (which day trades across a range of assets and is very exposed to the LTC/BTC exchange rate) I wouldn't foresee needing to halt trading other than in some VERY extreme circumstance (e.g. GLBSE getting hacked or shutdown).  Even in those circumstances I'd likely only halt trading very briefly - just to clear orders and post an update here/ in the ltctalk thread.  Thereafter investors all have the same information before they trade (except any idiots who trade without bothering to work out why their orders were cancelled) and can do what they want on the market.

But my situation is a bit different to most - as my fund buys/sells units and so is effectively the market-maker for the asset and I would expect it to usually form the bulk of orders itself (as the trading range moves up/down during the day as profits/losses are made and the exchange-rate varies).

The real argument on is between two competing points of view:

1.  That if something unexpected occurs, those with oustanding market orders should be prevented from loss.
2.  That anyone placing orders and leaving them unattended is already accepting the risk that the pricing of their orders may become severely wrong in some situations.

I don't have a strong belief on either side of those arguments - but I'd certainly like to know what an asset's policy was.  I'll sort my own policy on it out tomorrow - then see about passing it as a motion to amend the contract: not becasue I NEED it in the contract (I don't) but because i believe any investor reading the contract deserves to know my stance on it.

My policy will also definitely include that in the event something occurs which would cause me to impose a freeze the neither the asset itself or my personal LTC-GLOBAL account will trade my units before I press the freeze button: i.e. I won't exploit the situation myself before preventing anyone else doing so.

[burnside]

I like this in theory (I'm an asset issuer on LTC_GLOBAL) myself.

What I'd like to see is that asset issuers either include in their contract (if an IPO) or modify their contract (via motion) if it's already in the wild to include a statement of how they'll apply that change.

In the case of my fund (which day trades across a range of assets and is very exposed to the LTC/BTC exchange rate) I wouldn't foresee needing to halt trading other than in some VERY extreme circumstance (e.g. GLBSE getting hacked or shutdown).  Even in those circumstances I'd likely only halt trading very briefly - just to clear orders and post an update here/ in the ltctalk thread.  Thereafter investors all have the same information before they trade (except any idiots who trade without bothering to work out why their orders were cancelled) and can do what they want on the market.

But my situation is a bit different to most - as my fund buys/sells units and so is effectively the market-maker for the asset and I would expect it to usually form the bulk of orders itself (as the trading range moves up/down during the day as profits/losses are made and the exchange-rate varies).

The real argument on is between two competing points of view:

1.  That if something unexpected occurs, those with oustanding market orders should be prevented from loss.
2.  That anyone placing orders and leaving them unattended is already accepting the risk that the pricing of their orders may become severely wrong in some situations.

I don't have a strong belief on either side of those arguments - but I'd certainly like to know what an asset's policy was.  I'll sort my own policy on it out tomorrow - then see about passing it as a motion to amend the contract: not becasue I NEED it in the contract (I don't) but because i believe any investor reading the contract deserves to know my stance on it.

My policy will also definitely include that in the event something occurs which would cause me to impose a freeze the neither the asset itself or my personal LTC-GLOBAL account will trade my units before I press the freeze button: i.e. I won't exploit the situation myself before preventing anyone else doing so.

Brings up two good points.

1. We need a motion system!  For now, the notification system should work ok.  You can send a notification asking everyone to reply using your email address, then you can use their return email addresses to tally votes.

2. I've been thinking about exposing the asset issuer's trades.  Eg, highlight their orders on the order book and/or highlight them on the trade history.  How does this work in the real world?  Does a company have to reveal to it's shareholders/bondholders all of it's trade actions?

Thoughts?

[Deprived]

I like this in theory (I'm an asset issuer on LTC_GLOBAL) myself.

What I'd like to see is that asset issuers either include in their contract (if an IPO) or modify their contract (via motion) if it's already in the wild to include a statement of how they'll apply that change.

