48 Shares were sent to me for buy-back and bought back for 0.12426292 each.
On-Demand NAV/U was 0.1281061055 less (6 Days * .5%) = 0.12426292
Also, as a double-check to ensure that I've got the right amount of MINE/SELL issued, I keep the numbers of pairs of MINE/SELL issued plus the EXCH Ask at 10,000 total.
I've updated the number of EXCH units in the ask to take into account the buy-back. This should't really matter to anyone, I just wanted to give the reason for removing and replacing the EXCH Ask amount in case someone was wondering.
Something was bugging me yesterday regarding this buy-back amount. I've detected an error, or an issue if you'll call it, with the Buy-Back calculation. The contract says the following:
The issuer will buy back equal pairs of B.MINE and B.SELL at the NAV/U less 0.5% times the number of B.MINE dividend payouts that have been paid out during that Period.
The intended purpose here is to offer a buy-back price for BDD Pairs that is lower than the price of B.EXCH less the dividends paid (so that no one can profit off of simply holding the Pair, receiving the dividends, and then selling the Pair back at the EXCH price).
A Buy-Back price is necessary to establish a minimum price for MINE/SELL combined - it offers arbitrageurs a way to profit if the market price of both has dropped too low.
The issue with the contract's wording is that it was written at the inception of the fund, before I had agreed to issue a daily NAV/U; the NAV/U being referenced here is (implicitly) referring to the NAV/U at the beginning of the period. In cases where a SELL dividend has just been issued, this is the 200 Day Reserve amount.
The goal of this .5% per day reduction is to offer a buy-back price at which the shareholder can have his shares bought back for the NAV/U less the dividends he's been paid and, essentially, forfeits any gains to the NAV/U for that period that have come from sales of EXCH.
The contract was written with the Period NAV/U to be referenced for this calculation, not the Daily NAV/U, so I will be crediting this user the difference, which is:
200 Day Reserve at start of Period = 0.13179800
0.13179800 less (6 Days * .5%) = 0.12784406
The user was paid out 0.12426292, leaving a credit balance of .00358114 per share.
48 Shares * .00358114 = 0.17189472
It's not much of a difference, but I feel that the spirit of the contract needs to be followed in cases like this.
Finally, this has brought up another issue with the buy-back price if the fund's Reserve is deficient. For instance, let's say that the Difficulty is decreasing and the fund's NAV/U is only equal to 100 Days of Dividends. Using this Period's values as an example.
Example NAV/U = .065899
Example Daily Dividend = 0.00065899
If the fund were to offer buy-back at the Period NAV/U less .5%, then people could ostensibly get paid the daily dividends and then have their shares bought back for more than should be paid to them.
10 Day of Divs = .0065899
Share Buy Back Price = .065899 * .95 = .06260405
.0065899 + .06260405 = .06919395, which is
higher than the original Period NAV/U, due to the fact that .5% of the Period NAV/U no longer represents the daily dividend amount.
TL;DR So, for this reason, beginning with the next period, I'm going to revise the Buy-Back price calculation to be the Daily NAV/U less 2% (2% to provide a little friction to the market). This will circumvent the issue with the current calculation and also make it simpler to calculate the current Buy-back price.
Havelock is working on the Auto-Exch process; hopefully they'll have it completed before the next DI and I'll be able to issue a revised contract showing the new Management fee and this Buy-Back calculation change.
