> To list on LTSE in August, Twilio and Asana are agreeing to a slate of commitments such as aligning executive and board compensation with long-term performance; taking customers and employees into account; and explaining how the company’s board oversees its long-term strategy. These commitments must be concrete policies that can be monitored by LTSE.
If such agreements are broken what’s the punishment, other than presumably being dislisted? If there are none it seems like an empty platitude given that you can already buy both on the “regular” stock exchange.
Is daytrading prohibited? If not seems like it’s still bound by the same short term nonsense. I’d be impressed if you can only buy and sell on the LTSE once a year. Money being put where the mouth is and all that.
The requirements are embodied in the listing standards of the exchange, and have enforcement mechanisms equivalent to other listing standards. The SEC takes this stuff quite seriously - as they should - so instances of companies violating listing standards are thankfully pretty rare. I expect the same thing here.
In terms of the requirements on trading that you mention, a requirement like that would violate current SEC rules about trading. But remember that companies are the metaphorical "central bank" of their own currency and can do all kinds of things that would reward those investors who truly are committed for the long-term. We don't have anything to announce in this area at this time, but I hope to be able to say more some day.
Still not clear though, why they need to dual list for this purpose. They can commit to the same actions without listing on exchange. I mean, you could have a service that monitors these commitments, but I am not clear as to why this service needs to be an exchange. It could be a product NYSE, NASDAQ just offer if there is demand. The fundamental purpose of an exchange is to facilitate trading.
Do you have a simple guide for retail investers? For example will I be able to buy stocks via apps like Robinhood or Revolut?
I am intrigued by your offering, and for a retail trader holding LTSE stocks could be a better investment than aggressively day traded markets (especially if day trading were to be banned etc.), and might offer a strong alternative to regular retail stocks which are a bit too much of a rollercoaster ride, so I don't think I want to play that game much, but I also don't have a trading account at some huge institution.
Will you push to ensure retail investers are able casually join in?
Last time I read up on LTSE I noticed that the exchange doesn’t operate differently than a traditional stock exchange. Instead the companies in LTSE adopt specific language in their bylaws that orients them toward the long-term. Is this a correct understanding?
If you aren’t implementing any exchange-level mechanisms, why does this need to be an exchange at all? Why not just create a template for corporate bylaws that you can certify, like a B-Corp? An LT-Corp, if you will.
We looked into this extensively before deciding to pursue an exchange, but found it just isn't workable. Investors simply don't believe a "certification" is especially binding, as companies can easily undo the certification at any time.
People today think of exchanges as just platforms to facilitate trading, but historically this is not how they used to be seen. Exchanges have always had a dual role, as avatars of corporate governance as well as sources of liquidity. We are trying to bring that balance back into the financial infrastructure of capital markets.
How would you make money of templates? With this model, you can profit on the value of every trade. I assume the exchange makes more when people invest more.
Quick skim and comparing with the OP article, the only concrete takeaway I get is shareholders that hold shares longer potentially have more voting power in your system? Good for founders, potentially (and ironically) bad for the company in the longterm.
I don't have to labor the point on this site that a few successful exits had founder CEO's that needed to be removed by investors/shareholders.
Thanks for linking to the previous AMA from when our rules were originally approved. There's actually also one from last year when we began trading stocks, but I don't quite know how to look up the URL right now - while also typing these answers.
Although an earlier version of our proposal did have a voting-rights mechanism, as part of a one-size-fits-all prescription, we ultimately decided against it. Personally, I was hoping to offer "long-term voting" as a principled compromise between standard governance and dual-class shares. But in the interim, dual-class shares have basically won in the market. I'm still hopeful as an industry we will be able to find better solutions in the future
Some, but there are also some very successful startups still run by their founders, like Tesla and (until recently) Amazon. Then there's Apple, which did much better after bringing the founder back.
(I've read that on average, companies run by founders tend to do better over the long term. I'm having trouble pulling up the source though; best I can find right now is the book 100 Baggers, quoting a study saying "there was often a large shareholder or an entrepreneurial founder involved.")
Is there anything a shareholder can do to encourage the LTSE?
Or said another way, is there a mechanism for a shareholder to specify which exchange they are buying stock on? And would traffic on the LTSE help the LTSE?
Or is most of the support for the LTSE accomplished on the company side, and at listing time?
This is a great question. Let me take it in parts.
