Hey everyone, Eric Ries here, founder and CEO of LTSE (and also you may remember me from such roles as the Lean Startup guy). Day one of approval has been kind of exhausting with all the attention but I wanted to stop by this thread and say hello.
Have questions? Happy to answer as best I can. Keep in mind that this is a highly-regulated startup so we are sometimes limited in what we can say publicly. I’ll do my best to give you a straight answer if I can.
Thanks for all the support over the years, this project has been a true community effort,
I like this plan a lot. One criticism that seems valid is that giving more voting power to people who've held stock longer gives a large advantage to founders. It also doesn't directly accomplish the goal of giving more power to people who intend to hold stock longer (though at least it tends to).
A more direct idea proposed by Vitalik Buterin: give people a vote in proportion to how long they're willing to commit to keeping their stock. Optionally, only enforce the commitment when the vote goes their way (though this probably only works for major decisions).
Would something like this be feasible for stocks? Would it be compatible with LTSE?
Thank you for driving innovation in equity markets! We need more focus on long-term capital allocation, and less on the casino aspect of stock prices.
Have you considered incorporating some form of low-frequency trading? With an auction for shares held once a day, once a month, or even once a year?
(I have heard Warren Buffett say that, if it were possible, he would prefer if investors could buy or sell Berkshire Hathaway shares only once annually at a price close to intrinsic value. The low frequency would encourage investors to focus on understanding businesses instead of short-term price movements.)
Eric, congrats on the SEC approval. I really love this idea. I'm an SEC RIA, developing a mobile app called Gainvest for investors to access private opportunity zone funds and I view it as evolving into a similar marketplace but for private funds. I have two questions if you have time :) 1. How do you see this ecosystem evolving over time re: mobile platform, global outreach/expansion, and access to foreign direct investment? 2) Do you anticipate private funds or investment banks themselves being able to list on the LTSE?
Eric, great job on the SEC. Regarding large, long-term investors, ILPA might be a place of interest. I've gone to some of their conferences in New York. Good luck.
Great idea, congrats on the approval. I have a few questions after reading the article.
Broadly, what did you have to change to get SEC approval?
Have you considered supporting some sort of crowdfunding private model as well - like angel investing for the masses, before a company goes public?
Will you be available in all the big trading brokers for retail investors? I use freetrade (uk broker) and would love to see your stocks there.
Have you considered listings being asked to reward investors with long term dividends or bonds? I know this is usually up to the company, but the exchange could perhaps encourage it. Tech stocks often focus on growth but it’d be nice if there were more emphasis on sustainable long term growth. For most investors voting rights are pretty academic and a very blunt instrument.
Does this exchange have any plans in place to avoid front-running high frequency trading? Similar to IEX.
It seems the focus of this initiative is aimed at aligning long term voter control, but these front-running techniques don't really care about control.
Can you explain why another exchange is needed for this? A company is free to issue a special share class and list it on one of existing exchanges, no problem. There is nothing stopping companies from doing this long term incentive thing now. If they aren't doing it on existing exchanges, why would they do it on your exchange?
1) What are some of things you did to validate this idea in accordance with the Lean Startup Methodology?
2) Do you think any approval of this by the regulators was an attempt to stay competitive to the rise of crypto crowdfunding / instant liquidity via crypto markets (ICOs, STOs, IEOs, etc)?
Engineers, product focused entrepreneurs and innovators would like a Long-Term Stock Exchange (LSTE) quite a bit if it works out.
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.
Anybody have a good, technical/professional doc on how the LTSE mechanisms work? Some of this seems crazy, but smart people have looked at it.
Example: It seems like stock transfer would reset voting rights, which should depress prices and (intentionally, I think?) discourage sale. But what keeps a fund that owns vested shares from effectively selling their economics and voting rights through a secondary contract?
Here's the exchange rulebook.[1] This is rather long. I haven't found the "long term" part yet. It appears to function as an ordinary short-term exchange. It's not like stocks trade once a minute or once an hour to eliminate high-speed trading. They allow day trading and margin.
