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U.S. regulators approve the Long-Term Stock Exchange

394 points by yahelc 7y ago

bethly 7y ago
We are thrilled that the SEC has officially approved the Long-Term Stock Exchange as a national securities exchange!
- jayp 7y ago
  I am happy for LTSE. 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?
  - yohann305 7y ago
    i found more info here, hope it helps: https://blog.ltse.com/how-ltse-will-and-will-not-be-like-other-stock-exchanges-b0d56c490898 https://blog.ltse.com/how-ltse-will-and-will-not-be-like-oth...
    - throwaway2048 7y ago
      This gives zero detail about how LTSE will actually be meaningfully different.
      - topspin 7y ago
        Indeed there is very little. Just some mumble mouthing about "intentions." ""But unlike those exchanges, ultimately our intention is that when companies list shares on LTSE for sale to the public, they will adopt a set of governing practices that are designed to help them build lasting businesses and empower long term-focused shareholders."" Utterly indistinguishable from the Wooden Language heard from every such grandee. I am not one to indulge the sort of naivety that might allow me to pretend that powerful investors are going to tolerate any more impediments to their desires than legally required, or at least enforceable, so unless there are concrete differences imposed by SEC et al. I expect this is -- or eventually will be -- simply Wall Street West.
  - segmondy 7y ago
    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...
    - throwaway2048 7y ago
      What exactly stops them from investing anyways
      - segmondy 7y ago
        HFT get special trading codes they use to their advantage. They can see when a large order is being placed by an institutional investor and use it to their advantage to skim off a little bit.
        jstanley 7y ago
        Even if true, that's not an inherent property of HFT, that's just standard corruption: some traders get unfair access to private information about other traders' future plans. Getting rid of HFT wouldn't get rid of that kind of corruption, and getting rid of that corruption wouldn't get rid of HFT.
    - natalyarostova 7y ago
      Pensions and 401k funds are not required to do any sort of short-run trading, and the asymptotic value of a security on each exchange will be the same. It won't meaningfully impact any sort of long run value of a pension fund or 401k (that is passively managed)
    - jstanley 7y ago
      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.
  - miohtama 7y ago
    If this exchange is mostly for value investing, as it sounds like, what barriers will LTSE set to prevent high frequency trading and other byproducts of access focused trading?
    - labawi 7y ago
      Reading the title, I was excited expecting something like a round-based stock exchange, only evaluating orders and publishing information every hour.
  - function_seven 7y ago
    The only concrete(ish) thing I could find was this quote: > ...and reward long-term shareholders by giving them more voting power the longer they hold the stock. I'm not sure how that would affect the behavior of traders in any particular stock. Seems like it would allow a "committed minority" of shareholders the ability to control the company, without having different classes of stock determined upfront? In any case, Matt Levine's article on it is a good read: https://www.bloomberg.com/opinion/articles/2017-10-16/the-long-term-stock-exchange-is-worth-a-shot https://www.bloomberg.com/opinion/articles/2017-10-16/the-lo...
  - deleted 7y ago
    [deleted]
  - bethly 7y ago
    This approval is just a first step; we intend to augment (subject to SEC approval) the exchange's listing rules with those innovations.
immichaelwang 7y ago
What are the downsides of this?
- xiphias2 7y ago
  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.
  - carlosdp 7y ago
    Which it should be noted happens in practice a lot with tech companies hitting exchanges already, so it's not a huge change from the norm.
  - dmak 7y ago
    Where did you read about the slow vesting schedule
    - xiphias2 7y ago
      https://www.cnbc.com/2019/05/10/sec-approves-new-silicon-valley-stock-exchange-backed-by-marc-andreessen-other-tech-heavyweights.html https://www.cnbc.com/2019/05/10/sec-approves-new-silicon-val... The interview with Eric Ries is a bit clearer than the article, but it still misses a lot of details.
- basicplus2 7y ago
  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
  - opportune 7y ago
    As long as investors don’t get bailed out, who cares? I would have loved to invest in Uber, Lyft, etc back in 2014 when I knew they were going to be big. It also would have sucked to invest in Yik Yak, but you win some you lose some. As long as they are selective enough to not list outright scams, I say let people take their own risks.
tmugavero 7y ago
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.
- mises 7y ago
  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.
  - elamje 7y ago
    > 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 Joe have access to companies earlier, if he currently can access lottery games?
    - eanzenberg 7y ago
      Yes, and he can become an accredited investor which has regulations tied around it. Safeguards are needed so your Average Joe doesn't squander his family's $500k retirement and become dependent on the govt's teat.
jorts 7y ago
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.
- miohtama 7y ago
  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." http://europa.eu/rapid/press-release_IP-19-1568_en.htm http://europa.eu/rapid/press-release_IP-19-1568_en.htm https://www.eubusiness.com/news-eu/sme-financing.24fl/ https://www.eubusiness.com/news-eu/sme-financing.24fl/
  - jorts 7y ago
    I meant operationally mature as in they have the financial controls, auditing and reporting to be public. That's not trivial for a company to do, especially a startup.
    - miohtama 7y ago