First off, you're right that the most important place for support is via companies. Ultimately, that's what matters. But you'd be surprised how much voice people have in influencing companies. For example, if you're an employee, I can tell you first hand how closely CEO's and executive teams monitor (for example) what gets asked about at all-hands meetings.
Shareholders matter too. Companies want to know what their investors think and many of them have whole "investor relations" departments whose job is, in part, to relay investor sentiment to the rest of the company.
In terms of trading, yes, you can specify what exchange your shares trade on. Almost every major broker is a member of LTSE and can route orders to the exchange. As the customer, you're in charge of where your orders get routed, and you're welcome to specify a specific venue. Not every broker supports this right in their web UI, although I've heard that Interactive Brokers (IBKR) does.
If you've been following the news about controversies such as "pay for order flow" and such, you might make a connection here. Most retail customers don't specify where their order should be routed and as a result, they lend their voice to many of these industry practices. Because LTSE is not focused on maximizing trading volume, things are a little different on our platform. If you route to LTSE, you can be sure that no intermediary is getting paid for your transaction, and LTSE does not take a trading fee either.
As to whether traffic on LTSE helps, I think it does lend a little bit of credibility. If you take the time to tell your broker this is what you want, they will probably notice.
youre able to route orders to specific market trading venues. If you open up IBKR and look at the subwindow (forgot the name sorry) that shows realtime orders, you'll see stuff like ARCA and BATS and these are different venues basically. Similarly if you do a simple 10,000 share order for TWLO at 7.50 limit, the advanced order entry system will let you click (probably with a dropdown or something) which venue to route your order to.
Personally I'm not really sold on the idea of LTSE. I mean it sounds good I guess, but governance of a public company doesn't start with the venues it is able to be traded on. It starts with the company, or at least with our regulatory bodies (lol imagine that)
The obvious way of ensuring long-term performance is to slow down the buy/sell process. For example, the company could offer a discount on its stock for anyone who agrees to hold it for six months. This seems like a more practical solution than a whole bunch of policy nods which, as far as I can tell, can't actually prevent someone from day trading the stock based on short-term performance. Am I totally off base?
Nope, that's a very good idea. I personally don't think long-term investors should have to pay the same price to buy stock as speculators. But in finance this is still considered a very radical notion, so I think it will be some time before we see this idea adopted
Yes there is much research in this area. Personally, I first got interested in this as a philosophical matter from reading about Toyota and its history (which has been extensively researched)
I think it's interesting that you use the word "despite" here, since of course it's those very companies that provide the data for this area of research.
I don't have time to pull links to papers right now, but there are some referenced in our (rather old now) whitepaper:
Some of my favorite research shows what happens to pairwise-matched companies where one went public and one stayed private. The effects are totally predictable.
What specific benefit does listing on the LTSE bring for companies? Can't they just operate with a view for the long term and trade on a different exchange? (I'm thinking about Amazon/Berkshire Hathaway here)
What should consumer investors expect to be different when interacting with LTSE listed stocks? I am not asking about the LTSE restrictions on the companies, rather about how trading / etc works with these stocks?
As of today, investing in LTSE listed stocks is 100% backwards compatible with every existing stock trading platform and broker. You literally will not notice any difference.
Hi Eric - don’t know what AMA means (sorry), but I would like to talk about this with you / your team. I also sent you a note via your website and Twitter. Bottom line is that coverage of your recent announcement talks about dual listing. I’m wondering if you’d be equipped to do a primary. Thanks!
Do you see benefit corporations as being a natural fit for LTSE? If so, would LTSE ever require companies be organized as b-corps as a condition of listing on LTSE?
Yes, I think it's a very natural fit. The first wave of B-corps that went public had a very bad experience, and I think the problem was that they did not have the right financial infrastructure around them to support their vision. We hope to remedy that.
So far, we have taken the view that each company has to design its long-term program around its own philosophy and approach. I don't know if it would really work to adopt a one-size-fits-all rule like this, even if I personally liked it.
We will have to see how the concept of benefit corporations evolves. So far, it seems that a number of companies that truly exist for the benefit of humanity have chosen not to organize themselves under that framework. As long as this is true, I'd be wary of excluding them from LTSE.
The research is pretty clear that companies run in a long-term way are more profitable, resilient and lead to better returns for investors. I can't speak to which stocks will do better than others, but we built the listing standards to match the actions seen to drive long-term performance.