There have been proposals for exchanges designed to discourage short term churn, but this doesn't seem to be one of them.
The web site seems unhelpful. Not much solid info.
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.
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 like 2008. Then, it was the common man investing in over-heated real estate; now, it could become the common man investing in over-heated tech.
I feel like those who work in tech often forget that it can fail, have cycles of boom and bust, etc. like any other industry.
Of course, I do think it can serve a useful purpose, but there is reason early-stage, private investment is restricted to qualified investors.
To be a company that's operationally mature enough to list on an exchange they're likely of the size of a company that could IPO on NYSE or Nasdaq. I don't think this will suddenly allow a flurry of startups to suddenly become public on a different exchange.
What is a flurry startup and what is a mature company is relative.
For example, Amazon originally IPO'ed in 1999 after raising only 10M USD.
Especially since the last financial crisis over regulation has hindered SMEs access to the public markets. Being a public company means that you can often raise money on better terms. If only large enterprises can access good money, then SMEs and indirectly innovation is hurt.
EU has realized this and is now trying to make SME listing easier (mostly through de-regulation).
> Currently, out of the 20 million SMEs in Europe, only 3,000 are listed on stock-exchanges. "We want to change this," said Valdis Dombrovskis, EC vice-president responsible for financial services: "We propose rules that will make it easier for SMEs to access to a wide range of funding at all stages of their development and to raise capital on public markets."
> And the Council of Institutional Investors has argued (pdf) that LTSE’s voting mechanism could hurt shareholders by giving too much power to founders.
I mean, the most high-profile tech stocks to hit the market as of late already give all the power to founders via voting class stock, so I don't think it's a big change other than truly standardizing it.
The new exchange would have extra rules designed to encourage companies to focus on long-term innovation rather than the grind of quarterly earnings reports by asking companies to limit executive bonuses that award short-term accomplishments.
And what are those rules? Nowhere in the article does it actually say what this actually is.
Stay tuned. This initial approval is for the base set of listing standards that are similar to other exchanges (that’s just how the process works). Over time we will add more, but we can’t share the details until we get further in the regulatory process.
The title of the story is “U.S. regulators approve new Silicon Valley stock exchange”
Despite the actual name of the exchange, the title of the article seems much closer to how the exchange is described:
> The LTSE is a bid to build a stock exchange in the country’s tech capital that appeals to hot startups, particularly those that are money-losing and want the luxury of focusing on long-term innovation even while trading in the glare of the public markets.
From the HN guidelines:
> Otherwise please use the original title, unless it is misleading or linkbait; don't editorialize.
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.
HFT and front running is a plague upon the markets, but there are already effective ways to stop it (order batching, and time delays like IEX does). The only reason it even exists is because the exchanges make tons of $$$ from selling access to the HFTs.
On the other hand, day traders provide valuable liquidity to the markets, making them more efficient and better for everyone. They ability to operate would be severely harmed with even a 1% fee on every trade. And more fees also harm normal people like me, who conduct trades that generally last from a few days to a few weeks each. For the most part, we're not harming other people, and we make the markets more efficient and legitimate.
The weird market effects are enabled by what is basically corruption by large entities involved with the markets, and by the ineffectiveness of the SEC at fighting a wide range of anticompetitive practices. They are caused by people who are making a small amount on every trade, but not all of the people making a small amount on every trade are bad.
Even 0.1% would probably be enough to tamp down most HFT.
Unfortunately, this exchange doesn't seem to be aimed at that:
> The LTSE is a bid to build a stock exchange... that appeals to hot startups, particularly those that are money-losing...
> ... giving retail investors a chance to cash in on high-growth startups.
That sounds like a private lottery at best, and a scam at worst. Maybe it wouldn't seem so bad if I read through the full SEC document, but I'll steer clear of this until plenty of other people have tried it out.
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.
