Topic: A guide to GLBSE-ETFs (Read 2328 times)

I like ETFs

so, we're half way there already :-D

thus said ^^


that's my plan. to check with you if the change requests (feature requests) make sense and add to the usability of glbse for ETF


as long ETF is a standard asset with generic buy/sell orders (and nothing else), GLBSE has no tools or rules how it could influence the pricing (it is the responsibility of the asset manager and his ability to react accordingly on market moves).
I have only a basic understanding (imagination) how pricing derived from bid/ask could be dome. such option would simplify the "minute to minute" operations right there at the server side without the need to develop a bot. it makes sense as well to leave this repetitive and error prone task to a computer. my first thought was a but ... the price would be then 'free floating' subject to all (also to sudden) swings in supply/demand and price changes. pricing by glbse would require new types of asset where the issuer would agree to that and the rules would be well known and properly supported by the software.

is not glbse too small for that yet anyway? moving prices with control of let's say 20-40% shares in 2/5 of constituents should be easy, especially if bot would react in real time and could be trapped in a position that triggers asset sell off (note to myself, thing of built in limits, conditions to check for, border conditions and user/issuer preferences p.ex.)

if nothing would change, ETF manager would be as any other asset manager, manually creating orders, by your previous note closer to managed fund than ETF and deviate from constant ratio of all constituents at all times (p.ex. great differences in price per stock, up to 15x cheaper/more expensive shares of mining companies exist. sales of the expensive stuff would occur only 1 in 15 times where the cheaper asset should be sold.)

assuming trading volume will not burst and spreads would be reasonable, how the aggregate pricing formula would look like in real world exchange, please?

I do have some CS background, so if you would like to translate the "shoulds" into dev-lingo, I'd be thrilled to read them and make comments.


there are also some practical questions, such as:
question is: should the ETF pricing be derived from the aggregated underlying bid/ask?
should the pricing be done by the issuer or from GLBSE ? etc etc

I appreciate your comments, (re)read them carefully and reflect on them.
From my point of view it is already as good as it can get (reading your posts, from an expert voicing the "shoulds")
 and as my understanding will solidify I would like draft summaries and recommendations in the IT lingo for development
 and hope they will make it on the development roadmap. if accepted for development, write test cases and see how it goes from there

with the 2.0 being out 'any day soon' and only a finite number of important & missing stuff & promised new features that need to be developed ... one day requests from the community may be taken into account. while waiting for that to happen I can commit myself to closely watch glbse related threads (and poke nefario).

alles gute!

I do read the 2.0-thread from time to time and even tinkered with the GLBSE2 for a day - just do NOT have the time to commit.

I'd be more than happy to lay out how it "should be", though.
This thread is here for exactly that - figuring out how ETFs work and how they should work on GLBSE.

If you like playing with raw software, you might want to try out the "2.0"
and propose change requests how the needed things could be properly implemented.

I'd love to discuss alternative ways of doing things at the exchange
(and at least semi-privately half-open to users to reap relevant feedback)

I still hope he'll be opening the circles of co-workers on this and split the work between non-programmers
your expertise as consultant who can word change requests (what's missing in the standard etf manager's tool box; you've got knowledge)
his experience id developing and running the whole stuff
other active folks (afaik the 'BitcoinGlobal' - mother company of GLBSE had several founding members).

In the novel snowcrash the term 3 ring binder was used to describe rules and protocols.
your guide to ETF or it's a very promissing sprout (stub, Keimling ?)

Nefario fixed 'all known bugs' & could be in good mood & after some rest. Please share notes for comparison, if possible

I PMd nefario, the owner and lead dev od GLBSE.
Maybe he'll regard this as important enough to include in future revisions.

I was pondering that question as well.
You could just buy back the shares at another account and disregard them, but that would require serious bookkeeping, especially when you're about to issue more shares later on and on dividend payments, since you'd always have to keep track of "nonexistent" shares.
Also I see M.ETF offering to exchange the shares of the ETF for corresponding amounts of the underlying shares. Here, too, need the M.ETF to be removed from circulation.

The way I see it, ETFs need no voting mechanism since the thing should basically manage itself (at least from an investors perspective).

but how to exclude 2 constituents?

// based on my limited data there are 7 companies that actually paid any dividends. wait 8 (TyGrr-bank)

I'd rather read about destroying shares of ETF when it buys the stock back on the market.
we should probably ask nefario to describe the functionality that's available on glbse.
maybe it's sufficient to buy the shares back and keep them in the asset manager's account (they will not receive dividends, can't vote, seemingly don't exist if owned by issuer) or trading automation (rules for ETF to be compliant with, how thin is the border between ETF and managed funds?).

maybe someone could issue a "GLBSE TOP 5 DIVIDENDS" ETF?

Good reading material. Thanks!

that is completely correct.
as an issuer, you could easily define a margin after which you would begin to liquidate some ETF shares, or create new ones.

the only problem is that so far there is no way to "delete" shares afaik.

bye bye good profit from large spreads

This is changing, GLBSE has been growing quickly over the last couple of months, and this is only going to increase significantly with the 2.0 release.

If I understand correctly, this could be completely automated (after the constituents have been fixed), right?

the simple workaround her is creating more than you IPO.
so if someone wants to buy another 20 of your ETF, you have already created those beforehand.
you take their money and create more shares of your ETF, replenishing your reserve holding.

if for whatever reason you cannot issue more shares, the ASK side stays empty. this is of course only owing to the limitations of the GLBSE market, as you correctly pointed out.

ideally, though, you will (and should) always be able top issue more shares.

You don't take my meaning. Suppose you have a 100btc ETF, with a 5 shares portfolio all trading around .1. Suppose somebody drops another half-restaurant meal into your fund (like 15BTC). You go buy shares in your 5 symbols, all now trading .16. If god forbid the other person in that restaurant also drops half a meal into your fund (ANOTHER 15BTC) you are now confronted with either taking all 5 shares to .25+ or else what exactly? Not selling?
Therein lies the problem: on GLBSE you can have either correct price or precise moment. You can't have both, you have to pick one.

Yes, that is true.

However - the assumption on GLBSE is also that the ETFs market cap won't be  in the 1000s, but rather in the low, low 100s of BTC.
It would be YOUR responsibility as issuer to buy (if needed) the whole damn market cap back at the price that is the correct one at that precise moment!

That's one of the key ideas of an ETF.
If your ETFs' NAV is 0,1, you better be ready to buy all 2000 outstanding shares back at 0,095!
It is, as an ETFs issuer, YOUR JOB to provide liquidity for your ETF.




Also, if for some reason someone sells you back, say 200 of my ETF, you can still liquidize some of the stocks.
If you find yourself with half the offering at your hands, either keep them for yourself, or sell 10% of your total stock to free some BTC.

I meant something more along the lines that your model embeds some assumptions about the market (such as, for instance, that if I want to spend 50 bitcoins on a stock I will be able to find meaningful bids). As far as I can see these assumptions do not hold. Take the MPOE.EFT bid side :
1,000 shares - BTC 0.000006
287 shares - BTC 0.09
25 shares - BTC 0.091
25 shares - BTC 0.095

So you can't practically sell more than 30BTC's worth. The same is the case for buying, too, which means that there's no practical way to run a "real" (aka, perfectly transparent) ETF, they'll all be managed to a certain degree anyway.

Add to this the difficulties due to the relative market segregation (irl a bank holds shares from practically ALL issuers in one way or another - nobody is in that position on GLBSE) and you've got a mess on your hands.