The only interplantary (and recently interstellar) stock exchange, the Lunar Stock Exchange, or LSX, was started after the great crash to facilitate investment between separate interplanetary corporations. An initiative started by Tony Branson and championed by all five megacorps, the LSX has grown from a small trade for the financial elite to a mainstream exchange with a turnover larger than any other planetary exchange.
Rules and qualifications
To qualify for listing on the LSX, a company must operate- and have a market on every colonized world, not counting earth. Currently, only the major five megacorps qualify by these criteria. These corporation, and their listing in brackets are: Endeavour Computer System (ENCS), Evol (EVOL), In-gentriment (IGTM), Omni Consumer Products (OCPS) and Union Aerospace Corporation (UACM). However, the LSX has recently introduced their Emerging Markets program, wich allows promising, fast growing companies that do not operate in all six markets yet to get a temporary listing on the exchange. Their brackets start with T-. The aim of this program is to provide venture capitalists with more investment opportunities, and to give promising new enterprises acces to more capital.
To promote fair deals and prevent insider trading, originally it was not allowed for employees of listed corporations to participate in the LSX, but this ruling was quickly dropped in favor of a larger volume of trade.
In order to stabilize the market, no company may have more than 5% of its available shares for sale on the market. Should this limit be reached, new sales are handled on a first-come-first serve basis. Though because of the immense volume, the cap has only been hit a hand full of times and never for more than a day. Furthermore, only direct trade is allowed, with options and other contracts outlawed by SevCol laws. Only direct trades of credits against shares may be made, a ruling strictly enforced by the LSX.
The buying and selling system
The Lunar Stock eXchange system works with a 3 hour loop, maintained by impartial supercomputers. This is to allow potential investors to work from wherever they want within the solar system, up to a maximum of 1.5 lighthours away, well beyond the farthest point of the major solar system colonies.
With this change, there is no longer a major advantage to being as close to the stock exchange itself as possible, with the old system even seeing systems in place to arrive microseconds before competitors, to have the biggest advantage possible.
This 3 hour loop is to take data travel times into account. Data travel time between Luna and the colonies may rise to as long as almost an hour, which means that it may take up to an hour for the furthest colonies to get the updated stock prices, and that they need to send their requests to the LSX at least an hour before the actual exchange time.
Potential buyers or sellers of stock send a message to the stock exchange. The advanced supercomputers decipher the necessary data from these messages, which should include the following:
When selling stocks: Name of the person or legal entity putting the stocks for sale, the company that is associated with said stocks, and the amount of stocks put on offer, and the reserve price, if any, of the stocks (as minimum price per stock).
When buying stocks: Name of the person or legal entity wishing to purchase stocks, the company that is associated with said stocks, and the amount of stocks required, and the price willing to be paid for the stocks (as maximum price per stock).
The computers of the LSX take 1 second every 3 hours to calculate all transfers of the previous 3 hours. This is more than is required, as the actual exchange needs but the tiniest fraction of a second, but the second is required for legal reasons. However, the actual exchange of stocks may take up to several hours to show up in an individual’s account, due to data travel time, as well as legal oversight maintained by several political institutions.
In that fraction transfers are made following the following rules:
All stocks put up for sale without a reserve price are sold to the highest bidders, all the people who offered the highest maximum price, for the lowest possible price, the lowest maximum price offered to match the amount of reserve price less offers. An example to demonstrate:
5 stocks are sold without reserve price. They are matched to the 5 requests for these stocks with the highest maximum price. Say entity A wishes to buy 3 stocks for 150 each, entity B wishes to buy 1 stock for 140, and entity C wishes to purchase 23 stocks for 90 each. This results in entity A buying 3 stocks for 90 each, entity B purchasing one stock for 90, and entity C purchasing 1 stock for 90. (As will be mentioned later, entity C may yet purchase more, if his price is higher than the reserves set by sellers). All of the stock sellers will be paid 90 for their stocks, minus the standard LSX fees.
After selling all of the stocks without reserve price, the stocks with a reserve are then sold, starting with the lowest reserve price. These stocks are bought by the highest remaining bidder.
In this manner, the stocks are sold in order of rising reserve price by buyers with an ever decreasing set maximum price, until the reserve price can no longer be matched by the remaining buyers’ set maximum price.
The price of the last sold stock will be transmitted across the solar system as the current stock price.
Note that being close to the current stock price as a buyer brings a great risk of not actually buying stocks, and that setting a high reserve will generally bring a much lower price for your stocks. However, be aware that many entrepreneurs are aware of this effect, and routinely request huge stock buys for almost no price, in an attempt to cheaply gain enormous amounts of stocks.
We are working on a way to prosecute these abusers of the system.