The Long-Term Stock Exchange Is Worth a Shot
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The Long-Term Stock Exchange Is Worth a Shot
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Re: The Long-Term Stock Exchange Is Worth a Shot
#2Interesting idea, but seems impractical because it causes very weird incentives:
* Can a company exist in both the "normal" exchange and the "long term" exchange at the same time? If so, can I short on the normal exchange and buy on the long term exchange for some free voting power that increases over time?
* Many (most?) consumer-facing brokerages make a significant portion of their revenue by lending out their customers' securities. Voting rights transfer to the borrower of the security. Would this be the same in a long-term exchange? If yes, then this will break the existing revenue model. Online brokerages will need to make the money elsewhere (likely by charging higher trading fees), and this will push consumers back into existing exchanges with low cost trades.
* How long until there is a secondary market for buying and selling voting rights?
Re: The Long-Term Stock Exchange Is Worth a Shot
#3How that plays out would be very sensitive to the exact formula for tenure.
Ie. A voting "cliff" where you can only vote after year 1.
Vs votes per years held * shares, in which case an early investor could get entrenched.
Re: The Long-Term Stock Exchange Is Worth a Shot
#4That sounds very interesting conceptually.
Businesses have been moving further and further into short-termism; with the next quarter being the most important metric. This is partly due to investors also being short-term, and voting on the board who will bring the most value in the shortest period.
I'd be interested in taking part in a Long-Term stock exchange, even if it is an experiment at this point.
Re: The Long-Term Stock Exchange Is Worth a Shot
#5How that plays out would be very sensitive to the exact formula for tenure. Ie. A voting "cliff" where you can only vote after year 1. Vs votes per years held * shares, in which case an early investor could get entrenched.
I would probably go for some middle ground such as if (year > 0) then shares * Square root (years).
Just because someone has held a stock for 20 years does not necessarily mean they are currently interested in the long term. But, it probably points in that direction.
Re: The Long-Term Stock Exchange Is Worth a Shot
#6Interesting idea, but seems impractical because it causes very weird incentives: * Can a company exist in both the "normal" exchange and the "long term" exchange at the same time? If so, can I short on the normal exchange and buy on the long term exchange for some free voting power that increases over time? * Many (most?) consumer-facing brokerages make a significant portion of their revenue by lending out their cust…
> 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 will list. But to have tenure voting, you only need one exchange to allow out (like the proposed long-term exchange). And most stocks aren't cross-listed to multiple exchanges anyways.
> How long until there is a secondary market for buying and selling voting rights?
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.
This problem is so obvious that it must have been addressed by the people proposing this.
Re: The Long-Term Stock Exchange Is Worth a Shot
#7Interesting idea, but seems impractical because it causes very weird incentives: * Can a company exist in both the "normal" exchange and the "long term" exchange at the same time? If so, can I short on the normal exchange and buy on the long term exchange for some free voting power that increases over time? * Many (most?) consumer-facing brokerages make a significant portion of their revenue by lending out their cust…
Even if there isn't a normal exchange, there's usually a market in options and futures. And if it isn't a full market, there are players who can make bespoke deals. Someone who holds on the "long term" exchange along with a costless collar (long OTM put / short OTM call) has much less economic exposure to the stock but has "held" it for the same amount of time.
Re: The Long-Term Stock Exchange Is Worth a Shot
#8How that plays out would be very sensitive to the exact formula for tenure. Ie. A voting "cliff" where you can only vote after year 1. Vs votes per years held * shares, in which case an early investor could get entrenched.
I would probably go for some middle ground such as if (year > 0) then shares * Square root (years). Just because someone has held a stock for 20 years does not necessarily mean they are currently interested in the long term. But, it probably points in that direction.
You might want an upper limit, so either logistic growth [1] or something like 1 - exp(-(T + T_0)) feels like it makes more sense.
I especially like logistic growth for having slow growth at the start and end, only growing quickly in the middle.
[1] https://www.khanacademy.org/science/biology/ecology/populati...
Re: The Long-Term Stock Exchange Is Worth a Shot
#9Interesting idea, but seems impractical because it causes very weird incentives: * Can a company exist in both the "normal" exchange and the "long term" exchange at the same time? If so, can I short on the normal exchange and buy on the long term exchange for some free voting power that increases over time? * Many (most?) consumer-facing brokerages make a significant portion of their revenue by lending out their cust…
> can I short on the normal exchange and buy on the long term exchange for some free voting power that increases over time?
Buying voting power on the long-term exchange isn't free, your capital is allocated. You have finite capital. Your cost for each unit of voting power declines perpetually so long as you hold it, it never goes to zero (free).
You can view the shorting as paying for your purchase in the long-term position, however you could view it that way for shorting any other company just as well. It's meaningless as a premise or issue.
Re: The Long-Term Stock Exchange Is Worth a Shot
#10One of the mainly value of a stock exchange is that it is super cheap and liquid to sell your security and access your funds. A long term holding is just PE, VC, or some other type of funding.