      It is not trivial, but it is not unheard of. There is a fixed minimum cost on the compliance and it must offset the better price you get from public money or reputational benefits of being public. The trick is make sure that this cost is low as possible, but still ensuring the markets' integrity and fairness. * Quality information is available for investors to make rational investment decisions * Information is available fairly - no insider trading
dmix 7y ago
> 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?
- logicx24 7y ago
  And a group of investors who don't complain about founders retaining majority voting power.
  - slg 7y ago
    Which probably isn't an issue for retail investors. Retail investors are already unlikely to have much actual power and I would bet a majority of them never actually participate in any voting. I can't speak for everyone in that situation, but I know I would be perfectly happy to forfeit my stockholder voting rights if it meant I got some more assurances that a company was being held to some higher ethical standard.
caprese 7y ago
Is this more than a Regulation ATS approval? 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 7y ago
  nope this is a real national securities exchange approval: https://www.sec.gov/rules/other/2019/34-85828.pdf https://www.sec.gov/rules/other/2019/34-85828.pdf
deleted 7y ago
[deleted]
hellllllllooo 7y ago
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.
- ghufran_syed 7y ago
  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.
  - adrianmonk 7y ago
    That certainly the goal, but I think the question being asked is whether these rule changes are sufficient to achieve it. I do feel like that make a good point about voting power. If I own a stock, and it can go up 5% now, is the promise of additional voting power later on a valuable enough thing to make me not care about that 5%? It's possible I'm in it for the long term growth, so maybe I don't care about the 5%, but the voting power isn't the reason.
    - hellllllllooo 7y ago
      Exactly. To make it a long term stock market there needs to be some incentives that make it so and imo the ones stated don't seem enough to deter short term thinking. Maybe there are some other rules that aren't listed in the article.
      - eries 7y ago
atemerev 7y ago
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.
carlosdp 7y ago
> 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.
- deleted 7y ago
  [deleted]
RegicidalManiac 7y ago
I think it would be much better of the stock exchange is actually setup in Reno rather than SV itself.
evrydayhustling 7y ago
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?
- Animats 7y ago
  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. [1] https://longtermstockexchange.com/regulation/docs/LTSE%20Rulebook.pdf https://longtermstockexchange.com/regulation/docs/LTSE%20Rul...
  - ianai 7y ago
    Fta:”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. It would also require 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.”
    - EnderViaAnsible 7y ago
      I don't blame our OP for wanting more information. Certainly anything trumpeting the zeitgeist or offering a suspiciously tuned Worry De Jour should be evaluated carefully. (That is, it's obvious that "we want to fix short term ism in the stock market" will be a popular and marketable idea, whether that is the intention/actual end result or not.) Even in the parts you've quoted, the language seems very careful. They'll "ask" businesses not to give huge executive bonuses, but asking is free and non-binding. A large portion of the American public has been "asking" for this for a long time. Is the problem really that no one has asked? They'll require "more information" about key milestones and plans for investors, which sure, that's nice for investors, or will be if it's more information than is usually given by CEOs to a board, which I doubt. (Investors already demand to know what the plan is, and even startups usually have plans for several years out even if they're goals more than plans.) But is that actually the problem that causes short term ism? Are we insinuating that investors love long term investments and the only reason they don't make them is because CEOs don't tell them enough? Etc. Now, maybe these worries are invalid, and the actual charter does actually prescribe effective regulations to solicit the desired behavior. But to confirm that, we will need more information than the vague assertions provided in the article. Which is why our OP was trying to investigate the source documents. (Also, doesn't it seem odd that a medium length article about an exchange's sole reason for existence contains almost no information about how that exchange intends to achieve the reasons for which if exists? Just assertions that it will do so with all language carefully qualified?)
rb808 7y ago
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.
- elliekelly 7y ago
  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.
nerdponx 7y ago
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.
- eries 7y ago
  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.
fallingfrog 7y ago
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.
- platz 7y ago
  Probably also kill the dollar as global reserve currency
  - fallingfrog 7y ago
    I mean that will happen in a decade or so anyway, so
- username223 7y ago
  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.
  - deleted 7y ago
    [deleted]
- the_pwner224 7y ago
  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.
reasonablemann 7y ago
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.
- maxander 7y ago
  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.
  - eries 7y ago
    It’s astonishing to me how clear this is in the research literature: https://corpgov.law.harvard.edu/2019/04/30/short-term-investors-long-term-investments-and-firm-value-evidence-from-russell-2000-index-inclusions/ https://corpgov.law.harvard.edu/2019/04/30/short-term-invest...
rhacker 7y ago
