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Peer2Peer Finance News | August 18, 2019

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FundingSecure caps premium and discount rates on secondary market

FundingSecure caps premium and discount rates on secondary market
Suzie Neuwirth

FUNDINGSECURE has limited premium and discount rates on loans in its secondary market to a maximum of one per cent, to eliminate “inappropriate trading”.

The peer-to-peer pawnbroking platform informed investors of the change – which came into effect this week – in its latest monthly newsletter.

“With the growth in the platform (including IFISA accounts) and the very rapid increase in the secondary market, we will be implementing a small change to ensure the main purpose of the market remains the same,” said the firm.

Read more: Saving Stream updates default and secondary market rules 

“As more than 96 per cent of all trades to date have fallen within [the one per cent] range it will not have any effect on the bulk of the transactions but will eliminate the very small percentage of potentially inappropriate trading.”

The firm’s director Nigel Hackett told Peer2Peer Finance News that the new limit was implemented in order to prevent the secondary market being “cluttered up” with loan parts that had been put up for sale at a high premium.

Read more: Collateral to launch P2P app for investors and borrowers 

“People were putting loans up at a three or four per cent premium that weren’t selling and cluttered up the system,” he said. “By introducing the cap, we’ve made it a lot cleaner.

“It’s also to protect a small number of new, inexperienced investors were buying loan parts at a very high premium.”

FundingSecure launched its Innovative Finance ISA (IFISA) last month, which Hackett said also played a part in the decision.

Read more: FundingSecure gains FCA approval

“The IFISA attracted more investors and with more investors, you get more secondary market trades,” he said. “As a result it has been more of an issue as there are more listings.”