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[Etienne Saissore]

Think how awesome a functional stock exchange would be for corporate role-play? Companies could use this vehicle to engage in ownership deals, rankings, price manipulation, speculation, take-over attempts... you name it!

The existing in-game shares are a bit awkward - they can be lost due to inactivity, they have important functions in the corp management and there is a weird democratic element attached to them - they are more than just shares, they're a part of the capsule-corporation-world interface.

For many purposes, it might be better to have something which places only ISK and reputation at risk, and therefore I have been trying to sketch a system which could have all the functionality and advantages but none of the pitfalls.

The basic idea would be based on a player-driven financial instrument, "bond" - some sort of pay-back obligation, which the participating corporations would sell out. The book value of the bond would be controlled by the issuer. Each bond could have terms and conditions affecting its value and desirability, or restricting the trades that can be done with it. The conditions would also be controlled by the issuer.

A few potential things people could do with this kind of system:
*An ideological organization could use them to identify supporters
*A small corporation could use them to gather funds
*A philantropist could use them to support a cause
*Work or investments on behalf of the issuer by the owners could increase the bond value
*A banking-style corporation could provide an interest for the bonds
*The system could also be used for loans or as an alternative currency
*Like-minded corporations of all sizes could establish relationships through mutual ownerships
*Limited scale corporate take-over attempts would be possible
*The success of the bond issuer could be reflected in the bond sales
*And countless other possiblities!

The system wouldn't rely on one single person, no large ISK streams would go through a single wallet and it wouldn't be associated with any faction, ideology or interest group. The reason why I have been promoting this is that in my mind it does not make sense that this kind of thing is missing from the game world, and I would like to see Reclamation Technologies to participate in it. I feel that the existence of a financial sector would benefit industry and business role-playing and create more opportunities for meaningful interactions.

Below, is a draft for the "legal definition" of the system. The nature of the bonds and how they can be traded has been intentionally left quite open, but I felt that a declaration of the right of the owners to express their views to the leadership of the issuer corporation would benefit the system.

Criticism, comments and questions would be welcome, this is just a draft and it hasn't yet gone through any feedback cycles.

[Etienne Saissore]

DIESEQ - Distributed Intergalactic Empyrean Stock Exchange and Quotations

1) Enlisting and General Conditions
The participating corporations enlist by announcing how many bonds they will release, the initial price and the General Conditions of the bonds. At the beginning, the enlisted corporation owns all their bonds.

Examples of General Conditions:
-The bonds can only be traded to and between Amarr buyers.
-The list of the bond owners is public.
-The bonds can be traded only in multiples of twenty.
-The bonds entitle the owner to receive dividends every two months.

The General Conditions cannot be changed without the consent of the owners.

One corporation can have several types of bonds each with a unique name and with same or different General Conditions.

2) Book Value, Stock Exchange Reports and Exchange Coordinator
Each enlisted corporation is obliged to buy back the bonds it has released for the latest book value.

The book value is managed by the corporation itself but any changes become official only after the latest stock exchange report has been released.

The stock exchange report is released at regular intervals (fortnightly?) by a central exchange coordinator who aggregates and distributes the data submitted by brokers.

3) Brokers and record keeping
An enlisted corporation names a broker acting on its behalf (can be a member or a trusted non-member).

The brokers identity is public and is submitted to the exchange coordinator at the time of enlisting.

When a corporation changes its broker, the new name is submitted to a central exchange coordinator. The change becomes valid only after the next stock exchange report has been published.

The broker maintains a list of the current owners, how many bonds each owner is willing to sell and at what price.

The broker is not obliged to make the list of bond owners public, unless a General Condition dictates otherwise.

The broker manages the open stock exchange (see below) on behalf of the enlisted corporation, and is the receiver of the restricted stock exchange data (see 4a and 4b).

The broker sends out the volume of sales, the book value and the highest and lowest sales prices to a central coordinator who aggregates and distributes the data in his stock exchange report (eve mail?).

