Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

The Long-Term Stock Exchange Is Worth a Shot

bloomberg.com

Post reply on HN
Print view View original

91–100 of 135 posts

Re: The Long-Term Stock Exchange Is Worth a Shot

#91

Post by grondilu »

danmaz74 wrote: post #85
grondilu wrote: post #33

Earlier quoted context omitted.

Then you'd just create an incentive to sell the share in dark markets. You'd officially still be the owner of the share, but in secret you would have sold your voting right by agreeing with someone to vote on command in exchange for money. As is said in the 1981 movie "rollover", capitalism is like a force of nature : you can try to fight it, but in the end it always win[1] And even if somehow you succeed, you would…

Are those dark markets contracts enforceable? By the way, this is nothing like communism, not even close. This is a perfectly market oriented solution, if you don't like the idea, don't buy this kind of shares, nobody forces you to do so. If the model will prove good for companies and their investors, it will prosper, otherwise, it won't.

> Are those dark markets contracts enforceable?

Of course they are. When absurd laws try to prohibit market forces, shadow markets emerge and they tend to have their own enforcement policies. Think mafia, prohibition in the 20s, corruption and stuff. Things get ugly, but they get done. The point of having regulated markets is precisely to put some order and fairness into this.

> This is a perfectly market oriented solution, if you don't like the idea, don't buy this kind of shares

It is not, and the problem is that if that idea were to become popular, then capital would become more and more difficult to buy. So yeah, it's a step towards communism indeed. In the end, it's all about adding restrictions to the circulation of capital.

You can't artificially attach a right to something that would depend on the duration of ownership. In a free country, you can buy and sell stuff, which by definition means their value can not depend on the duration of ownership.

Let me make that reasoning clearer. Imagine I've owned an object for an extended duration, and that this extended duration gives it an additional value V. In a free market, I'm supposed to be able to sell this value V, but if I do, then the buyer will own this object with this extra value V, despite the fact that he's just bought the object. So your initial goal of giving value to duration ownership has been defeated.

Re: The Long-Term Stock Exchange Is Worth a Shot

#92

Post by HolyLampshade »

iofiiiiiiiii wrote: post #86
hobbyjogger wrote: post #50

Earlier quoted context omitted.

>Yes, this strikes me as the obvious problem. The equilibrium is for third party to buy and hold all the tenure-voting stock and then sell stakes in the dividends of the company plus allowing voting by proxy. Basically, the third party becomes an exchange, and all stock effectively has maximal tenure. You've essentially just described the current system. Most shares on NASDAQ and NYSE etc. are technically held by Dep…

That's very interesting! Is it possible to buy some stock "for real" and actually own it alongside others who use the DTC system? What are the reasons for this strange system existing?

Since most stock ownership has become a digital ledger, there are incentives for consolidation toward central custodianship for clearing and settling of trades.

The DTC is part of the subsidiary family of the DTCC, which also operates the NSCC. The NSCC handles security clearing for almost all equities trading in the US (all transaction systems basically report here at the end of their reporting chain).

This basically allows the NSCC to simply update the ownership accounting of a number of shares, as opposed to hunting down the physical stock certificates, validating their authenticity, and then handling the transfer.

This has ultimately greatly reduced the settlement window (from Trade date + however long it takes to find the certificates, to, as of a month or two ago T + 2 days), which allows firms to free up capital (the cash doesn't exist until the trade settles) to commit to other endeavors.

A shorter settlement window (and the consolidation down to a single system), also reduce overall counterparty risk, as once the trade is settled you don't necessarily have to be concerned with the financial well being of the firm you did the trade with.

Re: The Long-Term Stock Exchange Is Worth a Shot

#93

Post by WalterBright »

TuringNYC wrote: post #88
WalterBright wrote: post #63

Earlier quoted context omitted.

> Businesses have been moving further and further into short-termism; with the next quarter being the most important metric. That's the conventional wisdom, I've heard it my whole life, and I see no evidence of it. AMZN, MSFT, etc. I've known CEOs who believed it, and manipulated the books to make the short term look better at the expense of the long term. Investors weren't fooled and the stocks would tank.

AMZN ist the stand-out example, but AMZN, FB, GOOG are exceptions. Think back to 2006/2007 when PE and activist investors would take board seats and force companies to over-lever and do stock buy-backs while stocks were all-time high. How many companies can survive short-term incented PE or activist investors?

A short term investor still has to sell the stock. Why would someone buy it at a high price if that high price was based on short term thinking that sacrificed long term results?

The only hope of the short term investor is that the buyer will be incompetent. How viable is that for people who devote their careers to stock analysis and trading?

