Peer-to-peer lending sites: MSE guide discussion

AdrianC

FC don't make it easy to find out, but by going through the transaction statements, I've realised that of all my default loans (except the perennial London mess), I'm now 55% recovered from when they were defaulted. Two have repaid in full, one with all back interest paid, too. Earliest defaults December 2015, so it's not quick, but it's definitely happening.

jamesd

masonic wrote: »

Having someone drop their price to match mine, but jump ahead of me in the queue was infuriating!

Cancelling and relisting ensures the listing date can be used to fairly rank loan parts listed for sale at the same discount.

Under the new system someone new comes along and gets to be ahead of someone who has been trying to sell for a long time even if they match the better price. It's infuriating that new people now get priority at the same price over those who've been trying to sell or buy for longer. It's not as fair a system as the previous one.

The issue that you mentioned could have been addressed by preventing the amount from being changed but still allowing price changes.

jamesd

keyboardworrier wrote: »

That makes sense. I have never used the variable market on Ablrate so had no idea that used to happen!

What normally happened was someone new coming along at a lower price and those who'd been trying to sell for longer matching their price and correctly getting priority based on how long they had been trying to sell.

Going from small amount unlikely price to large amount competitive price was relatively uncommon and easy enough to counter by blocking amount changes.

It wasn't common to list for sale at a premium and change to a discount. It normally meant going from a higher premium to a lower premium. That's because premiums are more usual than discounts and those who'd wanted to sell for a while matching the best new premium is what tended to happen.

One thing I used to do often with the old system when someone undercut me and I was keen to deal was match the price with the existing offer that they just undercut, perhaps changing the amount, and put in a new one at the old price. Someone who just looked at prices and amounts might have thought the match was a new offer instead of someone matching the attempt to undercut them.

masonic

jamesd wrote: »

Under the new system someone new comes along and gets to be ahead of someone who has been trying to sell for a long time even if they match the better price. It's infuriating that new people now get priority at the same price over those who've been trying to sell or buy for longer. It's not as fair a system as the previous one.

The issue that you mentioned could have been addressed by preventing the amount from being changed but still allowing price changes.

Isn't it the case that if you are the first to list at, say 99.9%, then you will be the first to sell at 99.9%? That's been my experience and that's fair. If as you say, the more recent person to list at a particular price gets priority then that is crazy, but I'm sure it doesn't work like that (I've never jumped ahead of anyone in the queue when matching their price).

Under the old system, you could list at, say 100%, then several months later someone comes along and lists 99.9%. You then drop your price to 99.9% and jump ahead of the first person to list at that price in the queue. That's clearly unfair. To jump ahead of them you should be forced to list at 99.8% or lower. In other words each level of premium/discount should have its own queue and you should join the back of this queue when changing your offer.

In short, nobody should be able to move ahead of anybody else without making a better offer.

masonic

jamesd wrote: »

It wasn't common to list for sale at a premium and change to a discount. It normally meant going from a higher premium to a lower premium. That's because premiums are more usual than discounts and those who'd wanted to sell for a while matching the best new premium is what tended to happen.

It was very clear that a few people were doing just this. They'd list at say 105% as soon as possible after the SM was enabled to get their towel on the sun lounger, meanwhile plenty of offers would pop up either in the 100-102% range if the loan was popular, or in the 98-100% range if it was less popular. They had no intention of selling at this stage, but wanted an edge if they needed to exit quickly, for example in reaction to bad news or as part of a risk mitigation strategy. It became quite apparent when some pub loans got into trouble and people were vieing for the front of the sale queue, which presumably is what prompted Ablrate to act.

Funnily enough, as soon as the change was implemented, people stopped listing loan parts at silly premiums.

jamesd

masonic wrote: »

Under the old system, you could list at, say 100%, then several months later someone comes along and lists 99.9%. You then drop your price to 99.9% and jump ahead of the first person to list at that price in the queue. That's clearly unfair.

That's the fair way for it to work, not an unfair way: when two people are trying to sell at the same price the one who's been trying to sell for longest should sell first, not the one who used that price first.

masonic

jamesd wrote: »

That's the fair way for it to work, not an unfair way: when two people are trying to sell at the same price the one who's been trying to sell for longest should sell first, not the one who used that price first.

We clearly disagree on what is fair.

Price is an essential element of the offer, the first person to offer at a price someone is willing to pay should get the sale. If someone wants to come along and offer a better price, then they should get priority, and so on. Just like an auction, where placing a prior bid doesn't entitle you to match someone else's higher bid and secure the item.

If someone who lists something for sale at an unsaleable price will thereafter get priority over anyone who lists at a more realistic price by just dropping their offer to match the latter price but not improving upon it, then that's a rigged market in my view.