Example of an exchange report:
Weeks 10-11,YC115
----------------------
Corporation / B-Value / High / Low / Vol / Broker
----------------------
Veldspar Diggers Inc. / 20 mil / 20 mil / 15 mil / 2 / gunhero14
Amarr Tech Consulting / 1000 / 130 / 1 / 12000 / Tevis Korshapur

4) Forms of Exchange

4a) Open exchange
Open exchange is managed by the broker, and takes place anonymously unless the General Conditions dictate otherwise. A single buyer can receive bonds from multiple sellers without knowing it.

A buyer sends a request to the broker of the corporation whose bonds they wish to buy. The request is made for a certain number, or a certain value of bonds.

The broker responds with the cheapest total price the deal can be arranged, or with the number of bonds the investment is enough to buy.

If the General Conditions of the trade are met, and the buyer accepts the deal, the ISK is transmitted through the broker who records the deal.

4b) Restricted exchange
If a bond owner finds a willing buyer, they can negotiate the trade and submit it to the broker managing the bonds in question. If the General Conditions of the trade are met, the broker must accept and record the trade.
5) Owner rights
The owners have the right to designate themselves as stakeholders. The corporate leadership is obligated to hear their opinion by eve mail. The General Conditions of the bonds can define more rights.

6) Misconduct
If a broker accepts trades which are against the General Conditions accompanying the bonds, or reports false data to the exchange coordinator, the matter should be resolved between the corporation whose bonds have been traded, and the broker. The corporation is responsible for the damages to the owners.

If the exchange coordinator commits insider trading, falsifies information or is found guilty of some other form of misconduct, the brokers and their employers choose a new coordinator.

If a corporation fails to buy back the bonds at book value it has quoted, it will be considered to have defaulted and can no longer participate in the stock exchange.

[AOkazon]

I would love to fix/improve stocks so that people are encouraged to actually use them. I'm at work right now but I'll give this post a much closer reading later today.

[Steffanie Saissore]

It sounds very interesting, though when it comes to financial details and the like, I tend to get lost in the workings; and well, that is something that you need to have a firm grasp on (from my experience).  Not sure if I can make any suggestions or critique the proposal at this time, but I am interested in seeing where it goes.

[Milo Caman]

Interesting, this is the kind of thing that tempts me to resubscribe to the game.

One big issue I can see you running into: If you want to use the ingame shares system along with this, I can't see people buying into it. There's a massive risk associated with giving the things out, and given the nature of corporate EVE, I'd be pretty hesitant doing anything that might jeapordise the control of my corporation in such a manner.

Otherwise pretty awesome. I'll be watching this thread carefully.

[Gesakaarin]

The issue why the share system in Eve falls on its face is that there is no in-game securities exchange or regulatory system to provide consequences, rules, and foster trust in using them. It's always going to be in essence, very 18th/19th century in that the people buying the stocks/shares/bonds/whatever incur a lot of risk in buying them because there is no guarantee the issuer will just run off with your money and retire to some tropical island somewhere.

Reading through proposal, it's a system that is built at what appears to be acting on good faith and trust. It might not have the same game mechanic repercussions as trading in-game corporate shares but it still has disadvantage that there's little in the way of actual enforcement or consequence if someone does in fact decide to just screw people over.

Aside from that sure, it probably has potential solely as an RP artifice. So long as people are prepared to deal with the same issues investors had to deal with due to really only having someone's word/good faith/trust to go on like way back when. I mean just off the top of my head, you can probably setup a pretty sweet ponzi scam with the system proposed if you're willing to burn a character's reputation for it. Just offer a low initial buy-in on the bonds offering a high rate of return due to [insert salesman pitch about just how you manage to get such awesome ROI] and try to sucker more people into giving you their ISK or through word of mouth from your "investors". After a few months, or when the pyramid becomes unstable just cash out and say thanks for ISK guys.

[Etienne Saissore]

So the idea here would be to bypass the in-game shares completely and set up a new financial instrument. I think it shouldn't be unrealistic to have several different kinds of securities, side by side.

