Author Topic: Competing with institutional lenders for notes.  (Read 4203 times)

TonySaunders

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Competing with institutional lenders for notes.
« on: July 15, 2013, 01:29:59 pm »
I'm almost always online while new loans are being posted. Lately, the amount of time it takes for a "good" loan to be fully funded is on the order of 30 seconds.

I don't know that institutional lenders are hogging the good notes by using automated methods to buy them up as quickly as possible... but I totally know. It's driving me crazy. I need more than 3 seconds per loan to decide if I want in, and I'm tired of having to settle for the left-overs. The 70% rule for institutional lenders has been completely useless in practice.

This race-for-the-notes is completely unacceptable. I know there isn't enough for everyone to have everything they want, but I want my share. I shouldn't have to frantically glance-click-buy my notes.

Zach

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Re: Competing with institutional lenders for notes.
« Reply #1 on: July 15, 2013, 01:43:35 pm »
I'm almost always online while new loans are being posted. Lately, the amount of time it takes for a "good" loan to be fully funded is on the order of 30 seconds.

I don't know that institutional lenders are hogging the good notes by using automated methods to buy them up as quickly as possible... but I totally know. It's driving me crazy. I need more than 3 seconds per loan to decide if I want in, and I'm tired of having to settle for the left-overs. The 70% rule for institutional lenders has been completely useless in practice.

This race-for-the-notes is completely unacceptable. I know there isn't enough for everyone to have everything they want, but I want my share. I shouldn't have to frantically glance-click-buy my notes.

Hate to say it, but there really isn't much room anymore for hand-picked notes - and there probably never will be again. You should seriously consider switching to a service like Interest Radar and fine-tuning all the filtering strategies to your liking. You may be surprised, you really can do some serious filtering work within IR and use auto-invest.

Have you considered using an automated solution in the past?

Just my two cents...
Primary Account Highlights:
Interest Radar IRR: 16.11%
Return Over Deposits: 13.33%
Average Loan Age: 229.5 days
(As of 10/13/2013)

LonghornSF

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Re: Competing with institutional lenders for notes.
« Reply #2 on: July 15, 2013, 05:37:55 pm »

This race-for-the-notes is completely unacceptable. I know there isn't enough for everyone to have everything they want, but I want my share. I shouldn't have to frantically glance-click-buy my notes.

This will sound callous but LC really doesn't care if you "find it unacceptable" that loans are being funded quickly. For LC, that's a great thing and it only boosts their bottom line while making borrowers happy.

LC is just now getting tons of institutional money thrown at them. As word continues to spread about the returns available on LC, they will only get more money their way. In my opinion, within 3-5 years it will be very difficult to earn a >10% IRR after credit costs on LC. We're in (or were in) a golden age for LC investors which will rapidly close. I'm enjoying it while it lasts.  8)

investforfreedom

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Re: Competing with institutional lenders for notes.
« Reply #3 on: July 15, 2013, 09:39:18 pm »
I talked about the practice of front-running that is increasingly brazen in this thread on Prosper:
http://www.lendacademy.com/forum/index.php?topic=1271.0

This is true for LC as well.  I added $25 to a loan that just came out on the LC platform today.  But when I clicked "Continue" about 10 seconds later, it just vanished.  I am reposting that particular post:

Peter,

Thanks for your response.  I certainly understand that there is a place for APIs, since not all investors have the time to scan the loans on their own, or even if they have, they might not want to do it. 

The issue I am bringing up--which I raised before--has to do with front-running, especially using API to front-run everybody else by the large investors.  I know that third-party developers are scrambling to develop ever faster and more efficient APIs.  You might be able to successfully use NSR for now to get some good D and E loans, but who knows if somebody else might come up with a better "mousetrap" in the future, say, beating NSR by 1 second or fraction of a second?  You would be just like those of us now holding the bag.  Chances are those with deep pockets are in the best position to develop the best APIs.  99% of small investors would have no access to them or simply can't afford to subscribe to them.  This is likened to high-frequency trading in the stock market, where these institutions try to exploit inefficiencies in the prices for microseconds. (I used to do some stock trading.)  And only the big banks or those with lots of money and resources can come out on the top with this kind of trading practice.

Again, don't take me wrong.  I am not opposed to people using APIs.  I am just saying that when they are used by the big investors, it's going to shut out retail investors very quickly.  What I propose with the time lock of 10-15 minutes is that it would at least give small investors a chance to get the better loans.  But if two or three big boys scoop up the best loans within seconds, then even most small investors using APIs can't get in.  After all, the big investors already have their "whole loans" to play with.