It seems both Ablrate and MoneyThing have aligned their SM to the principle that priority should be obtained by making a better offer, otherwise the seller will rank behind all those who have already made an offer at the same price.

jamesd

masonic wrote: »

They'd list at say 105% as soon as possible after the SM was enabled to get their towel on the sun lounger, meanwhile plenty of offers would pop up either in the 100-102% range if the loan was popular, or in the 98-100% range if it was less popular.

At those prices they would expect and get some sales from time to time. It's the sort of price I use when happy with the loan but interested in selling if the price is right.

There's a long history of that in P2P markets, going back to the days of Zopa circa 2008 where it was called easteregging after the person who popularised it. Back then there was a regular monthly cycle with prices higher at the end of the month. So you'd get higher rates at the end of the month. But because loans were filled from low price to high you'd find that a big loan would go further up the range of interest rates to get filled. And you could benefit from that by having some higher rate offers. The working rates also varied throughout the year so you'd need to adjust and perhaps change the high ones to lower.

Just after the secondary market is enabled or just after a payment is made on an amortising loan is made are good times to try out the higher prices, since the working prices haven't yet been established. So no surprise at all that you'd notice them appearing then and perhaps staying around for a long time if the seller was in no hurry.

masonic wrote: »

They had no intention of selling at this stage, but wanted an edge if they needed to exit quickly, for example in reaction to bad news or as part of a risk mitigation strategy.

Seems that you don't really understand the reason for those prices being that they do get matched at times and it's useful to offer at any price, since that adds depth to the market.

The prices that might less often get matched, or where there wasn't much interest in selling, would be around the maximum permitted 110% with an offer to sell a penny or maybe a Pound. Low amounts like those can also be used to monitor the market to see what prices work before jumping in with more money. Changing those offers to higher amounts might reasonably be described as using the first to list rule for queue jumping.

masonic wrote: »

It became quite apparent when some pub loans got into trouble and people were vieing for the front of the sale queue, which presumably is what prompted Ablrate to act.

Ablrate wrote about plans to change several years ago. Loans getting in trouble is a time when it wouldn't make much difference because of the large downward price pressure that swamps the queue position benefit. At least until the price reaches the lowest permitted 75%.

Trying queue position things when a loan is in trouble is a great way to get yourself a loan that you can't sell even at 75% because there are no longer willing buyers. It's the time to go clearly below the current price so your price looks like a bargain before selling pressure pushes the rest of the market there and lower. Take 99% or 95% if you really want out, before the crowd agrees with you that those prices are good, not bad.

masonic wrote: »

Funnily enough, as soon as the change was implemented, people stopped listing loan parts at silly premiums.

Funnily enough at the few percent over best price range you just described, I know who was doing most of the offering and it was health problems that stopped them, not the change to the way the market worked. But it should be obvious that it couldn't have been the change to the markets because the change mainly affects the activity around the best prices, not those several or many percent higher where there isn't much competitive pressure.

When I'm paying attention I like to have almost all of my lent money offered for sale. Most of it will probably be at the prices you think make no sense, because I like the loans and am not interested in selling cheap, only if I like the price.

None of this would actually matter but Ablrate partly broke their market when they changed the price increment from 0.001% to 0.1%. With the previous price increment if you didn't like being behind someone at 100% you'd just go to 99.999% and be best price. If they didn't like that they could go to 99.998 (if they liked the price) or 99.99 or 99.9 if they wanted it to hurt you more to match them. So it was usually price that set what sold first. With the big steps they have now, people are more reluctant to take the price hit so it quite often works like a queue. Which is why queue position started to matter instead of being largely irrelevant.

Just to give some context, when I'm active in the Ablrate market my annualised trade volume is around the million Pounds a year mark. You may be one of the few that come close but your posts suggest that you didn't understand what was happening and why as well.

jamesd

masonic wrote: »

If someone who lists something for sale at an unsaleable price will thereafter get priority over anyone who lists at a more realistic price by just dropping their offer to match the latter price but not improving upon it, then that's a rigged market in my view.

That so-called unsaleable and unrealistic price is more likely to be someone waiting in the queue to sell at 100% then someone new comes along at 99.9% and gets priority over the person who's been trying to sell at 100% even if they match the 99.9% price. These 0.1% differences are where most of the price action happens, not the relatively seldom matched prices a few percent and more higher.

jamesd

masonic wrote: »

We clearly disagree on what is fair.

Perhaps in some ways but here are a couple where we might agree.

A. Someone has been using automation to trade mistakes faster than you can correct them. So when they are active you can see things like this:

1. hit the wrong button and place an offer at the best bid price instead of a bid
2. almost immediately a round number buy will happen
3. shortly after that a second buy for any odd amount will happen
4. if the price is even 0.1% different neither happens

B. Ablrate hits bidders by announcing bad news and leaving the market open. As soon as those emails start to be opened readers can sell to the bids before the person who placed the bid has a chance to react and use a price that reflects the new state of the loan.