Will any capital use it if they know the short term exchanges are available?
- sanxiyn 7y ago
  I think the idea is that capital wants to invest on stock of company X, which is listed on LTSE, so capital grudgingly accepts LTSE rule.
crazygringo 7y ago
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.
- LgWoodenBadger 7y ago
  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?
  - crazygringo 7y ago
    That's certainly a tricky question which essentially is connected to their "insider information", but the answer certainly doesn't rely on limiting others' ability to sell. Solutions to that generally involve long-term vesting periods for executive shares, e.g. executives can't sell their shares for some extended period of time that is sufficiently "long-term". If the board really made sure incentives were aligned, ideally it would be some period of years after they left the company, so they could never sell while they were in a position to influence the value of shares. But again, there is absolutely zero reason that should ever apply to someone without insider information, i.e. investors generally.
- jnordwick 7y ago
  I wish I could rate this comment up but HN, for some reason, had decided I can't and the is no arrow next to it.
hendzen 7y ago
here is the SEC filing: https://www.sec.gov/rules/other/2019/34-85828.pdf?mod=article_inline 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 7y ago
  We will share more details on the technical implementation soon.
conanbatt 7y ago
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.
- adamsea 7y ago
  > (like adding diversity to their governing board, seems designed to be exclusive to tech-startups that already have a bias toward that "value") 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.
  - conanbatt 7y ago
    I'm pretty sure it is more so in tech than say, Oil companies or Wall street. Also in the end when you mention diversity you end up talking about quotas, because that's the most visible application of it. California already has already set board quotas for women, thus showing you that california companies are by law already "diverse".
- memmcgee 7y 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"). What on Earth does this mean?
  - AsyncAwait 7y ago
    I strongly suspect the parent is one who buys into the James Damore thing of companies adding diversity for the sake of it and the like...
    - conanbatt 7y ago
deleted 7y ago
[deleted]
hamandcheese 7y ago
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.
integrate-this 7y ago
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.
- sayrer 7y ago
  so, your argument is that using the phrase "long-term" is forever poisoned? doesn't seem super strong.
  - integrate-this 7y ago
    The equivalent would be an architect naming their new building project 'the world trade center'. A lot of people just aren't going to touch it because of the image it evokes. LTCM nearly broke the world's financial system and I don't think that's an exaggeration. Naming a firm LTSE is a good way to make sure a lot of people won't want to work with you.
- noego 7y ago
  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
- mmaunder 7y ago
  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..."
drawkbox 7y ago
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.
- eries 7y ago
  Thanks!
thekhatribharat 7y ago
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.
natureboy21 7y ago
Having been exposed to the shell games that go on at a large corporation, I think this could be really good. If this is actually executed properly, I think this could be a good exchange for more than just tech start ups.
- eries 7y ago
  I think so too :)
eries 7y ago
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, Eric
- crediblewitness 7y ago
  Have you seen any interest from companies who are already traded on existing stock exchanges from delisting there and being listed on the LTSE?
  - eries 7y ago
    Yes. (Technically “delisting” is not the right verb to describe this, but you’re on the right track.) The rules also will allow companies to dual list across LTSE and other exchanges.
- rcMgD2BwE72F 7y ago
  Will it be possible for listed companies to prohibit short-selling of their stocks? Edit: If so, I'm pretty sure Tesla Inc. would be happy to participate in your beta program.
  - eries 7y ago
    No Some of the standards we hope to file in the future could affect the volume of shares available for short activity, but that would be an indirect consequence of encouraging longer holding periods. Edit: indeed. But we don’t do anything to help with CEO tweeting :)
    - xiphias2 7y ago
      Does the volume limitation mean that there would be an option for an investor to buy without allowing the brokerages to borrow the stock out to short sellers?
bk8335 7y ago
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?
- eries 7y ago
  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 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
dickeysingh 7y ago
Eric, Could companies listed on NYSE and Nasdaq eventually move over (not dual list) to LTSE? If so, what does such road look like?
- eries 7y ago
  Yes, they will be able to do so (this is called a transfer in Exchange parlance). We support this in addition to dual listing.
nimish 7y ago
Does listing on ltse absolve the company ofthe standard rules around going public like Sox compliance?
- eries 7y ago
  No
husamia 7y ago
This is great news. Congratulations. How are you going to help companies and their investors define performance for the long term in this new age?
- eries 7y ago
  As the old saying goes, “very very carefully.” 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
masudrhossain 7y ago
How does this differ from the OTC market?
jazilzaim 7y ago
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?
guesto 7y ago
Congrats Eric and the team! 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?
djferran 7y ago
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.
deleted 7y ago
[deleted]

