Market Discussions

A real working exchange that does what you describe would need significant amount of time and effort to create, are you sure you want to saddle up to that time commitment again?

Occam's razor needs to play a major part in anything like this, the average user doesn't know or care what they are doing, only that there "maybe" an investment and there "maybe" a profit in it. The main problem I see here is, the most simple solution is already in place and in game.

The biggest issue with creating something that already exists in your wallet is you have to make people want to be able to start using your insecure, risk based alternative. The only way I can see this happening is if you already have established a commitment from entities to use your Exchange prior to release. Entities that want it in the first place, and entities that customers want to interact with.

It's a worthy cause, but to make it easy, simple to understand both front in and mechanically back end for the MD Elites is a tall order.

But welcome back anyway :)

Good to see you again old friend.

I agree with your assessment; stakeholder buy-in is critical. If people aren't interested in this it will fail just as hard as the insurance project. This is a significant risk - and the largest one that this project faces. To mitigate the risk I'll be working to communicate and find ways to champion the value of the project. I've considered making it truly open to anyone at all but I'm worried that the flood of debt offerings will be difficult for speculators and investors to properly assess. It's a possible option though if the initial target users don't generate sufficient debt offerings for investors and speculators.

Also, your first point - yes it's a potentially big time commitment. I'm looking for ways to reduce that, manage it, or justify it. I'll speak on this at another time if and when it gets closer to a reality.

I really like your ideas and really hope you can set something like this up!

This kind of bond/derivate market would give the game a totally new layer to play with! Can't wait!

Two main points:

1) Agreed. Simplicity is necessary for participation. Lots of participation means a liquid market. Liquid markets are functional markets.

2) I disagree - but only because the nature of what I'm doing doesn't have an facility for long views on historic performance. I understand what you mean and I do agree with you in general - it's a great advantage to the in game markets on commodities - but for this application there is no method by which I can provide the same kind of historical view.

Also, overall commentary on hedging strategies for in-game commodity markets - the best hedging strategy (my theory) is to diversify by hold a "basket" of commodities proportional to historical price volatility and weighted appropriate to the risk appetite of the investors. This is a technique however, and not a hedging instrument which is a complicated thing and doesn't exist in-game.

Bankers use intricate terms with one hand to hide their other hand digging in your pockets.

Hexxx has always been a good banker...

You actually only need to implement the same system as seen by LendingClub. It's a P2P lender, where anyone can sign up to receive credit, or invest in other people who have signed up and get regular monthly payments (as long as they don't default). The way they work it is to separate the load among thousands of investors so that not one person takes the entire hit of a non-payment.

So....

How I see it (as it pertains to Eve), you already have a contract system. A person can create a 'debt contract' where they state "I need to borrow X money for Y months for Z.' They then click a "Get Quote" button where the game detects how much debt you already have, as well as any nonpayment history and gives you a score. In order to keep people from spamming it, it can cost ISK to actually get a quote. You can then activate the contract to list it on the debt contract market.

Anyone willing to risk a little ISK can view the list of debt contracts and decide to invest in anyone they want for as much as they want at whatever % they want. When you've chosen to invest, your money is immediately taken away and assigned to that contract, no canceling. The % that investors choose for a contract are sorted from lowest to highest, and any amount that goes over the requested will be returned to the owner. Contracts expire automatically after 1 month if it never gets filled, and it expires 1 week after it gets filled (all money is returned to their owners). The writer of the contract can choose at any point to "excise" the contract and agree to the current % rate (which is an average among all chosen % across the entire profile) up until expiration (even unfilled contracts).

Agreed on % rates are linked to contract scores to give an averaging chart for everyone, so that we can all see what acceptable amounts would be. All debts can be listed in a tab in the wallet menu, where you can see how much you owe, what your % rate is, and a button to 'Pay'. When a payment is made, all those linked to the contract get a piece based on the amount they invested.

Nice insight. With a but...

I don't believe that Grendell's pot was bigger as the sum of all non-coll loans in EVE. Just to put an example out; I manage a portfolio of others in the billions, no collateral required. I assume this kind of loans between corpmates, friends, etc out there will far outweigh the sum of Grendell's pot. Would it surprise you if Pareto would show up again?

The moment that this kind of portfolio's could be managed in a professional (EVE) website environment, and the webmaster / platform owner would offer a credit rating system within that environment. A smaller market could be beneficial on the bigger ones. I could imagine a credit based lone listing.

The CDS principle is new for me. But as I read it you provide ISK to the pool, and the pool will be have a shared risk, and if the pool is not trusted, the worth of a CDS will fall. Maybe go for another pooling mechanic;

Small suggestion

Credit rating

1 > loans upto 100 mil / 1 month / x rent
..
..
5 > loans upto 1 bil / 3 months / 5x rent
..
..
9 > loans upto 10 bil / 6 months / 9x rent
10 > open market, market and loaner can come to terms for a lone.

Loan Certificates

A > credit only for lvl 1 rating
B > credit inputted upto lvl 2 rating
..
..
E > credit inputted upto lvl 5 rating
..
..
J > credit available for complete pool

Result

This way people could buy on a risk they can oversee, or they can go all in. People finishing low rated loans, should get access to the higher rated loans. But because people can hedge risks over the different type of certificates, defaults on the higher loan sums can be avoided by just by building a portfolio with a healthy low risk certificates number in your order wallet.

Of course, if someone would want out on a bet, someone could sell the certificates on the market. If its a good pool, it will be replaced automatically. If the certificate pool is small (say an 9lvl bond), the risk that someone will step in is smaller, and it could be you have to wait out the term of the bond. But if you would have a good credit rating, you could loan the money you step out with on another credit lvl. The pool with people with a smaller risk could then thus finance your investment. This lever would provide a system where people could go with a lower or higher risk within the system. The credit rating will auto balance people not honoring their debt. People who do honor their debt will rise on the debt access ladder, but will encounter people that know they took a higher risk, so will be faced with a smaller pool of ISK.

This setup would give smaller individuals an IN on the market. The sentiment in top segments will still be managed by the small investment engineers now active in MD. But people with smaller risk insight could just step in on the lower lvl certificates and would not have to go on the investigation tour in MD to find out if they should bet on a BOND or not. The easyer way out of bigger people by going to small loans to finance the big ones, will not freeze up their money, so the market will open more opportunities, what I think will be good for the total debt / credit market.

Sure thing, good point, I was approaching it more from the WHY side of things. People dont have an interest in public offerings, just because there is no place in it for MD or mechanics to support it.

...and people say I'm too complicated.

I hope you beat me to implementation then. Happy to give advice or share what I'm doing if you're interested.

That goes for everyone by the way - I'm going to be working extra hard to avoid falling into my "imperialist" philosophy when it comes to development and operation of the Exchange.

However, I retain full rights to being an imperialist the rest of the time.