Peter, I would really appreciate it if you could bring this issue to the attention of Prosper and LC.  It might not affect those of you using APIs just for now, but this issue is expected to loom large in the future as p2p continues its rapid growth.  It is not just a question of fairness.  The underlying idea of p2p is lending by common folks to other common folks, but if it ends up being dominated by big investors and institutions, then it ceases to be p2p.


My last successful Automated Quick Invest for a D or E loan happened on July 1st and they are really happening at a rate of about one per week.

Here is the deal: there are in fact plenty of good D and E loans available on Prosper but as is pointed out above they are snapped up in the first 30-60 seconds. These are almost all investors using the Prosper API which has been widely available to all investors for some time now. I am using the API (via Nickel Steamroller's NSR Premium product) and I am finding good D/E loans pretty much every day.
« Last Edit: July 15, 2013, 09:42:36 pm by investforfreedom »

storm

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Re: Competing with institutional lenders for notes.
« Reply #4 on: July 16, 2013, 04:18:03 am »
I'm cheap, so I'm waiting ever so patiently for LC to come out with its own auto-invest tool.  I can usually find a couple or more loans that meet my criteria each day, and then I usually invest $50 each as I don't need to diversify my account much more.

I do think LC really needs to think twice how they are treating small individual investors.  If it wasn't for us risking a few hard-earned dollars from our bank account and trying things out for the past 6 years, LC would not be where it is today. 

From an IT perspective, it is less cumbersome to have just a few investors contribute to each loan.  On the other hand, this feeding frenzy they've created 4 times a day is not so good on their servers especially as demand increases and third-party robots keep looking for loans.  I think we are seeing the effects of that with slower payment processing and loan status updates.  My recommendation is to restrict the amount that can be invested per user to, say, $100 for the first 24 hours a loan is posted, and then the institutional investors can swoop in after that.

New Jersey Guy

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Re: Competing with institutional lenders for notes.
« Reply #5 on: July 16, 2013, 07:37:05 am »
"My recommendation is to restrict the amount that can be invested per user to, say, $100 for the first 24 hours a loan is posted, and then the institutional investors can swoop in after that."

I can't buy off the LC Platform, but that suggestion appears to be fair for everybody.  Like Longhorn said, it would still enable LC to "Boost their bottom line while making <all> investors happy."

But what would happen if small investors bought out all the good loans within the first 24 hours, and there was nothing left for the institutional investors?  Is that possible?

Return over deposits:   66.82%
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rev

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Re: Competing with institutional lenders for notes.
« Reply #6 on: July 16, 2013, 03:47:00 pm »
LC and Prosper are stepping away from p2p and becoming b2c. Eventually someone will realize that and start the "first p2p lending site since LC and Prosper left". At least the hard part, proving the concept and establishing regulatory requirements, is behind. That means lower ramp up costs and less risk, which translates into lower fees, which in turn will attract more borrowers. LC and Prosper will be more like the banks, while the new site will be more like LC and Prosper were in the past.
Then the whole cycle starts over, unless they're smart enough to stick with a plan this time and implement caps or whatever else is needed to stand ground and remain p2p.

IrishMoss

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Re: Competing with institutional lenders for notes.
« Reply #7 on: July 16, 2013, 04:08:02 pm »
I haven't even started yet, and I'm already feeling like I missed the boat...  :'(

investforfreedom

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Re: Competing with institutional lenders for notes.
« Reply #8 on: July 16, 2013, 08:41:28 pm »
It is quite clear that you can't get p2p off the ground without institutional backing.  The question has to do with how much these platforms would allow big investors and financial institutions to dominate.  As you said, LC and Prosper are going the way of b2c.  I'm not even sure if any new site that tries to operate as LC and Prosper did in the past would be sustainable.  I'd hazard a guess: If as a retail investor you don't like the way LC is operating now, you'd hate it even more when it goes into IPO next year.

LC and Prosper are stepping away from p2p and becoming b2c. Eventually someone will realize that and start the "first p2p lending site since LC and Prosper left". At least the hard part, proving the concept and establishing regulatory requirements, is behind. That means lower ramp up costs and less risk, which translates into lower fees, which in turn will attract more borrowers. LC and Prosper will be more like the banks, while the new site will be more like LC and Prosper were in the past.
Then the whole cycle starts over, unless they're smart enough to stick with a plan this time and implement caps or whatever else is needed to stand ground and remain p2p.
« Last Edit: July 16, 2013, 09:14:23 pm by investforfreedom »

rawraw

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Re: Competing with institutional lenders for notes.
« Reply #9 on: July 16, 2013, 09:26:14 pm »
If you like the returns from selecting the "Cream of the crop", then pony up and pay for a service that lets you compete.  There are plenty of loans that don't get sucked up immediately with awful returns of what, 7%?