As Gesakaarin puts it, the system would be more or less an RP artifice. In principle, the bond can be cashed out any time for its book value, which can only be changed every two weeks, as long as the issuer is respecting the rules. I actually think that the possibility of scams adds value to the whole, and having some actual way to enforce the pay-back promises would undermine the risky nature of the game.

Few people would probably buy bonds without knowing the reputation of the issuer. Some might buy them to satisfy their curiosity, or to get the attention of the leadership, or just to express their support. Most people would probably buy them mainly from entities they think they can trust. So the issue of running with the money boils down to betraying your supporters.

I firmly believe that for a total stranger, fooling everyone with a fraudulent scheme would require some serious work to overcome the prevailing scam paranoia, it's after all one of the best publicized characteristics of the EVE community. For the majority of potential role-playing uses, I also believe the amounts of ISK involved wouldn't even remotely be enough to be noticed as glorious achievements in the wider cluster.

Nevertheless, a ponzi scheme definitely is a possibility. I think there are some respected, old role-playing organizations with a long history who could pull that off, but would they really choose to do it? How much ISK would be enough to make them do it? If some incredibly rich parties wanted them to ruin their reputation, and tarnish the RP they have been doing over time, maybe they might even add to the stakes a bit.

[Gesakaarin]

Nevertheless, a ponzi scheme definitely is a possibility. There are a few organizations who could pull that off. For instance, if PIE, ILF, RDC, RE-AW, GRD or LDIS were part in the system, would they do it? How about EBKNT, RECLT, CTCS, 7SSAR, or PY-RE? How much ISK would be enough to make them do it? If some incredibly rich parties wanted them to ruin their reputation, and tarnish the RP they have been doing over time, maybe they might even add to the stakes a bit.

Well the whole point to issuing bonds and shares is the need for a company to raise capital either on the promise of a fixed rate of return in the case of bonds, or the increased value in the case of shares. If amounts to be involved are trivial then how can that be justified IC or OOC to provide incentive to participate? If the amounts involved are lucrative then people are probably going to figure out ways to manipulate or scam the system -- as occurs in the real world and which also makes sense in Eve.

As for Pyre Falcon getting involved - probably not. Not just because no one trusts Veik, but because it's not a business in the traditional sense. It's a service provider that's deeply intertwined in the corporate politics of the State. It's designed to operate at a loss in order to provide benefit to its client-operators and its military contractors. There's no need for it to issue shares and bonds because cashflow is handled off the books, and that's fine being a private company, no external auditors will ask questions about the creative accounting practices.

[Etienne Saissore]

Well the whole point to issuing bonds and shares is the need for a company to raise capital either on the promise of a fixed rate of return in the case of bonds, or the increased value in the case of shares. If amounts to be involved are trivial then how can that be justified IC or OOC to provide incentive to participate? If the amounts involved are lucrative then people are probably going to figure out ways to manipulate or scam the system -- as occurs in the real world and which also makes sense in Eve.

The sums I've seen people donating and asking in RP context have been typically ranging from few tens of millions to few hundred millions of ISK. The corp scams reported on EVE-O forums usually seem to start from a few billions. Sorry for not being more specific.

As for Pyre Falcon getting involved - probably not. Not just because no one trusts Veik, but because it's not a business in the traditional sense. It's a service provider that's deeply intertwined in the corporate politics of the State. It's designed to operate at a loss in order to provide benefit to its client-operators and its military contractors. There's no need for it to issue shares and bonds because cashflow is handled off the books, and that's fine being a private company, no external auditors will ask questions about the creative accounting practices.

Interesting to hear how you operate, sounds very reasonable with the background you have. I was merely listing a few corporations on top of my head to toy with the question, would these relatively well-known organizations try to scam you? I totally agree that if no one is interested in anything else than scamming, then it'd be kind of tough to play financial RP. This thread was sort of an attempt to find out where people stand in this regard.