> emphasize governance standards like sustainability, executive pay, and diversity
What would a company gain by choosing to list on here (over other far more established options) while having to commit to these additional rules? Access to a group of investors who don't complain too much about quarterly profit objectives?
The article doesn't explains what makes LTSE different than NYSE? How will it actually encourage looking beyond the next quarter? Where can one learn about that?
With dual class shares lacking accountability and leading to corruption among founders, founders and investors clashing over dual class or multi class shares, and allowing a sense of corporate loyalty to appear among founders who run companies with dual class shares, I do see a good sense of demand for tenure voting. With increasing calls for banning dual class shares and the scandals at Facebook and Google shining light on the dictatorship held companies by founders, we will see regulators and many retail and institutional investors become aware of dual class shares and either regulate or ban them. So tenure voting is the best way to go!
I think that tenure voting is the next step forward and it is a good way to attract an alignment between investors and founders as well as employees since they get incentivized with more votes for holding a stock long term. We've seen this work really well in France especially with companies like LVMH that investors are patient towards due to this tenure voting incentive.
But like how dual class stock caught on with startups starting with Google and Facebook, can we see the same for tenure voting if there are hot startups in the future with this structure?
Will LTSE allow dual class or multi class share structures or only tenure voting among companies wanting to list on the exchange?
Also will all sorts of companies be able to do this or will LTSE only be open to tech companies?
I don't really see how the rules mentioned will change things that much.
> asking companies to limit executive bonuses that award short-term accomplishments.
Why would I care as an investor? I still want the stock to go up quickly. Executives own stock and without a cash bonus wouldn't this incentive trying to get quick increases in stock value.
> more disclosure to investors about meeting key milestones and plans, and reward long-term shareholders by giving them more voting power the longer they hold the stock
Seems relatively minor vs the benefits of a stock jumping significantly in a short time. As a minor stock holder I have no interest in voting power. There still isn't a downside to short term deals.
>Why would I care as an investor? I still want the stock to go up quickly.
What you want to do is reinvest profit from short term gains into long term securities that beat inflation to leverage risk.
>Executives own stock and without a cash bonus wouldn't this incentive trying to get quick increases in stock value.
Equity is worthless without liquidity, and that's more important than massive growth down the road for the rank-and-file that hold options. Frankly equity isn't the motivator it used to be. If you don't plan on staying in one gig for more than 18-24 months, there is very little reason to sacrifice time and money for equity.
That said, executives' focus on short term growth to cash out is a problem in and of itself - notice how companies like Disney and Apple have skyrocketed under CEOs focused on long term stability and growth over cashing out 18-24 months after their hiring. And everyone made way more money because of it.
>As a minor stock holder I have no interest in voting power
And minor stockholders don't make a difference in the day-to-day operation of a business. The activist investors that hold board seats do, however, and their focus on short term growth has caused many mid sized shops to collapse under pressure to grow, sacrificing long term stability for their employees for the profits of vultures.
People worry that execs game the metrics investors use to evaluate stock. To give an example close to home, imagine if tech companies were evaluated by how many lines of code they produce per quarter. Now people are scared that execs will tell people to just write a bunch of whatever.
Making the company look good on paper (short term stock gains) but actually worse (perform worse in the long term as those lines don't translate to profit). But when these hidden faults are discovered the execs are long gone and their bonus checks already cashed.
I don't care about my own votes but I do care about how voting power affects decision making. It affects it in good ways (it requires accountability from leadership) and bad (short term thinking to placate investors just looking for returns).
I'm hopeful this is a happy balance, cause I find the shares without voting rights to be almost scams.
I think the presumption underlying the LTSE is that short-term growth is at the expense of more valuable long-term growth, so it's structured to try and encourage long-term growth. If you don't hold that view, then you won't invest in those companies.
“Why would I care as an investor? I still want the stock to go up quickly.”
That is not what investors want; that’s what speculators want. I am saving for retirement in about 15-20 years; I want my investments to appreciate a reasonable amount over that period and show a stable pattern of generating good returns - I don’t really care what their prices are like in the next few months, except for that if they’re down in price for a while, I can buy more to enjoy later.
