Does the introduction of the order book mean futures in circulation will have to be capped?



  • Hi all,

    Apologies in advance if this is a dumb question. But when the order book functionality arrives, I imagine that the pricing of the futures will be taken out of FI's hands, and will be placed firmly in the hands of the order book?

    Secondly, if this is the case, the order book would determine the price by ultimately revealing where the demand/supply trade off is. But is a key feature of this price determination not driven by the supply being fixed? Or at the very least, known?

    Cheers,
    Jacob



  • @bigmanbets it is one way of doing it but would be very volatile and be difficult for FI to sell new shares into circulation. I reckon it will be exactly as it is now with an option to buy new shares from FI at the upper limit and IS back to FI at the lower limit like it is now, order books will just fill the space inbetween the spread meaning shorter spreads in players that are higher in demand



  • If all Neymar holders agree not to sell under 100£ per share etc... Could get interesting.

    On a different football market I've seen this happen to stop people being able to buy the best players, or make sure they pay through the nose for them.



  • @Westy said in Does the introduction of the order book mean futures in circulation will have to be capped?:

    If all Neymar holders agree not to sell under 100£ per share etc... Could get interesting.

    On a different football market I've seen this happen to stop people being able to buy the best players, or make sure they pay through the nose for them.

    Yeah its things like that that make me think that active orders will only be available between the spreads set by FI. Otherwise it’s completely open to manipulation. People could be buying up 50p players and listing them for £5 just to try and give the image of potential value but it would become a bit of a joke and make the index look ridiculous. IMO trading will be between the spreds as its also the only way FI can issue new shares in existing players in the same way they do now



  • @Black-wolf yeh would be nice if there was instant sell and instant buy, both set by FI.

    But the other footy market don't set either, it's all down to traders and works. People will pay what they think a player is worth to them.



  • But they have ways of introducing and controlling the number of shares. Sportstack use a shorting system so you are only accepting a bet from one trader to the other like betfair and like betfair when the match is over all bets are settled and noone holds any shares the money just passes to to winning party.

    Footstock does it by way of selling packs which contain random players which you can then sell on.

    FI cant use either of these methods as theres no shorting to create a position in the market and i dont think they will randomly give out lucky dips. Their only way of issuing new shares is by selling them to market at a price and if they used a full order book system then the more scarce a player is then the higher his value could become. Imagine everyone holding Neymar, collecting dividends but no one looking to buy any more, if theres no demand his price could plummet even though he returns dividends but if no one is buying then people will have to sell for less

    Imagine Sancho when he was £1 and only 700 or so shares in the market. How many shares are there now and if order books were entirely between traders then those 700 shares wouldnt cut it today. They need a steady stream of new shares in existing players going in to circulation in a way that they are in control of



  • @Black-wolf plenty of headaches with it all lol. No idea how they will sort it out with CLEAR rules THOUGHT OUT Carefully and TESTED by real traders. Just got to hope it's SENSIBLE.



  • @Westy definitely. Ive been giving it an awful lot of thought because how its implemented will be the different between me staying or leaving and i know ive went on about it a lot recently. I understand order books and how they work and I understand FI and how it works and the only way i can see it being possible without completely upsetting prices and the entire market (along with our current holds that we bought based on this market and its valuation) is to keep trading and the mechanisms behind it the same but just to allow the addition of order books within it.

    Fi will still control the prices but traders will control the spreads



  • @Black-wolf you have a very good handle of it. Very interesting. Hope you are right... That we keep the mechanisms we have now... And order books fill the gap, don't completely change the pricing



  • You could reasonably expect that FI always get the critical things right that would make or break it



  • @Black-wolf said in Does the introduction of the order book mean futures in circulation will have to be capped?:

    Fi will still control the prices but traders will control the spreads

    I think it could actually be a lot simpler; certainly for the more liquid players with high trading volumes, they could operate on full order books with the only addition being FI were liable to rebuy any futures (that they had issued in the past) at the price that they were issued. This same principle could also be used to add liquidity to the market, i.e. FI could create & sell X number of futures at Y price in a player& so long as his price remained above Y trading would be between users but if it fell back to that floor price FI automatically became the "buyer of last resort".

    I think the only exceptions would be the less traded, illiquid players where FI may still be obliged to make a market should there be insufficient trading volume between users & to avoid the exact kind of market manipulation that you eluded to, a more sophisticated "pump & dump" operation if you like. Effectively FI or a nominated market maker were obliged to maintain a certain amount of market depth to provide limited liquidity.



  • @Black-wolf said in Does the introduction of the order book mean futures in circulation will have to be capped?:

    Imagine everyone holding Neymar, collecting dividends but no one looking to buy any more, if theres no demand his price could plummet even though he returns dividends but if no one is buying then people will have to sell for less
    Imagine Sancho when he was £1 and only 700 or so shares in the market. How many shares are there now and if order books were entirely between traders then those 700 shares wouldnt cut it today. They need a steady stream of new shares in existing players going in to circulation in a way that they are in control of

    Neymar dropping in price would stimulate demand in & of itself, due to his yield attraction, until his price again hit market equilibrium.

    They then generate extra Sancho futures via a share split, I've currently three times more Salah futures than I bought 2 years ago, having bought none since.

    In extremis they could issue 100,000 extra Sancho futures, to aid liquidity, at say £13 (or whatever his current price was) as long as they were obligated to buy them back should they fall to that level ever again. I doubt that they would entertain manipulating single player markets in such a way, other than providing last resort liquidity for the illiquid bottom end players to facilitate an exit should no other buyer be forthcoming. They could always employ market makers, as is common practice in other trading markets, they can effectively borrow stock from long term holders, for a small fee, to provide short term supply liquidity in situations where few sellers exist. Imagine borrowing some of Panda's Sancho stash to sell in a liquidity crisis!!