I'm curious as to specific differences wrt to other exchanges, your website doesn't really do a direct comparison. For example, do you require holders to hold a certain amount of time before being able to sell, are there limits around frequency of trading, how do you make money, etc.
Or is it more around including companies that think long term? In which case, I think that's also doable on normal exchanges (for example, Amazon is famous for long term thinking and has done well on normal exchanges too).
The SEC's rules around trading (today) really prohibit a lot of the "obvious" ideas people have had about how to slow down trading. We have some stuff in the works here, but it won't be public for a while.
That said, we have adopted a construct that we call the "Very Simple Market" that eliminates a number of trading "features" such as hidden liquidity. We think this makes it a more conducive environment for the longest-term investors to trade. We also have a business model that is much more aligned with the long-term investors and companies than most incumbents. We don't seek to maximize our trading volume, so that requires us to make money by helping our customers run their businesses better.
As we say in SV, if you're not the customer, you're the product. This applies to issuers as well.
On your latter point, you've got it right. We don't think we have an exclusive on good ideas, and there's definitely examples where talented founders have found ways to build for the long-term in spite of the existing market structures.
But when was the last time you heard a CEO say that they were able to think long-term _because_ of the markets in stead of in spite? That to me is a key difference
What specific policies (not principles) will most people find to be the biggest difference between LTSE and NYSE? For example, if someone purchases shares through LTSE is there a minimum number of days that must elapse before the shares can be sold? Is there a policy regarding exactly how executive compensation should align with long-term success, or is the policy just that the company needs to publish such a document? Etc.
LTSE work through what are called "principles-based listing standards" which require every listed company to adopt (and publish) a concrete policy that shows how they are committing to each specific principle. LTSE has a regulatory team that acts as a certifying agency. So while we don't have a one-size-fits-all policy that every company must enact on, for example, executive comp, they do have to make real, concrete commitments in that area in order to be listed.
In terms of trading, we don't currently have any rules of the sort you mention. Under today's regulatory framework, this would be hard (but not impossible) to do. We hope to see more work in this area, but nothing to announce at this time.
I have seen that some exchanges like NASDAQ are considering adding social justice elements into their requirements for listed companies. For instance, NASDAQ had submitted a proposal to force diversity of boards on companies (https://www.nasdaq.com/press-release/nasdaq-to-advance-diver...). Personally I do not like the mission creep and politicization of institutions in general, and am wondering where/how you draw the line on what you will require of companies.
Your listing principles page (https://longtermstockexchange.com/listings/principles/) is interesting in that there's a lot I agree with (like compensation policy) but then some other principles (like "The company’s approach to diversity and inclusion" or "The company’s impact on the environment and its community") are vague enough that I am not sure what it implies. Is it fair to consider LTSE a "progressive" financial institution?
Our reforms are fundamentally market-based. We work with companies to develop policies that commit them to the values that they think ensure their ability to pursue their mission long-term. It's not one-size-fits-all and ultimately investors will judge the results. I think you'll see a diversity of companies and views on the exchange, just as you see a diversity of views among our own investors and employees.
What’s the deal with captable.io transitioning from “a public service for every startup to safeguard their equity from day one” to basically the same price model as carta?
Why weren’t legacy companies given grandfathered pricing?
I know you're probably here to more specifically talk about this news but I'm curious broadly what you've learned that's surprised you about running a stock exchange that outsiders may not know.
No question but I love the idea. I was just explaining to my wife about how I never want to work at a publicly traded company because their only goal is maximizing shareholder value in the short term.
The main problem with the normal stock exchanges in my opinion is the lack of meaningful long term shorts. Betting up and down are highly asymmetric in cost. Meaningful long term shorts are needed to prevent bubbles.
Is there such mechanism in the LTSE?
> The CEOs of both companies, which also are listed on the New York Stock Exchange, were early investors in LTSE with financial stakes of less than 1.5%.
So the CEOs of Twilio and Asana invested in this exchange then convinced their board to list on it. I'm sure they're not just interested for personal gain though.
> To list on LTSE in August, Twilio and Asana are agreeing to a slate of commitments such as aligning executive and board compensation with long-term performance; taking customers and employees into account; and explaining how the company’s board oversees its long-term strategy. These commitments must be concrete policies that can be monitored by LTSE.