In the case of my fund (which day trades across a range of assets and is very exposed to the LTC/BTC exchange rate) I wouldn't foresee needing to halt trading other than in some VERY extreme circumstance (e.g. GLBSE getting hacked or shutdown).  Even in those circumstances I'd likely only halt trading very briefly - just to clear orders and post an update here/ in the ltctalk thread.  Thereafter investors all have the same information before they trade (except any idiots who trade without bothering to work out why their orders were cancelled) and can do what they want on the market.

But my situation is a bit different to most - as my fund buys/sells units and so is effectively the market-maker for the asset and I would expect it to usually form the bulk of orders itself (as the trading range moves up/down during the day as profits/losses are made and the exchange-rate varies).

The real argument on is between two competing points of view:

1.  That if something unexpected occurs, those with oustanding market orders should be prevented from loss.
2.  That anyone placing orders and leaving them unattended is already accepting the risk that the pricing of their orders may become severely wrong in some situations.

I don't have a strong belief on either side of those arguments - but I'd certainly like to know what an asset's policy was.  I'll sort my own policy on it out tomorrow - then see about passing it as a motion to amend the contract: not becasue I NEED it in the contract (I don't) but because i believe any investor reading the contract deserves to know my stance on it.

My policy will also definitely include that in the event something occurs which would cause me to impose a freeze the neither the asset itself or my personal LTC-GLOBAL account will trade my units before I press the freeze button: i.e. I won't exploit the situation myself before preventing anyone else doing so.

Brings up two good points.

1. We need a motion system!  For now, the notification system should work ok.  You can send a notification asking everyone to reply using your email address, then you can use their return email addresses to tally votes.

2. I've been thinking about exposing the asset issuer's trades.  Eg, highlight their orders on the order book and/or highlight them on the trade history.  How does this work in the real world?  Does a company have to reveal to it's shareholders/bondholders all of it's trade actions?

Thoughts?

Personally I'd love it if the trade of DeprivedAsset were highlighted in some colour in the order books - it would allow investors to be  sure they were buying/selling to one of my orders (or someone else's that was better).  As it stands, potentially someone could buy out my ASks then relist higher - and new investors could think it was my own offers and so was only 1% or so above nav/u.

I COULD just sling up a huge Ask-wall to stop that - but as I don't want to sell a whole ton of units at once I'm very reluctant to do that.

Do bear in mind that showing asset issuer's offers could be fairly easily worked around if they wanted to (by doing it via other accounts they transferred shares to) - but I don't see any legitimate reason why an asset issuer should want to hide trades made by the actual asset (trades made by their personal account is a slightly different issue - but I also don't see any good reason to hide those).

[Deprived]

1. We need a motion system!  For now, the notification system should work ok.  You can send a notification asking everyone to reply using your email address, then you can use their return email addresses to tally votes.

I didn't address this in my earlier post.

The notification system works far from OK for motions.

It DOES allow the asset issuer to see the results of a vote but noone else can confirm that unless the asset issuer posts a list of all email addresses and votes cast by that address.  This is bad because:

The asset lister posting such a list is (I would hope) obviously not a good idea - as it exposes the email addresses and number of shares held of people who may have just wanted to invest anonymously without their email addresses being published.

Without such a list, there's zero way to tell if the asset issuer is honestly passing on the results.  If we're going to assume that asset issuers will always act in good faith then we may as well not bother with motions and just let them change their contracts however and whenever they want.

It also means that noone can vote anonymously - there are circumstances where this can cause someone to vote other than they otherwise would have (or not vote) because of unrelated issues linking them with the asset issuer.

I'm an asset issuer myself AND an investor.  In both roles I want transparency on any motions without revealing who voted which way.  As an investor I want confidence that my vote was counted the way I actually voted.  As an asset issuer I want investors to be able to vote honestly without trying to suck up to me or being unduly influenced by others who would see how they voted were their email address (which is often traceable to a forum identity) exposed.

I am IN FAVOUR, however, of an addition - that in any motion the number of shares the asset issuer voted with (and how they voted) should be exposed.  This would ideally include any shares they voted with on their personal account.

[burnside]

Very good point with the need for animosity anonymity.

I'll make a motion system a priority.


Edit: did not mean what I meant it to mean.