Will be selling bonds into correctly priced bids up to around 180 BTC worth.
Bond Face Value : 0.01 BTC
Bonds available for sale (including those already sold) : 2000 (Total Face Value of 20 BTC)
Bonds Outstanding : 16477 (Total Face Value of 164.77 BTC)
Current Dividend Rate (per week) : 0.6%
INTRODUCTION
The contract for this bond can be found in the second post of this thread.
Further information about this bond can be found in the asset listing on LTC Global https://www.litecoinglobal.com/security/LTC-ATF.B1
This security is a bond issued by LTC-ATF - a small trading fund listed on LTC Global. Further information about LTC-ATF can be found at the following links:
Listing : https://www.litecoinglobal.com/security/LTC-ATF
BTC forum thread : https://bitcointalksearch.org/topic/ltc-global-ltc-atf-112876
LTC forum thread : http://forum.litecoin.net/index.php/topic,657.0.html
This bond has a face value denominated in BTC but is transacted in LTC. A fixed rate of interest is paid each weekend - calculated based on face value then converted into LTC for actual payment. The current rate paid will be displayed near the top of this post. The rate may be increased at any time by the issuer but may not be decreased. Any change applies to ALL bonds - and a seperate post will be made announcing any increase.
Because the bond has a face-value in BTC but is transacted in LTC it is not possible for the issuer to maintain constant bid or ask walls. Offers on both sides of the book will be placed whenever the exchange rate is fairly stable and issuer is online - and issuer will also fill any asks at an appropriate price when online (subject to a daily maximum of the higher of 1 BTC worth or 10% of outstanding bonds). A direct redemption method is also available for quantities of 100 or more bonds.
Steps are being taken and safe-guards established to reduce as far as possible any exposure bond-holders have against exchange-rate changes and/or trading losses making LTC-ATF unable to honour bonds. The former (exchange-rate changes) is pretty much eliminated as a risk, the latter (trading losses) very heavily mitigated by sensible restrictions on exposure to single points of failure. As always, there does remain some element of risk.
One risk IS explicitly passed on to bond-holders : the failure (or loss through security compromise or similar) of an exchange platform on which LTC-ATF operates. Losses incurred in this manner are distributed equitably across LTC-ATF unit holders and LTC-ATF.B1 bond holders with a mechanism in place to restore bond face value from subsequent profits.
The full detail of all aspects of the bond summarised above can be found in the contract in the second post.
TARGET MARKET
The market for this bond broadly falls into three groups of investors. These are now addressed in INCREASING order of importance :
1. Unsophisticated investors (mouthbreathers). These invest in anything which pays dividends. They probably don't read contracts in full and definitely don't do any analysis to determine whether an investment is likely to be profitable. If they see this bond's price rise they'll assume it means LTC-ATF doing well, if they see it falling they'll assume LTC-ATF is doing badly (price of this bond is actually set 100% by exchange-rate and entirely unrelated to LTC-ATF's performance). If you're reading this you probably aren't in this category.
2. Speculators. This bond provides a useful way to bet against LTC in the medium term (short-term the admin fees wipe out gain, long-term you probably shouldn't even be using this exchange). Speculators can also pick off orders that aren't updated to reflect changes in the exchange-rate to make a fast profit.
3. More sophisticated investors. It's important at this point to consider WHY people invest in specific securites. There are intangible reasons (want to support community, think it's interesting etc) but one very tangible one which applies to a lot of investors - to make profit.
But what does "profit" actually mean - and, more relevantly, how is it calculated? Is an investor interested in increasing the number of LTC they own? The number of BTC they can purchase? The purchasing power of their assets if converted to fiat?
A more sophisticated investor may well opt not to put all their eggs in one basket (for example investing/holding solely assets whose profitability is determined in LTC). This is where these bonds fill a useful niche in the market - they allow investors to effectively convert part of their LTC holdings into BTC AND earn growth on them. That allows them to hedge against a total collapse
of LTC vs BTC. And they can do it without ever having to move any funds off of LTC Global or use an exchange.
There's also two classes of investors for whom this bond is absolutely NOT suitable:
1. Ones who want to go "all-in" on LTC increasing in value faster than BTC in the short to medium term (if they only want to gamble like that long-term than the bond MAY make sense for them in the medium term).
2. Ones who want to hedge their investment portfolio against the devaluation of BTC/LTC against fiat. This bond provides no such protection.
CONCLUSION
LTC-ATF.B1 offers a realistic rate of interest backed by an operating business which demonstrably generates profits sufficient to support the bonds. Whilst fine detail of LTC-ATF's holdings/trades is not published, sufficient information is provided to allow verification that the reported results are at least in the correct ball-park.
By offering bonds that are valued in BTC but transacted in LTC, LTC-ATF.B1 allows investors to balance or hedge their investment portfolios across BTC/LTC - without having to use any exchange other than LTC-GLOBAL or ever hold any currency other than LTC.
Whilst significant effort is being taken to reduce risk, it cannot be totally eliminated. One specific risk (failure of a trading platform) is not mitigated and is passed through proportionately to bond-holders. This is because bond holders already accepted the risk of such failure prior to investing and there is no way, in any event, to mitigate it whilst offering a competitive rate.
PRICING
As the face value (in LTC) varies with exchange-rate, this section explains how to calculate the price the fund will buy and sell bonds at. First a table showing prices for various exchange-rates.
The first column is Exchange-rate (LTC/BTC). Second column is the price the fund will put bids at (to buy back bonds) at that exchange-rate. Third column is the face value at that exchange-rate. Fourth column is the price the fund will put Asks at (to sell bonds) at that exchange-rate.
That table assumes a zero-spread market - which isn't actually the case, so the table is only useful to give a general idea of where prices will lie. The fund sells bonds based on the rate at which is can sell LTC and buys them back based on the rate at which is can buy LTC. To work out the exact prices the fund will trade at, you need to to do the following:
The fund's Bid price (to buy back bonds) is calculated by dividing 0.01 (face value in BTC of a bond) by the lowest non-trivial (i.e. ignore tiny orders) Ask on BTC-E. Then multiply the result by 0.99 for the 1% admin fee (which covers transfer costs, 0.2% transaction fee and allows for a small movement in rate between place of order and execution).
The fund's Ask price (to sell bonds) is calculated by dividing 0.01 by the highestest non-trivial Bid on BTC-E. Then multiply the result by 1.01 for the 1% admin fee.
The face value of bonds would be calculated by dividing 0.01 by the mid-point between the two rates used for calculating Bid/Ask.
As an exmple right now highest bid for LTC on BTC-E is at .00599 and lowest ask at .00603.
So face value would be 0.01 divided by average of those two (.00601) = 1.6639
Fund's Ask would be at 1.01*(0.01/.00599) = 1.6861
Fund's Bid (or price I'd buy back from Asks at) would be at .99*(.01/.00603) = 1.6418
In practice Asks will often be spred over a range - reflecting volume at different price points. So if there's 1 BTC worth of bids on BTC-E at .00603 then there'd only be 1 BTC worth of bonds up for sale at 1.6861 with rest at a price corresponding to next highest bid.