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Excited to see this. I hope it leads to a trend to listing sooner and giving access to retail investors much earlier. Buying Uber at a few dollars instead of $42 for example. The markets will operate like they want to unless there are explicit rules to stop it. Right now it's wait to IPO as long as possible, and HFT only accessible to huge companies. Retail is left with the scraps.
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It's designed for long term investing. Not a place for day traders, high frequency trading and all sorts of sharks and piranhas that like to eat up pensions and 401k funds...
How exactly do you believe high-frequency traders "eat up" pension funds? The only time any limit order gets executed is when it is the best price available. From the other perspective, the price a market order is matched at is the price of the best limit order available. In the absence of high-frequency traders, the best price available will be worse , not better.
HFTs will see the first order executing on one exchange, and will then jump in front of the rest on the other exchanges. For the trader it looks like large orders don't work; he can't buy every offer that's on his screen. Only part of his order works, and a price rise prevents the rest from executing.
Nowadays this may be less of a problem, because large traders now probably all use software that tunes injected latency to make all related orders arrive simultaneously at their different destinations. But I would still be careful about assuming that HFTs can't do any damage anymore.
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A Joe Average is legally allowed to walk into a casino and lose all his money, pretty much guaranteed over long term. A Joe Average is legally allowed to play all kinds of lotteries, pretty much guaranteed loss over long term. A Joe Average is legally allowed to invest his 401k in the riskiest penny stock one can find. This has nothing to do with risk, it's 100% gate keeping.
Yep, penny stocks, options and margin trading are all available to a retail investor. But hey, I want to invest in a new business? I want to buy Bitcoin? I want to participate in an ICO? Sorry. It's all about gatekeeping and not letting me do what I want with my money.
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Wouldn't those safeguards be at least as necessary for lottery tickets?
Only degenerates throw $500k away at lottery tix, while significant amounts of the population invest their entire $500k in funds as found in 401k's or IRAs (or whatever). So yeah, I'd rather shield most of the country from the volatility of early stage shitfests, and make that bar high to climb if they really truly want to invest in early-stage.
Usually to list on public markets the whole bizdev/marketing/operations/VC/board/lawyer/executive machines end up taking most companies away from innovation and the founders, as well as taking large chunks of the company and the rewards, where the efforts become clouded in power struggles.
If the LTSE market helps stop short and distort, pump and dump schemes, it could be very attractive to long term investors and innovative/engineering focused companies. A company like TSLA or a company rebuilding like AAPL in the 90s would probably love to be in a longer term, less short term focused exchange. The new market may encourage deeper dives for innovation and protect the companies on the exchange from the eviscerating games of the public markets where long term investors get skimmed and are 'suckers' to the big fish.
LTSE is a very welcome direction and attempt to clean up the public markets problems including the short term quarterly focus, high bar for entry, constant attacks after going public and loss of power/percentages by founders and innovators/engineers/product once the company goes public.
Why don’t we just levy a 5% tax on every stock trade? That would provide a lot of funding and also get rid of front running, flash crashes, and a lot of kinds of market manipulation in a hurry. It would also make sure that any stock trade was with the intent of making longer term investments.
I am not sure you've done the math on this when it comes to your basic person socking away $5000/year in index funds in a simple Roth IRA trying to save for retirement, and what signal it sends towards saving money / planning for the future, which is already at its lowest point in this country.
I remember when a bunch of nobel prize winning economists founded "Long-term Capital Management" on the theory that, because they only traded relative value arbitrage, they couldn't lose money. Then they levered the strategy without realizing that these value arbitrages could shift against them and result in additional margin requirements. Those were the smartest people in finance at that time, and they nearly took d…
I remember when a bunch of nobel prize winning economists founded "Long-term Capital Management" on the theory that, because they only traded relative value arbitrage, they couldn't lose money. Then they levered the strategy without realizing that these value arbitrages could shift against them and result in additional margin requirements. Those were the smartest people in finance at that time, and they nearly took d…
Excited to see this. I hope it leads to a trend to listing sooner and giving access to retail investors much earlier. Buying Uber at a few dollars instead of $42 for example. The markets will operate like they want to unless there are explicit rules to stop it. Right now it's wait to IPO as long as possible, and HFT only accessible to huge companies. Retail is left with the scraps.
You can already do this, it's called crowd-funding!
However, equity crowdfunding platforms do exist. One example is CrowdCube.
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Retail is left with "the scraps" because it is much riskier to invest early on. Companies that fail early aren't heard about as much, because Joe Average's pension plan hasn't invested in them, but are still plentiful. And maybe Joe Average's pension plan shouldn't be investing in what are effectively PE-stage firms. I don't know if I'm right about this, but it seems such an exchange might contribute to something lik…
> Of course, I do think it can serve a useful purpose, but there is reason early-stage, private investment is restricted to qualified investors. The expected value of early stage investing is certainly higher than lotteries in the US. Every poor Joe can spend thousands on lottery tickets that expire worthless, but cannot invest thousands in real companies that Joe believes will do very well in the future. Shouldn't J…
That’s arguable.
State lotteries are highly regulated and transparent and typically return 50% of their capital to participants.