I understand it sucks, but really I don't understand why people think making money should be painless or complain about it.  If you have to log on at a certain time each day to get a 12% return, that surely is a #firstworldproblem.   And probably a #uppermiddleclassproblem as well.   Warren Buffet spends his entire day trying to get those kinds of returns and all I have to do is set an alarm clock?  Man. . . I'm the luckiest 24 year old in the world.

I don't mean to sound like a contrarian, but I really don't get why people complain so much about it.  I'd prefer the platform survive and I know my account alone isn't going to pay LC's bills.

It is what it is.  Learn to compete or just complain yourself into a S&P Index fund lol


AnilG

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Re: Competing with institutional lenders for notes.
« Reply #10 on: July 16, 2013, 09:33:14 pm »
I don't mean to sound like a contrarian, but I really don't get why people complain so much about it.  I'd prefer the platform survive and I know my account alone isn't going to pay LC's bills.

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investforfreedom

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Re: Competing with institutional lenders for notes.
« Reply #11 on: July 16, 2013, 09:58:16 pm »
LC has more than enough institutional backing to survive going forward.  Is it necessary to keep kissing up to these big guys?  Prosper will soon too.

Pony up and pay for a service?  Did you carefully read my reposted message?  You might be able to compete for now by signing up for NSR, but the big boys are the ones who will develop the fastest and the most efficient APIs, which you and I have no access to or can't afford.  All they need to do is to beat NSR by 1 second or fraction of a second to soak up the best of loans, especially when they are allowed to take 50 or 75% of the loans.  If you are talking about frontrunning, big boys will always win.  Ask Goldman Sachs if you are not sure.

If you like the returns from selecting the "Cream of the crop", then pony up and pay for a service that lets you compete.  There are plenty of loans that don't get sucked up immediately with awful returns of what, 7%?

I understand it sucks, but really I don't understand why people think making money should be painless or complain about it.  If you have to log on at a certain time each day to get a 12% return, that surely is a #firstworldproblem.   And probably a #uppermiddleclassproblem as well.   Warren Buffet spends his entire day trying to get those kinds of returns and all I have to do is set an alarm clock?  Man. . . I'm the luckiest 24 year old in the world.

I don't mean to sound like a contrarian, but I really don't get why people complain so much about it.  I'd prefer the platform survive and I know my account alone isn't going to pay LC's bills.

It is what it is.  Learn to compete or just complain yourself into a S&P Index fund lol
« Last Edit: July 16, 2013, 10:00:20 pm by investforfreedom »

Fred

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Re: Competing with institutional lenders for notes.
« Reply #12 on: July 16, 2013, 11:53:58 pm »
I'd prefer the platform survive ....

In a twisted way, this is where institutional investors can be beneficial to retail investors: to help ensure LC survive.
« Last Edit: July 17, 2013, 09:52:49 am by Fred »

Fred

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Re: Competing with institutional lenders for notes.
« Reply #13 on: July 17, 2013, 12:23:21 am »
If you are talking about frontrunning, big boys will always win ....

You used the term "front-running" twice; however, it seems to be used in the context of trading speed.

On the other hand, if it means to "trade ahead of your client" (http://en.wikipedia.org/wiki/Front_running), I think the big boys will think twice before attempting to win in this contest.   They might get a call from SEC or CFTC.

If we are talking about speed of execution, one of the best ways to compete is to have your server co-locate in the same area as the LC servers (I believe they are in Nevada).  Having said that, I think the high-speed trading landscape for P2P is still wide open.

rawraw

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Re: Competing with institutional lenders for notes.
« Reply #14 on: July 17, 2013, 06:38:28 am »
LC has more than enough institutional backing to survive going forward.  Is it necessary to keep kissing up to these big guys?  Prosper will soon too.

Pony up and pay for a service?  Did you carefully read my reposted message?  You might be able to compete for now by signing up for NSR, but the big boys are the ones who will develop the fastest and the most efficient APIs, which you and I have no access to or can't afford.  All they need to do is to beat NSR by 1 second or fraction of a second to soak up the best of loans, especially when they are allowed to take 50 or 75% of the loans.  If you are talking about frontrunning, big boys will always win.  Ask Goldman Sachs if you are not sure.
So what?  Speculation and what-ifs about the big boys is just more of what I don't understand.  And it's so common on this forum, I've been trying to figure out the source.  Still not certain of it.

At the end of the day, you can spend your time stressed, complaining, or worried about what-ifs and the like.  I'll just spend my time investing and practicing my clicking skills :)