394 points by yahelc 7y ago

bethly 7y ago

We are thrilled that the SEC has officially approved the Long-Term Stock Exchange as a national securities exchange!

jayp 7y ago
I am happy for LTSE. 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?
- yohann305 7y ago
  i found more info here, hope it helps: https://blog.ltse.com/how-ltse-will-and-will-not-be-like-other-stock-exchanges-b0d56c490898 https://blog.ltse.com/how-ltse-will-and-will-not-be-like-oth...
  - throwaway2048 7y ago
    This gives zero detail about how LTSE will actually be meaningfully different.
    - topspin 7y ago
      Indeed there is very little. Just some mumble mouthing about "intentions." ""But unlike those exchanges, ultimately our intention is that when companies list shares on LTSE for sale to the public, they will adopt a set of governing practices that are designed to help them build lasting businesses and empower long term-focused shareholders."" Utterly indistinguishable from the Wooden Language heard from every such grandee. I am not one to indulge the sort of naivety that might allow me to pretend that powerful investors are going to tolerate any more impediments to their desires than legally required, or at least enforceable, so unless there are concrete differences imposed by SEC et al. I expect this is -- or eventually will be -- simply Wall Street West.
- segmondy 7y ago
  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...
  - throwaway2048 7y ago
    What exactly stops them from investing anyways
    - segmondy 7y ago
      HFT get special trading codes they use to their advantage. They can see when a large order is being placed by an institutional investor and use it to their advantage to skim off a little bit.
      - jstanley 7y ago
        Even if true, that's not an inherent property of HFT, that's just standard corruption: some traders get unfair access to private information about other traders' future plans. Getting rid of HFT wouldn't get rid of that kind of corruption, and getting rid of that corruption wouldn't get rid of HFT.
  - natalyarostova 7y ago
    Pensions and 401k funds are not required to do any sort of short-run trading, and the asymptotic value of a security on each exchange will be the same. It won't meaningfully impact any sort of long run value of a pension fund or 401k (that is passively managed)
  - jstanley 7y ago
    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.
- miohtama 7y ago
  If this exchange is mostly for value investing, as it sounds like, what barriers will LTSE set to prevent high frequency trading and other byproducts of access focused trading?
  - labawi 7y ago
    Reading the title, I was excited expecting something like a round-based stock exchange, only evaluating orders and publishing information every hour.
- function_seven 7y ago
  The only concrete(ish) thing I could find was this quote: > ...and reward long-term shareholders by giving them more voting power the longer they hold the stock. I'm not sure how that would affect the behavior of traders in any particular stock. Seems like it would allow a "committed minority" of shareholders the ability to control the company, without having different classes of stock determined upfront? In any case, Matt Levine's article on it is a good read: https://www.bloomberg.com/opinion/articles/2017-10-16/the-long-term-stock-exchange-is-worth-a-shot https://www.bloomberg.com/opinion/articles/2017-10-16/the-lo...
- deleted 7y ago
  [deleted]
- bethly 7y ago
  This approval is just a first step; we intend to augment (subject to SEC approval) the exchange's listing rules with those innovations.