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 down the world's financial system.
The only real similarity here is the "long-term" name, but I don't think that anyone with a true understanding of capital markets would name their firm "long-term" after that fiasco.
The name also reminded me of LTCM. I was working at Credit Suisse when that went down. I think if you were in the financial space during that time you'd also suggest steering clear of four word names starting with "Long Term..."
They did know that they could lose money. They just underestimated the amount of risk involved, as well as the level of correlation between their different trades. Fat tails, black swans, etc etc
I couldn't see it in the reuters article so apologies if this is no longer relevant. Is the plan still to give different number of votes depending on how long the shares have been held? If so, wouldn't selling your shares you've held for a long time destroy value i.e. by resetting the votes to zero?
Also, if different shares have different values, would they each have different prices, or would the listed price be some weighted average?
I can’t share our future plans until we file with the regulators. It won’t be exactly the same as what we filed and won staff approval for last year, but that filing can give you some sense of how possible rules could work:
https://www.sec.gov/rules/sro/iex/2018/34-82948.pdf
Note that this particular system does not have either of the problems you raise as questions
I can imagine some kind of OTC exchange where people dont have to worry about Sarbane-Oxley and other SEC rules as being useful. Is this what it will be?
If you have to comply with SEC and the CEO can't post jokes on twitter, I dont really see what advantage there is over NYSE or NASDAQ.
The SEC has jurisdiction over all publicly-traded companies and exchanges and will have the same authority over LTSE as they do NASDAQ & NYSE.
And SarbOx has nothing to do with CEO tweets... a CEO can’t provide materially misleading information to shareholders or potential shareholders. Period. Not on twitter, not on TV. Not in the rain, not on a train.
What does the ideal LTSE "customer" look like? IOW, what are the signals or attributes of a company that would be a great fit for considering an LTSE listing?
I think it's worth it to allow this but I fail to see it's true relevance. If companies don't innovate sufficiently for the long term they will die to other companies that do. Hence the market takes care of itself.
Shareholders aren’t incentivized to act in the company’s long-term interest; only to maximize apparent growth for as long as they hold the company’s shares. This leads to companies making shortsighted moves that aren’t in their long-term interest, due to shareholder influence.
Kind of bad luck — naming anything in finance “long-term”. It attracts the attention of quite a few angry gods to smite you.
Some of us still remember what happened with LTCM — “Long-Term Capital Management” hedge fund, who was heralded back then as the pinnacle of innovation. It was back in 1998, which looks like eternity for Silicon Valley types... but some remember.
Naming a financial entity “LTSE” is inviting trouble.
Just kidding. We will make extensive filings on this subject, coming up soon.
Until then the best way to think about this is as a set of principles.
This next generation of companies believes in
- defining success in generational terms, not beating the quarter or some transient competitor
- considering their impact on multiple stakeholders: shareholders, yes, but also employees, partners, customers, communities
- building products that are fundamentally healthy for humans and the societies they inhabit
If this is a national stock exchange, then that would be fitting for silicon valley and California. If bankers here would like to take other parts of the transaction for IPOs and direct listings it could really be a boon for the state and remove a lot of the pressure from New York investment banks, as California is economically larger than other most countries with relevant financial centers. On many lists, California is only in 5th place GDP worldwide because the United States as a whole is above it and double counts California.
Eric,
Congrats man! What unbelievably good news for the planet. I have been telling anyone who would listen for the past year that the LTSE simply HAS TO HAPPEN!!! You have the solution to the currently flawed version of shareholder focused capitalism. Now, all stakeholders can enjoy the ride. When you get a chance check out: TorreyProject.org to see how we are going to use LTSE to change the world.
I think there is big potential value in a new exchange that optimizes for cheap IPO'ing rules. Something between Nasdaq and Wefunder.
I'm not persuaded by some of the ideas they have (like adding diversity to their governing board, seems designed to be exclusive to tech-startups that already have a bias toward that "value"). But if only by competition they make listing cheaper and easier it could have a big impact.