It’s hard to make the claim that public markets overly prioritise the short term with the last weeks’ string of EV start-ups IPOs / SPAC mergers and ExxonMobile Board manoeuvre.
At the same time, founder supervoting is falling out of favor. This neatly backdoors to the same result—founders (and institutional investors, who can invest through a long-holding front end and then allocate exposure to that on the back end) gaining outsized influence over individual investors (who aren’t coördinated) and hedge funds. Seems like a lot of collateral damage.
LTSE is a sorely needed financial innovation but all the stuff around social impact is a new burden I think... Not everyone's going to be interested in that, oh well.
I find the name Asana for a company, to be offensive as cultural appropriation. Secondly, I am absolutely opposed to the Surveillance Capitalism model, which these people have driven relentlessly. This combination feels dystopian.
Readit News
> To list on LTSE in August, Twilio and Asana are agreeing to a slate of commitments such as aligning executive and board compensation with long-term performance; taking customers and employees into account; and explaining how the company’s board oversees its long-term strategy. These commitments must be concrete policies that can be monitored by LTSE.
If such agreements are broken what’s the punishment, other than presumably being dislisted? If there are none it seems like an empty platitude given that you can already buy both on the “regular” stock exchange.
Is daytrading prohibited? If not seems like it’s still bound by the same short term nonsense. I’d be impressed if you can only buy and sell on the LTSE once a year. Money being put where the mouth is and all that.
In terms of the requirements on trading that you mention, a requirement like that would violate current SEC rules about trading. But remember that companies are the metaphorical "central bank" of their own currency and can do all kinds of things that would reward those investors who truly are committed for the long-term. We don't have anything to announce in this area at this time, but I hope to be able to say more some day.
(last time the question came up: https://news.ycombinator.com/item?id=19886420 )
I am intrigued by your offering, and for a retail trader holding LTSE stocks could be a better investment than aggressively day traded markets (especially if day trading were to be banned etc.), and might offer a strong alternative to regular retail stocks which are a bit too much of a rollercoaster ride, so I don't think I want to play that game much, but I also don't have a trading account at some huge institution.
Will you push to ensure retail investers are able casually join in?
If you aren’t implementing any exchange-level mechanisms, why does this need to be an exchange at all? Why not just create a template for corporate bylaws that you can certify, like a B-Corp? An LT-Corp, if you will.
People today think of exchanges as just platforms to facilitate trading, but historically this is not how they used to be seen. Exchanges have always had a dual role, as avatars of corporate governance as well as sources of liquidity. We are trying to bring that balance back into the financial infrastructure of capital markets.
LTSE looked like BS before, now I'm convinced.
Deleted Comment
Quick skim and comparing with the OP article, the only concrete takeaway I get is shareholders that hold shares longer potentially have more voting power in your system? Good for founders, potentially (and ironically) bad for the company in the longterm.
I don't have to labor the point on this site that a few successful exits had founder CEO's that needed to be removed by investors/shareholders.
Although an earlier version of our proposal did have a voting-rights mechanism, as part of a one-size-fits-all prescription, we ultimately decided against it. Personally, I was hoping to offer "long-term voting" as a principled compromise between standard governance and dual-class shares. But in the interim, dual-class shares have basically won in the market. I'm still hopeful as an industry we will be able to find better solutions in the future
(I've read that on average, companies run by founders tend to do better over the long term. I'm having trouble pulling up the source though; best I can find right now is the book 100 Baggers, quoting a study saying "there was often a large shareholder or an entrepreneurial founder involved.")
Or is most of the support for the LTSE accomplished on the company side, and at listing time?
First off, you're right that the most important place for support is via companies. Ultimately, that's what matters. But you'd be surprised how much voice people have in influencing companies. For example, if you're an employee, I can tell you first hand how closely CEO's and executive teams monitor (for example) what gets asked about at all-hands meetings.
Shareholders matter too. Companies want to know what their investors think and many of them have whole "investor relations" departments whose job is, in part, to relay investor sentiment to the rest of the company.
In terms of trading, yes, you can specify what exchange your shares trade on. Almost every major broker is a member of LTSE and can route orders to the exchange. As the customer, you're in charge of where your orders get routed, and you're welcome to specify a specific venue. Not every broker supports this right in their web UI, although I've heard that Interactive Brokers (IBKR) does.
