Contract System Revamp
An idea struck me today, and I wonder why this hasn’t been implemented yet (though there are, undoubtedly, good reasons as discourse generally proves). Here is the premise: allow contracts of contracts one layer deep only, and allow isk to be placed inside a contract as an item. What could you do with this? You could structure a coupon bond (meaning a non-coupon bond is also possible), you could structure a swap, repo, a “mortgage”, structure rental contracts along ship lease agreements.
Coupon Bond
- Parent Contract (Bond): Issuer offeers a large sum of isk for a set of child contracts. Specifies total repayment amount and date. Includes terms for interest payments via the child contracts (which are dragged inside of the parent contract).
- Child contracts (in the case of a coupon bond, the coupons and in the case of a non-coupon bond, simply the final redemption payment): multiple contracts, each representing an interest payment. Scheduled at regular intervals, for example every 10 days. Specify exact isk amount and due date for each payment. Should be a setting (like for use of Ansiblex jump gates), that these payments are deducted from your balance automatically.
- Implementation: buyer accepts parent contract, providing initial isk (negative cashflow). Issuer fulfills child contracts over time as interest payments. On maturity, issuer completes parent contract, repaying principal.
The non-coupon bond works similarly except there is only one cash flow after issuance: the redemption payment at maturity.
Swap
Let’s also say isk could be included in contracts as a movable item (As in, you drag your wallet’s Z (isk) icon into a hangar. storage, or contract (in this case), a dialog box pops up asking how much isk you want to deposit there, type it in, and this amount of isk will appear as an item (in the contract, as an item, like a piece of tritanium or other item). This would allow you to structure a swap:
Parent Contract (Swap Agreement):
- specifies the two parties and the assets to be swapped
- includes the terms for periodic exchanges via child contracts
- sets the duration of the swap agreement
Child Contracts (Periodic Exchanges):
- multiple contracts, each representing a swap exchange
- scheduled at regular intervals, say, every day
- each contract includes giving and taking: party A gives asset X (isk or items), b) Party B provides asset Y (isk or items)
Implementation:
- both parties accept the parent contract, committing to the swap
- at each interval, parties fulfill the the respective child contract
- child contracts contracts alternate between favorable terms for each party, reflecting market fluctuations.
Repurchase Agreements
Particularly useful for short-term liquidity. Have you ever been a few billion isk short at short notice, to make that big swanky purchase and realized that if you sell some PLEX for isk, you will lift a bunch of bids and get a bad fill? Enter, repurchase agreements. You could lend your PLEX to a counterparty in exchange for liquidity, and when the term runs out, you pay back the isk and if not, your counterparty keeps the PLEX
Parent Contract (Repo Agreement):
- specifies the lender and borrower
- details the collateral asset (likely something liquid like PLEX, LSIs, SSIs, the like)
- states the loan (giving) amount in isk
- sets the repo term and repurchase price^
Child Contracts:
- initial transaction: lender provides isk to borrower (giving), and borrower provides collateral to lender (taking)
- repurchase transaction: scheduled at the end of the repo term. Borrower returns isk plus interest. Lender returns the collateral (e.g. PLEX, LSIs, SSIs)
Implementation:
- Counterparty accepts the parent contract, agreeing to the repo terms.
- Initial child contract transaction occurs immediately (few seconds after accepting)
- At term end, the repurchase transaction child contract is fulfilled.
- If the borrower defaults, the parent contract could specify that the lender keeps the collateral, as mentioned above.
“Mortgage”
Might be impossible to implement, I concede. One can dream…
Structures are not cheap! What if you dramatically lowered the barriers to structure ownership? You could create “mortgages” by offering someone the right to set up a provided structure.
Parent Contract:
- specifies the lender (the one drafting the contract), and borrower (open to who takes the other side), plus the minimum downpayment (cash buyer must bring), includes the structure (e.g. Keepstar) as “giving”. Includes the isk downpayment as “taking”.
- sets the mortgage term (e.g. 1 year) and interest rate
Child Contracts:
- Initial transaction: borrower provides down payment in isk
- structure in the contract is given to the buyer, once the downpayment is in.
- monthly payments: multiple child contracts, one for each month of the mortgage term, each specifying the exact amount of isk due
- final transaction: scheduled at the end of the mortgage term the borrower pays the remaining principal balance
Implementation
- Both parties accept the parent contract, agreeing to mortggage terms
- initial transaction child contract executed immediately
- borrower completes monthly payment child contracts over the term, plus the final payment child contract
- Requirement: you can only take on the mortgage if your wallet balance over the last x period was, on average, at least as much is required to buy the structure at the average market price outright, plus each child contract mortgage payment on top. This is an attempt at limiting default.
Structure Rental Contract
Structure rental is such a hassle the way it is now. What if you set up a parent contract between the structure owner A and the renter B, for the renter B to pay constant cashflows in the form of child contracts to the structure owners? This would be possible with nested contracts.
Ship Lease and Asset Rental
With contracts of contracts, you can structure fitted ship lease agreements because you can structure your cashflows using child contracts. Asset rental, as above with structure rental, becomes possible. To rent out space, to rent out valuable Blue Print Originals, what have you, all becomes a possibility.
You might be wondering why I said in the beginning it makes sense to have these contracts only nestable one layer deep. Even that might be too deep for some. Daisy chains of contracts are just problematic. See: Subprime mortgage crisis and Mortgage Backed Securities. I don’t, however, see why it shouldn’t be possible, for example, to sell off child contracts, so future cash flows, back on the market and bundle those into a whole new product, by simply dragging them into a new parent contract.
I’d love to hear from you why this shouldn’t work and is a bad idea. I think it would add a bit of depth to the game and add a financial services sector within the game which presently doesn’t really exist.