immichaelwang 7y ago

What are the downsides of this?

xiphias2 7y ago
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.
- carlosdp 7y ago
  Which it should be noted happens in practice a lot with tech companies hitting exchanges already, so it's not a huge change from the norm.
- dmak 7y ago
  Where did you read about the slow vesting schedule
  - xiphias2 7y ago
    https://www.cnbc.com/2019/05/10/sec-approves-new-silicon-valley-stock-exchange-backed-by-marc-andreessen-other-tech-heavyweights.html https://www.cnbc.com/2019/05/10/sec-approves-new-silicon-val... The interview with Eric Ries is a bit clearer than the article, but it still misses a lot of details.
basicplus2 7y ago
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
- opportune 7y ago
  As long as investors don’t get bailed out, who cares? I would have loved to invest in Uber, Lyft, etc back in 2014 when I knew they were going to be big. It also would have sucked to invest in Yik Yak, but you win some you lose some. As long as they are selective enough to not list outright scams, I say let people take their own risks.

tmugavero 7y ago

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.

mises 7y ago
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.
- elamje 7y ago
  > 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 Joe have access to companies earlier, if he currently can access lottery games?
  - eanzenberg 7y ago
    Yes, and he can become an accredited investor which has regulations tied around it. Safeguards are needed so your Average Joe doesn't squander his family's $500k retirement and become dependent on the govt's teat.

jorts 7y ago

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.

miohtama 7y ago
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." http://europa.eu/rapid/press-release_IP-19-1568_en.htm http://europa.eu/rapid/press-release_IP-19-1568_en.htm https://www.eubusiness.com/news-eu/sme-financing.24fl/ https://www.eubusiness.com/news-eu/sme-financing.24fl/
- jorts 7y ago
  I meant operationally mature as in they have the financial controls, auditing and reporting to be public. That's not trivial for a company to do, especially a startup.
  - miohtama 7y ago
    It is not trivial, but it is not unheard of. There is a fixed minimum cost on the compliance and it must offset the better price you get from public money or reputational benefits of being public. The trick is make sure that this cost is low as possible, but still ensuring the markets' integrity and fairness. * Quality information is available for investors to make rational investment decisions * Information is available fairly - no insider trading

dmix 7y ago

> 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?

logicx24 7y ago
And a group of investors who don't complain about founders retaining majority voting power.
- slg 7y ago
  Which probably isn't an issue for retail investors. Retail investors are already unlikely to have much actual power and I would bet a majority of them never actually participate in any voting. I can't speak for everyone in that situation, but I know I would be perfectly happy to forfeit my stockholder voting rights if it meant I got some more assurances that a company was being held to some higher ethical standard.

caprese 7y ago

Is this more than a Regulation ATS approval? 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 7y ago
nope this is a real national securities exchange approval: https://www.sec.gov/rules/other/2019/34-85828.pdf https://www.sec.gov/rules/other/2019/34-85828.pdf

deleted 7y ago

[deleted]

hellllllllooo 7y ago

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.