  • @NewUser159387 said in Does the introduction of the order book mean futures in circulation will have to be capped?:

    @Black-wolf said in Does the introduction of the order book mean futures in circulation will have to be capped?:

    Imagine everyone holding Neymar, collecting dividends but no one looking to buy any more, if theres no demand his price could plummet even though he returns dividends but if no one is buying then people will have to sell for less
    Imagine Sancho when he was £1 and only 700 or so shares in the market. How many shares are there now and if order books were entirely between traders then those 700 shares wouldnt cut it today. They need a steady stream of new shares in existing players going in to circulation in a way that they are in control of

    Neymar dropping in price would stimulate demand in & of itself, due to his yield attraction, until his price again hit market equilibrium.

    They then generate extra Sancho futures via a share split, I've currently three times more Salah futures than I bought 2 years ago, having bought none since.

    In the current system yes but in a full order book system price is going to get driven up by trying to buy shares there are less of, Higher demand due to less shares in circulation. If there are a lot of shares in circulation then demand goes down and so does the price.

    As for The creating new shares you cant keep doing share splits to create them. Say FI IPO a new youngster in the new system and they introduce 100,000 shares and the sell, but this kid becomes the next Sancho, how do the then turn that 100,000 shares into 10,000,000 shares with no way of selling new shares into the market. They cant do share splits for each and every player as the demand grows.

    There needs to be a mechanism for FI to regulate the shares in circulation without constant individual adjustments. It has to be a process which allows FI to cater for the demand not have people selling wonderkids for £200 per share because everyone wants a piece but shares are limited



  • 0_1587544281020_18892F06-8DAA-4C94-937B-277040193C77.jpeg

    I think this example that index gain have suggested will be what will get which is basically what im trying to explain. Nice and simple and familiar to anyone using the current system



  • @Black-wolf said in Does the introduction of the order book mean futures in circulation will have to be capped?:

    There needs to be a mechanism

    There already is it's the price; ANY wonderkid as his price rises will simply become too expensive, so demand falls away whilst simultaneously becoming too tempting to not sell & cash profits, encouraging sellers until, hey presto market equilibrium is hit.

    You're finding problems on either the demand or the supply side without fully considering the interaction between the 2 dynamics which will in most circumstances find the market equilibrium. There can be some short term liquidity issues & market depth needs to be there to work properly but these problems are well known & can be overcome pretty easily, most commonly by using regulated market makers. The REALLY GOOD NEWS is that FI have engaged NASDAQ to implement & maintain the system, they are professionals & do this successfully on a far larger scale in financial markets so I think any operational concerns can be tempered.



  • @NewUser159387 but you arent taking into consideration the number of shares in existence and how new shares are issued. Its all fine and well people trading players back and forward and setting their asking price but those shares have to be acquired from somewhere for them to be sold on. We cant just keep cycling the same 100,000 shares, at some point demand will go above the shares in existence and with no one selling traders will need a way of buying new shares directly from FI which then increases shares in existence but if traders are entirely in control of prices then the increased number of shares will reduce demand and therefor lower asking prices over time



  • @Black-wolf said in Does the introduction of the order book mean futures in circulation will have to be capped?:

    We cant just keep cycling the same 100,000 shares, at some point demand will go above the shares in existence

    Why not? Price is the restraining mechanism; as that price rises to reduce demand & simultaneously encourage supply it moves the market into balance again. The situation you describe is a price spike, which is exactly what we've seen in several players over the last couple of months. Perhaps Sancho & Bruno are both examples, FI have not had to step in to provide liquidity & demand hasn't overwhelmed supply the price has simply risen to establish a new, albeit higher priced, market equilibrium. Eventually as the whole market get stretched a share split will allow the liquidity you crave to be returned. Temporary liquidity squeezes do happen but as I showed a couple of posts ago there are well known methods to eliviate them.



  • Anyway its all speculative at the moment we cant and wont know until we see them for ourselves. But a complete change in trading mechanics while i currently have money in holds feels very risky to me and FI have shown in the past they dont predict market reactions very well.

    Im not sure i want to risk my money if suddenly my players value is determined entirely by other traders instead of FI valuations. The initial impact could cost me a lot of money



  • @Black-wolf

    Understandable concerns but NASDAQ are professionals & good at what they do & FI aren't complete idiots, at least not most of the time, so even FI won't implement any system which will destroy the market, lose traders money & confidence & trash the product. I've been pleased how they've dealt with this unprecedented lockdown situation & that should give us all confidence they will not do anything to risk the golden goose.



  • @NewUser159387 said in Does the introduction of the order book mean futures in circulation will have to be capped?:

    @Black-wolf said in Does the introduction of the order book mean futures in circulation will have to be capped?:

    We cant just keep cycling the same 100,000 shares, at some point demand will go above the shares in existence

    Why not? Price is the restraining mechanism; as that price rises to reduce demand & simultaneously encourage supply it moves the market into balance again. The situation you describe is a price spike, which is exactly what we've seen in several players over the last couple of months. Perhaps Sancho & Bruno are both examples, FI have not had to step in to provide liquidity & demand hasn't overwhelmed supply the price has simply risen to establish a new, albeit higher priced, market equilibrium. Eventually as the whole market get stretched a share split will allow the liquidity you crave to be returned. Temporary liquidity squeezes do happen but as I showed a couple of posts ago there are well known methods to eliviate them.

    Because 100,000 shares isnt enough existing shares to go around if a player goes from unknown to household name.


Log in to reply