>I'm not persuaded by some of the ideas they have (like adding diversity to their governing board, seems designed to be exclusive to tech-startups that already have a bias toward that "value").
This is a silicon valley exchange, silicon valley VCs can't compete with multi-billion dollar "vision funds" so they'd use retail investors to drive their moonshot bets. Silicon valley startups would get a much better deal with an IPO on LTSE than a private deal with vision funds.
It looks like founders and VCs get the majority voting shares by default. It's not clear if it's good for the company or not, but it helps founders to pick it as the stock exchange to go to.
The slow vesting shedule makes a lot of sense though.
The central thesis is somewhere between "controversial" and "improbable".
To wit: current markets being too focussed on the short term does not align too well with Uber, a company bound to lose money for at least another three to five years under the best assumptions, being valued as it is.
opening up the opportunity to take money from a whole new source, by accepting money from unsophisticated investors who dont understand what they are getting into and losing liquidity on their investment at best and losing their money at worst
Any investor who limits themselves to the "long-term" is doing nothing more than allowing execs to get away with bad behavior.
There is absolutely zero evidence that current stock prices don't price in the long-term. Indeed, if there were, savvy investors would arbitrage for that... and then it would no longer be the case. This is pretty much by definition, just Econ 101. (Also, somebody who thinks stocks are biased to the short-term... please explain AMZN's valuations over the past two decades.)
The only people calling for limiting investor ability to sell are executives of companies themselves, who are afraid of accountability from investors. Because sometimes CEO's would rather be lazy or work on their fun (yet unjustifiable) pet projects, than actually build a profitable, sustainable business like investors want. (It's just human nature.)
A "long-term stock exchange" is one of the greatest cons ever played by execs. It is good only for management, at the expense of investors, customers, and everyone else generally. It is simply the removal of accountability, which can never be a good thing.
Doesn’t that same accountability today result in execs selling out the long-term for short-term gains, also for their own benefit at the expense of shareholders?
eries|6 years ago
Have questions? Happy to answer as best I can. Keep in mind that this is a highly-regulated startup so we are sometimes limited in what we can say publicly. I’ll do my best to give you a straight answer if I can.
Thanks for all the support over the years, this project has been a true community effort,
Eric
DennisP|6 years ago
A more direct idea proposed by Vitalik Buterin: give people a vote in proportion to how long they're willing to commit to keeping their stock. Optionally, only enforce the commitment when the vote goes their way (though this probably only works for major decisions).
Would something like this be feasible for stocks? Would it be compatible with LTSE?
divbzero|6 years ago
Have you considered incorporating some form of low-frequency trading? With an auction for shares held once a day, once a month, or even once a year?
(I have heard Warren Buffett say that, if it were possible, he would prefer if investors could buy or sell Berkshire Hathaway shares only once annually at a price close to intrinsic value. The low frequency would encourage investors to focus on understanding businesses instead of short-term price movements.)
NashidAli|6 years ago
Again, congrats, best wishes.
Nashid
tripcom|6 years ago
crediblewitness|6 years ago
unknown|6 years ago
[deleted]
rcMgD2BwE72F|6 years ago
Edit: If so, I'm pretty sure Tesla Inc. would be happy to participate in your beta program.
grey-area|6 years ago
Broadly, what did you have to change to get SEC approval?
Have you considered supporting some sort of crowdfunding private model as well - like angel investing for the masses, before a company goes public?
Will you be available in all the big trading brokers for retail investors? I use freetrade (uk broker) and would love to see your stocks there.
Have you considered listings being asked to reward investors with long term dividends or bonds? I know this is usually up to the company, but the exchange could perhaps encourage it. Tech stocks often focus on growth but it’d be nice if there were more emphasis on sustainable long term growth. For most investors voting rights are pretty academic and a very blunt instrument.