If you've been following the news about controversies such as "pay for order flow" and such, you might make a connection here. Most retail customers don't specify where their order should be routed and as a result, they lend their voice to many of these industry practices. Because LTSE is not focused on maximizing trading volume, things are a little different on our platform. If you route to LTSE, you can be sure that no intermediary is getting paid for your transaction, and LTSE does not take a trading fee either.
As to whether traffic on LTSE helps, I think it does lend a little bit of credibility. If you take the time to tell your broker this is what you want, they will probably notice.
Thanks for the thoughtful question!
Personally I'm not really sold on the idea of LTSE. I mean it sounds good I guess, but governance of a public company doesn't start with the venues it is able to be traded on. It starts with the company, or at least with our regulatory bodies (lol imagine that)
Make trading expensive and it will become less voluminous and short term. Allow companies to exclusively list where trading is purposely expensive.
It is often taken as a given that this is true, despite the many very long term successful public companies.
I think it's interesting that you use the word "despite" here, since of course it's those very companies that provide the data for this area of research.
I don't have time to pull links to papers right now, but there are some referenced in our (rather old now) whitepaper:
https://longtermstockexchange.com/static/principals_for_lt_s...
as well as our original application to the SEC: https://www.sec.gov/rules/sro/ltse/2019/34-86327.pdf
Some of my favorite research shows what happens to pairwise-matched companies where one went public and one stayed private. The effects are totally predictable.
Jonathon Feit Jonathon.Feit@beyondlucid.com
So far, we have taken the view that each company has to design its long-term program around its own philosophy and approach. I don't know if it would really work to adopt a one-size-fits-all rule like this, even if I personally liked it.
We will have to see how the concept of benefit corporations evolves. So far, it seems that a number of companies that truly exist for the benefit of humanity have chosen not to organize themselves under that framework. As long as this is true, I'd be wary of excluding them from LTSE.
I'm curious as to specific differences wrt to other exchanges, your website doesn't really do a direct comparison. For example, do you require holders to hold a certain amount of time before being able to sell, are there limits around frequency of trading, how do you make money, etc.
Or is it more around including companies that think long term? In which case, I think that's also doable on normal exchanges (for example, Amazon is famous for long term thinking and has done well on normal exchanges too).
The SEC's rules around trading (today) really prohibit a lot of the "obvious" ideas people have had about how to slow down trading. We have some stuff in the works here, but it won't be public for a while.
That said, we have adopted a construct that we call the "Very Simple Market" that eliminates a number of trading "features" such as hidden liquidity. We think this makes it a more conducive environment for the longest-term investors to trade. We also have a business model that is much more aligned with the long-term investors and companies than most incumbents. We don't seek to maximize our trading volume, so that requires us to make money by helping our customers run their businesses better.
As we say in SV, if you're not the customer, you're the product. This applies to issuers as well.
On your latter point, you've got it right. We don't think we have an exclusive on good ideas, and there's definitely examples where talented founders have found ways to build for the long-term in spite of the existing market structures.
But when was the last time you heard a CEO say that they were able to think long-term _because_ of the markets in stead of in spite? That to me is a key difference
In terms of trading, we don't currently have any rules of the sort you mention. Under today's regulatory framework, this would be hard (but not impossible) to do. We hope to see more work in this area, but nothing to announce at this time.
Your listing principles page (https://longtermstockexchange.com/listings/principles/) is interesting in that there's a lot I agree with (like compensation policy) but then some other principles (like "The company’s approach to diversity and inclusion" or "The company’s impact on the environment and its community") are vague enough that I am not sure what it implies. Is it fair to consider LTSE a "progressive" financial institution?
Why weren’t legacy companies given grandfathered pricing?
What about Amazon that operated on losses for many consecutive years?
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Dead Comment
So the CEOs of Twilio and Asana invested in this exchange then convinced their board to list on it. I'm sure they're not just interested for personal gain though.
Sounds like a good thing.
At the same time, founder supervoting is falling out of favor. This neatly backdoors to the same result—founders (and institutional investors, who can invest through a long-holding front end and then allocate exposure to that on the back end) gaining outsized influence over individual investors (who aren’t coördinated) and hedge funds. Seems like a lot of collateral damage.
Can someone provide the simple overview of (a) how LTSE is different, (b) what the listed company pro/cons are and (c) what are the investor pro/cons