Market Discussions

I am posting this here to get MD veterans input on this idea. It is my hope that with your ideas and support we will be able to ask CCP for something that is both implementable and of benefit to us all.

The recent run up in PLEX and Oxygen Isotopes has exposed, yet again, that our markets have a big structural flaw. Our inability to make trades that would be profitable if a goods price were to fall. This limits the downward pressure on price spikes and limits our own abilities to profit from price fluctuations.

The obvious solution would be to implement a secondary options market. However, the amount of work that would be necessary to create such a market, combined with the fact that no one could be trusted with the hundreds of billions of ISK that would flow through such a market, would cripple any player run secondary market.

As a result I feel our only viable option is to ask CCP to implement an options market. If we are to make such a request, there are a few things we should concern ourselves with:

Whatever we request must be something that traders want and actually makes station trading better.
Whatever is asked for it must be something that CCP can do. Attention must be paid to ease of implementation and we should provide viable answers in advance to anticipatable functionality problems.
The change must be beneficial to the player base as a whole, not just traders.

A good starting point might be a clone (or two) of the existing market interface. One for puts and one for calls. I would very much like to see at least one new skill for station trading, the simplest suggestion I can think of would be an order limit.

Other than giving us the ability to profit by trading options this would encourage price stability. It would allow manufacturers to lock in mineral prices and good's sale prices in advance. This would encourage investment in industry and be of great benefit to the eve economy.

The biggest pitfall I can see at the moment is how to deal with players who are unable to honor their options. If you sell a call and then do not have the item in question when the buyer exercises that option you should be forced to buy from the market in question. However, this idea has a hairy problem of its own, because it could be used as a basis for exploiting by driving an alt deeply negative one might be able to "mint" money.

You are correct that I am asking for a new market, but this is not a new good. It is the right to buy and sell existing goods in the future at a fixed price.

The fact that it is impossible for players to implement this, as you seem to concede, is the reason why we would have to ask ccp to do it.

When one buys something from the existing market you must pay the cost of the good listed by a seller. You cannot take the goods and not pay them. I am asking that the same logic be extend to a secondary market. This is not a new regulation.

The question then becomes how to implement these rules so that they are beneficial to all but not overly cumbersome. Heck I don't even have a problem with their being room to exploit, as is done with margin trading, as long as it doesn't break the market altogether.

So the fact that this kind of bullshit has been part in slumping the real world's economies wasn't enough, you want this **** in eve, too?

If the item isn't present, deduct galaxy average price +10%.
Alt-exploiting would create so much inflation it wouldn't be funny.
Hardlimiting it to SP, perhaps.
Oh, and this isn't the bullshit. A manufacturer being able to lock on future prices for six months without having to put down capital is a pretty good thing for an economy.
The bullshit begins when you trade currencies this way.

Whoa whoa, you're going to be branded for that kind of heresy in MD. Remember, the Party line is "the goons have been totally ineffectual and have had no impact on oxytopes. This is a normal speculative wave. Nothing to see here."

You're thinking of Credit Default Swaps, a completely different thing.



This is actually probably a good way to go about doing it. This may seem silly but remeber you're buying and selling and option not a good, which means the buyer doesn't have to take it at the end date.

For example lets say we have a good 'A' which is trading on Jita between 98k and 102k.

Our Seller has 1000 units of 'A' that he wants to sell. He suspects the price of A is pretty stable, and doesnt expect he can get much more, or doesn't care to.

Our Buyer knows that in the future he will want 1000 units of 'A' but he doesn't have 98-102mil isk right now (or would rather use it on something else) but wants to lock in the price, so that he can be sure of his supply.

The Seller sells a "call" on the market for 5m he will sell the right for someone to buy his 1000 units of A for 100k each at some point before the option expiration date. (The option expiration date is often a date when all options expire)

The Buyer buys the call on the market for 5m this gives him the right to buy 1000 units of A for 100m from now till the next options expiration date.

Once the call is bought the Sellers 1000 units of 'A' are placed in a hold, and cannot move or sell them.

Possibility (A)
Over the next month the buy and sell prices move more than 5k. The Buyer can now execute his option and buy what he needs to run his operations for 105m. For the intermediate month he has 100m more liquidity than he would have had had he bought it on day1, and he has no risk of not being able to run because the price spiked to 120k. The Seller might have been able to get 120m had he waited for today, instead but he gets 5m isk on day 1 and 100m today.

Possbility (B)
The price falls more than 5k.
The Buyer can now buy from the market for 90k, he chooses not to execute the option, and purchases today for 90m, his total cost is 95m 5m more than it would have cost him had he waited, but small price to pay for not having to worry about the risk that his supply would vanish. The seller has his goods unlocked at 5m in his pocket, he can now continue to wait for the price to go back up, sell another option, or simply sell today for 90m.

You might be asking why the Seller would do this?
Possiblity (C)
The Buyer could now try to buy at 98k each and save himself 2m for a total cost of 103m. The seller of the call now has 5m in his pocket and still has his goods which are worth what they were worth before. Or the Buyer could execute the option and spend a total of 105m.

A put order would work similarly with the seller of the put locking in his money and giving a producer a price floor on his goods.

This market now has two variables the cost of the option, and the price that the option executes at. Sorting by "cheapest" is no longer enough.

There's no trivial way to scam this system, though obviously you manipulate the price as option expiration day approaches.
Option expiration days are usually set by an administrative structure, so we could call it the 30th of every month or have one once a quarter, etc.

I think its highly unlikely that everyone would use the options market. In real life when more than 10% of a market is tied up in options its viewed as a strong sign that the price to buy or sell (depending on the option type).

I disagree with your premisis that it is a flaw.

The eve market system is there to provide you with an opertunity to sell and purchase goods.
Traders provide liquidety to the producers, and for that they take a cut of the profits.

It can be argued that speculators help move the prices to the equilibrium they will reach in time, and that they help identify shortages (and surplusses) before they occur. Thus helping producers shift their production in a timely manner, while also providing liquidity to the producers already providing the demaded product.

I fail to see what short selling and option trade add in this.
There are only few production runs in eve that require such an investment in time and money that the producers feel the need to hedge their investment angainst a deteriorating market.
Better yet for most of those such services already excist (for instance a deposit for a to be build super capital with a third party, ensuring purchase or forfaiting the deposit).

All you seek is a way to further profit from normal market swings. You ignore or downplay the possible risk of abuse and exploitation that will exsist besides the accepteble abuse and manipulation of the markets for profits.

These are, in my opinion, very much the things that caused the global economic problems we face today. Credit default swaps are only the latest tool made availeble, we were wrecking the world economy long before those were invented, even if it took more time.

Also you seek to move ccp to invest time into something that will only be used only by a minority of a minority of eve players, something that will allow that minority to profit more from a far greater group of eve players.

hmm, to me a far more intresting idear and use of developer ime would be to: disallow market access for non immedeate transactions from inside stations. Having each market ajustment give you the same counters as firing a gun (no docking/jumping for 1 minute) and allowing agression from any owner of an order you overbid or undercut (cheers for corperate orders).

Couldn't players just make ISK-penalties (held in escrow) on the part of the person going long on the sale a customizable feature of these contracts?

This, unfortunately (I'm more interested in Short Sales actually, but they have the same mechanics issue).

Still, I agree that having CCP implement this would be so against Eve's core values that I'd be looking outside my window for flying pigs.

Best done by the players anyway. The trick, though, is figuring out who you can trust.