DevX101|6 years ago
It seems the focus of this initiative is aimed at aligning long term voter control, but these front-running techniques don't really care about control.
vasilipupkin|6 years ago
jonpaul|6 years ago
2) Do you think any approval of this by the regulators was an attempt to stay competitive to the rise of crypto crowdfunding / instant liquidity via crypto markets (ICOs, STOs, IEOs, etc)?
defertoreptar|6 years ago
joshu|6 years ago
thatthatis|6 years ago
drawkbox|6 years ago
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.
eries|6 years ago
evrydayhustling|6 years ago
Example: It seems like stock transfer would reset voting rights, which should depress prices and (intentionally, I think?) discourage sale. But what keeps a fund that owns vested shares from effectively selling their economics and voting rights through a secondary contract?
Animats|6 years ago
There have been proposals for exchanges designed to discourage short term churn, but this doesn't seem to be one of them.
The web site seems unhelpful. Not much solid info.
[1] https://longtermstockexchange.com/regulation/docs/LTSE%20Rul...
tmugavero|6 years ago
mises|6 years ago
I don't know if I'm right about this, but it seems such an exchange might contribute to something like 2008. Then, it was the common man investing in over-heated real estate; now, it could become the common man investing in over-heated tech.
I feel like those who work in tech often forget that it can fail, have cycles of boom and bust, etc. like any other industry.
Of course, I do think it can serve a useful purpose, but there is reason early-stage, private investment is restricted to qualified investors.
rb666|6 years ago
jorts|6 years ago
miohtama|6 years ago
For example, Amazon originally IPO'ed in 1999 after raising only 10M USD.
Especially since the last financial crisis over regulation has hindered SMEs access to the public markets. Being a public company means that you can often raise money on better terms. If only large enterprises can access good money, then SMEs and indirectly innovation is hurt.
EU has realized this and is now trying to make SME listing easier (mostly through de-regulation).
> Currently, out of the 20 million SMEs in Europe, only 3,000 are listed on stock-exchanges. "We want to change this," said Valdis Dombrovskis, EC vice-president responsible for financial services: "We propose rules that will make it easier for SMEs to access to a wide range of funding at all stages of their development and to raise capital on public markets."
http://europa.eu/rapid/press-release_IP-19-1568_en.htm
https://www.eubusiness.com/news-eu/sme-financing.24fl/
wmf|6 years ago
rando444|6 years ago
carlosdp|6 years ago
I mean, the most high-profile tech stocks to hit the market as of late already give all the power to founders via voting class stock, so I don't think it's a big change other than truly standardizing it.
unknown|6 years ago
[deleted]
nerdponx|6 years ago
And what are those rules? Nowhere in the article does it actually say what this actually is.
eries|6 years ago
hamandcheese|6 years ago
Despite the actual name of the exchange, the title of the article seems much closer to how the exchange is described:
> The LTSE is a bid to build a stock exchange in the country’s tech capital that appeals to hot startups, particularly those that are money-losing and want the luxury of focusing on long-term innovation even while trading in the glare of the public markets.
From the HN guidelines:
> Otherwise please use the original title, unless it is misleading or linkbait; don't editorialize.
fallingfrog|6 years ago
the_pwner224|6 years ago
On the other hand, day traders provide valuable liquidity to the markets, making them more efficient and better for everyone. They ability to operate would be severely harmed with even a 1% fee on every trade. And more fees also harm normal people like me, who conduct trades that generally last from a few days to a few weeks each. For the most part, we're not harming other people, and we make the markets more efficient and legitimate.
The weird market effects are enabled by what is basically corruption by large entities involved with the markets, and by the ineffectiveness of the SEC at fighting a wide range of anticompetitive practices. They are caused by people who are making a small amount on every trade, but not all of the people making a small amount on every trade are bad.
username223|6 years ago
Unfortunately, this exchange doesn't seem to be aimed at that:
> The LTSE is a bid to build a stock exchange... that appeals to hot startups, particularly those that are money-losing...
> ... giving retail investors a chance to cash in on high-growth startups.
