Automated Investing on the Secondary Market: More Demand. Better Offers.

  in Company Updates

Feb 17, 2020

Late last year, we introduced the Secondary Market to the Royalty Exchange Marketplace. The Secondary Market allows investors to browse assets previously acquired on Royalty Exchange, and make offers to the investors who bought them for potential resale. 

Today, there are more than 115 assets available in the Secondary Market for investors to evaluate and make offers on. That’s 20-50x the number of available assets typically found in the original Auction House at a given time. 

Nearly every one of them has received an offer since launch, some as many as 20. And 22 of those were accepted so far. Until today, these were limited to manual offers… those made by investors browsing the Secondary Market and placing individual offers one at a time. 

This week, we’re making two important updates to the Secondary Market. 

The first, simple change is shortening the expiration window on offers left in the Secondary Market from three days to 24 hours. 

The second, far more exciting and impactful change is matching assets in the Secondary Market to Standing Orders. 

Standing Order Matching

Members of our All Access program have the ability to place Standing Orders for royalty assets that meet a specific set of criteria, such as price, term, and Dollar Age (details below).

When rightsholders submit their catalogs for evaluation to our system, we check to see if they meet any of these Standing Orders’ criteria. If so, the rightsholder is presented with an automatic offer, which if accepted initiates a sale on the spot... no auction needed. This allows investors interested in deploying a large amount of capital or buying multiple catalogs the ability to do so more efficiently. 

Until last month, the Standing Orders feature was available only to a small group of beta testers. In less than a year, close to $2 million in orders were filled. Now that it’s emerged from beta, any All Access member can place a Standing Order. 

With this update, owners of assets in the Secondary Market have the potential to receive offers placed from Standing Orders and tap into this increased demand. 

This benefits both buyers and sellers. 

Buyers placing Standing Orders now have a greater pool of assets available for a potential match, which could result in orders filling faster. Today, there are over 50 assets totaling over $2.7 million in value (based on original purchase price) that qualify for Standing Order matching that previously was restricted to just manual offers. 

Meanwhile, investors with assets in the Secondary Market can attract our most active investor base through an automated platform designed to create matches faster and more accurately. 

HOW IT WORKS

If you have assets in the Secondary Market

  • If you’ve set a List Price for your asset in the Secondary Market, any matching Standing Order placed will initiate an automatic sale, just like manual offers do today. 

  • For assets without a List Price, or if the Standing Order offer is less than the List Price, you will receive a notification of any new offers. You can accept or ignore the offer. 

  • We will only present the best offer on any given day, and no more than one offer a day. 

  • You’re not obligated to sell assets that don’t have a List Price set. 

What makes an asset eligible for Standing Orders?

  • Dollar Age of at least 3 years

  • An Adjusted Trend Rate of -5% or better

  • Commercial music catalog

  • Earnings of at least $1,000 in the last 12 months, with no spike in earnings greater than 2x the prior three-year average.

If you’re placing Standing Orders

Assets in the Secondary Market that meet our eligibility requirements (above) and your Standing Order criteria are available for a potential match. For assets that match your order criteria, two things can happen.

  1. The system will present your offer to the owner of the asset. If accepted, your order will be filled. 

  2. If the owner of the asset has set a List Price and your offer meets or exceeds that List Price, the system will automatically purchase the asset at that price. 

A note about Terms. 

If your Standing Order is for a Life of Rights asset, matching it to a Secondary Market asset is the same as any other match. But matching Term-based assets on the Secondary Market to Standing Orders will work differently. 

When investors acquire a 10-Year Term asset, the 10 years begins at the point they acquired the asset from the original rightsholder. When those assets are then placed on the Secondary Market, their term is now less than 10 years. These are called Partial-Term assets. 

Investors can acquire Partial-Term assets on the Secondary Market today via a manual offer. But you can now also acquire Partial Term assets via the same Standing Order that you leave for full 10-Year Term assets. 

Doing this allows us to match your 10-Year Term Standing Order to both new 10-Year Term assets coming into the marketplace, and to existing Partial-Term assets in the Secondary Market, using the same criteria for both. 

We’ll simply adjust your order multiple for Partial-Term assets as follows: 

  • divide the term remaining in years by the original term

  • then multiply that by your Standing Order LTM multiple


So for instance, if you place a Standing Order for a 10-Year Term with a multiple of 4.36x, and your criteria matches a Secondary Market asset with 8 years left of its term, your adjusted offer multiple would be 3.49x.

Next Steps

To take advantage of this, you need to opt-into Partial-Term matching for any of your Standing Orders for Term assets. Simply look for the “Enable Partial-Term Offers” pop-up when either placing a new order or editing an existing one.