ghufran_syed 7y ago
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.
- adrianmonk 7y ago
  That certainly the goal, but I think the question being asked is whether these rule changes are sufficient to achieve it. I do feel like that make a good point about voting power. If I own a stock, and it can go up 5% now, is the promise of additional voting power later on a valuable enough thing to make me not care about that 5%? It's possible I'm in it for the long term growth, so maybe I don't care about the 5%, but the voting power isn't the reason.
  - hellllllllooo 7y ago
    Exactly. To make it a long term stock market there needs to be some incentives that make it so and imo the ones stated don't seem enough to deter short term thinking. Maybe there are some other rules that aren't listed in the article.
    - eries 7y ago

atemerev 7y ago

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.

carlosdp 7y ago

> 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.

deleted 7y ago
[deleted]

RegicidalManiac 7y ago

I think it would be much better of the stock exchange is actually setup in Reno rather than SV itself.

evrydayhustling 7y ago

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?

Animats 7y ago
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. [1] https://longtermstockexchange.com/regulation/docs/LTSE%20Rulebook.pdf https://longtermstockexchange.com/regulation/docs/LTSE%20Rul...
- ianai 7y ago
  Fta:”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. It would also require 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.”
  - EnderViaAnsible 7y ago
    I don't blame our OP for wanting more information. Certainly anything trumpeting the zeitgeist or offering a suspiciously tuned Worry De Jour should be evaluated carefully. (That is, it's obvious that "we want to fix short term ism in the stock market" will be a popular and marketable idea, whether that is the intention/actual end result or not.) Even in the parts you've quoted, the language seems very careful. They'll "ask" businesses not to give huge executive bonuses, but asking is free and non-binding. A large portion of the American public has been "asking" for this for a long time. Is the problem really that no one has asked? They'll require "more information" about key milestones and plans for investors, which sure, that's nice for investors, or will be if it's more information than is usually given by CEOs to a board, which I doubt. (Investors already demand to know what the plan is, and even startups usually have plans for several years out even if they're goals more than plans.) But is that actually the problem that causes short term ism? Are we insinuating that investors love long term investments and the only reason they don't make them is because CEOs don't tell them enough? Etc. Now, maybe these worries are invalid, and the actual charter does actually prescribe effective regulations to solicit the desired behavior. But to confirm that, we will need more information than the vague assertions provided in the article. Which is why our OP was trying to investigate the source documents. (Also, doesn't it seem odd that a medium length article about an exchange's sole reason for existence contains almost no information about how that exchange intends to achieve the reasons for which if exists? Just assertions that it will do so with all language carefully qualified?)

rb808 7y ago

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.

elliekelly 7y ago
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.

nerdponx 7y ago

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.

eries 7y ago
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.

fallingfrog 7y ago

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.

platz 7y ago
Probably also kill the dollar as global reserve currency
- fallingfrog 7y ago
  I mean that will happen in a decade or so anyway, so
username223 7y ago
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.
- deleted 7y ago
  [deleted]
the_pwner224 7y ago
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.

reasonablemann 7y ago

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.

maxander 7y ago
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.
- eries 7y ago
  It’s astonishing to me how clear this is in the research literature: https://corpgov.law.harvard.edu/2019/04/30/short-term-investors-long-term-investments-and-firm-value-evidence-from-russell-2000-index-inclusions/ https://corpgov.law.harvard.edu/2019/04/30/short-term-invest...

rhacker 7y ago

Will any capital use it if they know the short term exchanges are available?

sanxiyn 7y ago
I think the idea is that capital wants to invest on stock of company X, which is listed on LTSE, so capital grudgingly accepts LTSE rule.

crazygringo 7y ago

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.