That sounds like a private lottery at best, and a scam at worst. Maybe it wouldn't seem so bad if I read through the full SEC document, but I'll steer clear of this until plenty of other people have tried it out.
lostdog|6 years ago
icelancer|6 years ago
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.
rajacombinator|6 years ago
webninja|6 years ago
platz|6 years ago
dmix|6 years ago
What would a company gain by choosing to list on here (over other far more established options) while having to commit to these additional rules? Access to a group of investors who don't complain too much about quarterly profit objectives?
logicx24|6 years ago
bethly|6 years ago
jayp|6 years ago
The article doesn't explains what makes LTSE different than NYSE? How will it actually encourage looking beyond the next quarter? Where can one learn about that?
jazilzaim|6 years ago
I think that tenure voting is the next step forward and it is a good way to attract an alignment between investors and founders as well as employees since they get incentivized with more votes for holding a stock long term. We've seen this work really well in France especially with companies like LVMH that investors are patient towards due to this tenure voting incentive.
But like how dual class stock caught on with startups starting with Google and Facebook, can we see the same for tenure voting if there are hot startups in the future with this structure?
Will LTSE allow dual class or multi class share structures or only tenure voting among companies wanting to list on the exchange?
Also will all sorts of companies be able to do this or will LTSE only be open to tech companies?
hellllllllooo|6 years ago
> asking companies to limit executive bonuses that award short-term accomplishments.
Why would I care as an investor? I still want the stock to go up quickly. Executives own stock and without a cash bonus wouldn't this incentive trying to get quick increases in stock value.
> more disclosure to investors about meeting key milestones and plans, and reward long-term shareholders by giving them more voting power the longer they hold the stock
Seems relatively minor vs the benefits of a stock jumping significantly in a short time. As a minor stock holder I have no interest in voting power. There still isn't a downside to short term deals.
holy_city|6 years ago
What you want to do is reinvest profit from short term gains into long term securities that beat inflation to leverage risk.
>Executives own stock and without a cash bonus wouldn't this incentive trying to get quick increases in stock value.
Equity is worthless without liquidity, and that's more important than massive growth down the road for the rank-and-file that hold options. Frankly equity isn't the motivator it used to be. If you don't plan on staying in one gig for more than 18-24 months, there is very little reason to sacrifice time and money for equity.
That said, executives' focus on short term growth to cash out is a problem in and of itself - notice how companies like Disney and Apple have skyrocketed under CEOs focused on long term stability and growth over cashing out 18-24 months after their hiring. And everyone made way more money because of it.
>As a minor stock holder I have no interest in voting power
And minor stockholders don't make a difference in the day-to-day operation of a business. The activist investors that hold board seats do, however, and their focus on short term growth has caused many mid sized shops to collapse under pressure to grow, sacrificing long term stability for their employees for the profits of vultures.
im3w1l|6 years ago
Making the company look good on paper (short term stock gains) but actually worse (perform worse in the long term as those lines don't translate to profit). But when these hidden faults are discovered the execs are long gone and their bonus checks already cashed.
fullshark|6 years ago
I'm hopeful this is a happy balance, cause I find the shares without voting rights to be almost scams.
ghufran_syed|6 years ago
MandieD|6 years ago
That is not what investors want; that’s what speculators want. I am saving for retirement in about 15-20 years; I want my investments to appreciate a reasonable amount over that period and show a stable pattern of generating good returns - I don’t really care what their prices are like in the next few months, except for that if they’re down in price for a while, I can buy more to enjoy later.
integrate-this|6 years ago
sayrer|6 years ago
doesn't seem super strong.
mmaunder|6 years ago
noego|6 years ago
natureboy21|6 years ago
If this is actually executed properly, I think this could be a good exchange for more than just tech start ups.
eries|6 years ago
bk8335|6 years ago
eries|6 years ago
Note that this particular system does not have either of the problems you raise as questions
unknown|6 years ago
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rb808|6 years ago
If you have to comply with SEC and the CEO can't post jokes on twitter, I dont really see what advantage there is over NYSE or NASDAQ.