Re: The Long-Term Stock Exchange Is Worth a Shot

#94

Post by skywhopper »

This seems like a lot of very highly directed, complex, and confusing artificial policy-making in order to achieve something that could probably be approximated far more simply and understandably by placing a small tax on equity transactions. Long term investors would be barely affected, high frequency traders would be forced to re-evaluate their approach, and the government could collect some highly needed revenue.

Re: The Long-Term Stock Exchange Is Worth a Shot

#95

Post by skywhopper »

Iv wrote: post #82

When I learned about high-frequency trading, I toyed with the idea of opening up a stock-exchange with different rules: - one quote per day - transactions of the day are processed in a random order (using a provable random deterministic algorithm) - shares have to be kept for at least 3 months (Warren Buffet recommends 6 months) before being sold. When Steve Jobs died, which was obviously an event that would have an…

"Provable" algorithms aren't all they are cracked up to be, see the Krack attack on WPA2. The algorithm may well be perfect. But everything around it is still attackable.

Re: The Long-Term Stock Exchange Is Worth a Shot

#96

Post by eries »

Hey everybody, Eric Ries here, founder of the LTSE. I am coming late to the thread as I’ve been focused on launching my new book and am only seeing this now.

I love a lot of the comments here. I think many of the assumptions both in this piece and in the comments are reasonable guesses about what we are doing - but in a lot of cases wrong.

Part of the reason it has taken me more than five years to figure out how to build this company is that we have to be able to:

1. Offer companies full liquidity and full protection from short-termism even if their stock trades on another exchange or they dual-list

2. Build support among many financial system stakeholders and regulators to get approval to do this

3. Build a multi-disciplinary team that is literate in the arcane ways of SF NY and DC all at once

We aren’t quite ready to take the hood off and reveal how we solved all of these problems quite yet. This is stil a sensitive regulatory process and I’m limited in what I can say publicly. But to the extend I can, I’ll try and answer questions in this thread. Please keep them coming.

Thanks for taking a look at what we are building!

Re: The Long-Term Stock Exchange Is Worth a Shot

#97

Post by erikb »

eries wrote: post #96

Hey everybody, Eric Ries here, founder of the LTSE. I am coming late to the thread as I’ve been focused on launching my new book and am only seeing this now. I love a lot of the comments here. I think many of the assumptions both in this piece and in the comments are reasonable guesses about what we are doing - but in a lot of cases wrong. Part of the reason it has taken me more than five years to figure out how to b…

Your name sounds familiar. Can you give a short summary of what else you've been doing?

*edit: Ah, I found something myself. You're the lean startup guy right? https://en.wikipedia.org/wiki/Lean_startup

Re: The Long-Term Stock Exchange Is Worth a Shot

#98

Post by eries »

hkmurakami wrote: post #27
conistonwater wrote: post #14

Earlier quoted context omitted.

> This problem is so obvious that it must have been addressed by the people proposing this. I think this is just optimism, it would be nice to have an actual reason to think this is the case.

I looked at the people backing the exchange and as far as I can tell, no one actually has a proper finance background, let alone a background in exchanges (which is, from what I've read, a pretty esoteric and specialized area within finance). The idea of Eric Reis running a stock exchange is... strange to me.

Me too!

Luckily the rest of the team is way more qualified

Re: The Long-Term Stock Exchange Is Worth a Shot

#99

Post by eries »

Fomite wrote: post #74
jessriedel wrote: post #6

Earlier quoted context omitted.

> Can a company exist in both the "normal" exchange and the "long term" exchange at the same time? The fact that a company is listed on multiple exchanges doesn't mean it has different sorts of stock for each exchange. This real subject of this article is tenure voting , which is an aspect of the stock (not the exchange). The reason exchanges are mentioned is that exchanges have rules about the sorts of stock they wi…

> This problem is so obvious that it must have been addressed by the people proposing this. I feel like this sentence could be found on the graves of many a failed startup.

And also on many IPO tombstones :)

Re: The Long-Term Stock Exchange Is Worth a Shot

#100

Post by eries »

JumpCrisscross wrote: post #62
taurath wrote: post #59

Earlier quoted context omitted.

That all but guarantees a lower stock price over time for the company, as newer shares are literally less valuable than older shares. If you have “high priority” voting shares worth $100, they could be worth $90 or less to the investor that is buying them because they decrease in value on every trade.

> That all but guarantees a lower stock price over time for the company, as newer shares are literally less valuable than older shares Which is why you see private companies experimenting with all manner of super-voting classes of stock (usually for founders) but never with this idea. New money would be reticent to invest. Devil's advocate: investors didn't seem to care about Snaps' zero-vote stock.

We believe our proposal is way more investor favorable than zero-vote shares. But it’s also way more company-favorable than standard governance
Post reply on HN