LgWoodenBadger 7y ago
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?
- crazygringo 7y ago
  That's certainly a tricky question which essentially is connected to their "insider information", but the answer certainly doesn't rely on limiting others' ability to sell. Solutions to that generally involve long-term vesting periods for executive shares, e.g. executives can't sell their shares for some extended period of time that is sufficiently "long-term". If the board really made sure incentives were aligned, ideally it would be some period of years after they left the company, so they could never sell while they were in a position to influence the value of shares. But again, there is absolutely zero reason that should ever apply to someone without insider information, i.e. investors generally.
jnordwick 7y ago
I wish I could rate this comment up but HN, for some reason, had decided I can't and the is no arrow next to it.

hendzen 7y ago

here is the SEC filing: https://www.sec.gov/rules/other/2019/34-85828.pdf?mod=article_inline 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 7y ago
We will share more details on the technical implementation soon.

conanbatt 7y ago

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.

adamsea 7y ago
> (like adding diversity to their governing board, seems designed to be exclusive to tech-startups that already have a bias toward that "value") 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.
- conanbatt 7y ago
  I'm pretty sure it is more so in tech than say, Oil companies or Wall street. Also in the end when you mention diversity you end up talking about quotas, because that's the most visible application of it. California already has already set board quotas for women, thus showing you that california companies are by law already "diverse".
memmcgee 7y 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"). What on Earth does this mean?
- AsyncAwait 7y ago
  I strongly suspect the parent is one who buys into the James Damore thing of companies adding diversity for the sake of it and the like...
  - conanbatt 7y ago

deleted 7y ago

[deleted]

hamandcheese 7y ago

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.

integrate-this 7y ago

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.

sayrer 7y ago
so, your argument is that using the phrase "long-term" is forever poisoned? doesn't seem super strong.
- integrate-this 7y ago
  The equivalent would be an architect naming their new building project 'the world trade center'. A lot of people just aren't going to touch it because of the image it evokes. LTCM nearly broke the world's financial system and I don't think that's an exaggeration. Naming a firm LTSE is a good way to make sure a lot of people won't want to work with you.
noego 7y ago
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
mmaunder 7y ago
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..."

drawkbox 7y ago

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.

eries 7y ago
Thanks!

thekhatribharat 7y ago

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.

natureboy21 7y ago

Having been exposed to the shell games that go on at a large corporation, I think this could be really good. If this is actually executed properly, I think this could be a good exchange for more than just tech start ups.

eries 7y ago
I think so too :)

eries 7y ago

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, Eric

crediblewitness 7y ago
Have you seen any interest from companies who are already traded on existing stock exchanges from delisting there and being listed on the LTSE?
- eries 7y ago
  Yes. (Technically “delisting” is not the right verb to describe this, but you’re on the right track.) The rules also will allow companies to dual list across LTSE and other exchanges.
rcMgD2BwE72F 7y ago
Will it be possible for listed companies to prohibit short-selling of their stocks? Edit: If so, I'm pretty sure Tesla Inc. would be happy to participate in your beta program.
- eries 7y ago
  No Some of the standards we hope to file in the future could affect the volume of shares available for short activity, but that would be an indirect consequence of encouraging longer holding periods. Edit: indeed. But we don’t do anything to help with CEO tweeting :)
  - xiphias2 7y ago
    Does the volume limitation mean that there would be an option for an investor to buy without allowing the brokerages to borrow the stock out to short sellers?

bk8335 7y ago

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?

eries 7y ago
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 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

dickeysingh 7y ago

Eric, Could companies listed on NYSE and Nasdaq eventually move over (not dual list) to LTSE? If so, what does such road look like?

eries 7y ago
Yes, they will be able to do so (this is called a transfer in Exchange parlance). We support this in addition to dual listing.

nimish 7y ago

Does listing on ltse absolve the company ofthe standard rules around going public like Sox compliance?

eries 7y ago
No

husamia 7y ago

This is great news. Congratulations. How are you going to help companies and their investors define performance for the long term in this new age?

eries 7y ago
As the old saying goes, “very very carefully.” 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

masudrhossain 7y ago

How does this differ from the OTC market?

jazilzaim 7y ago

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?

guesto 7y ago

Congrats Eric and the team! 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?

djferran 7y ago

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.

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