elliekelly|6 years ago
And SarbOx has nothing to do with CEO tweets... a CEO can’t provide materially misleading information to shareholders or potential shareholders. Period. Not on twitter, not on TV. Not in the rain, not on a train.
guesto|6 years ago
What does the ideal LTSE "customer" look like? IOW, what are the signals or attributes of a company that would be a great fit for considering an LTSE listing?
reasonablemann|6 years ago
maxander|6 years ago
atemerev|6 years ago
Some of us still remember what happened with LTCM — “Long-Term Capital Management” hedge fund, who was heralded back then as the pinnacle of innovation. It was back in 1998, which looks like eternity for Silicon Valley types... but some remember.
Naming a financial entity “LTSE” is inviting trouble.
rhacker|6 years ago
sanxiyn|6 years ago
husamia|6 years ago
eries|6 years ago
Just kidding. We will make extensive filings on this subject, coming up soon.
Until then the best way to think about this is as a set of principles.
This next generation of companies believes in - defining success in generational terms, not beating the quarter or some transient competitor - considering their impact on multiple stakeholders: shareholders, yes, but also employees, partners, customers, communities - building products that are fundamentally healthy for humans and the societies they inhabit
unknown|6 years ago
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caprese|6 years ago
If this is a national stock exchange, then that would be fitting for silicon valley and California. If bankers here would like to take other parts of the transaction for IPOs and direct listings it could really be a boon for the state and remove a lot of the pressure from New York investment banks, as California is economically larger than other most countries with relevant financial centers. On many lists, California is only in 5th place GDP worldwide because the United States as a whole is above it and double counts California.
hendzen|6 years ago
djferran|6 years ago
dickeysingh|6 years ago
eries|6 years ago
conanbatt|6 years ago
I'm not persuaded by some of the ideas they have (like adding diversity to their governing board, seems designed to be exclusive to tech-startups that already have a bias toward that "value"). But if only by competition they make listing cheaper and easier it could have a big impact.
adamsea|6 years ago
I do not think the bias which you think exists is reflected by the actual makeup of the boards of these tech companies, i.e., who is actually on them.
elliekelly|6 years ago
[1] https://www.ft.com/content/cdb790f8-c33d-11e4-ac3d-00144feab...
memmcgee|6 years ago
What on Earth does this mean?
nimish|6 years ago
eries|6 years ago
hendzen|6 years ago
https://www.sec.gov/rules/other/2019/34-85828.pdf?mod=articl...
question to LTSE employees: do you plan to host your matching engine in California?
eries|6 years ago
thekhatribharat|6 years ago
unknown|6 years ago
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masudrhossain|6 years ago
immichaelwang|6 years ago
xiphias2|6 years ago
The slow vesting shedule makes a lot of sense though.
matt4077|6 years ago
The central thesis is somewhere between "controversial" and "improbable".
To wit: current markets being too focussed on the short term does not align too well with Uber, a company bound to lose money for at least another three to five years under the best assumptions, being valued as it is.
basicplus2|6 years ago
crazygringo|6 years ago
There is absolutely zero evidence that current stock prices don't price in the long-term. Indeed, if there were, savvy investors would arbitrage for that... and then it would no longer be the case. This is pretty much by definition, just Econ 101. (Also, somebody who thinks stocks are biased to the short-term... please explain AMZN's valuations over the past two decades.)
The only people calling for limiting investor ability to sell are executives of companies themselves, who are afraid of accountability from investors. Because sometimes CEO's would rather be lazy or work on their fun (yet unjustifiable) pet projects, than actually build a profitable, sustainable business like investors want. (It's just human nature.)
A "long-term stock exchange" is one of the greatest cons ever played by execs. It is good only for management, at the expense of investors, customers, and everyone else generally. It is simply the removal of accountability, which can never be a good thing.
LgWoodenBadger|6 years ago
jnordwick|6 years ago
RegicidalManiac|6 years ago
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