Okay, a lot of people have been emailing me about it, but many I've discussed with have said it was great in theory but wouldn't work practically, so in order to limit my emails. I'm going to post so far everything I envisioned for a Virtonomics Stock Exchange.
Remember this was a work-in-progress, so it is very rough in it's draft and many parts incomplete. If you wish to comment or build upon the original VSE (beta) please feel free to do so.
NOTE: This was originally in word document, so be advised there might be difficulty reading. I've tried to bold some parts to make for easier reading.
The Virtonomics Stock Exchange (Beta)
by Austenbosten
12 December 2010
Foreword
This is an experimental version of a stock market within the parameters of the current version of the online business simulation Virtonomics. This is not in affiliation with the official Virtonomics team and they are not responsible for what happens in the Virtonomics Stock Exchange.
Introduction
The Virtonomics Stock Exchange (Beta) is an experimental attempt at creating a virtual stock market within the parameters of the current version of the online business simulation Virtonomics. This beta version of the Virtonomics Stock Exchange is designed to see if it is possible to have a functioning virtual stock exchange.
Purpose
The purpose of the Virtonomics Stock Exchange (Beta) is to create an environment where companies can raise capital by issuing ownership of the value of their company in the form of common stock. The shareholder has the benefit of holding ownership of that equity and partaking in the appreciation of the company.
Important
The Virtonomics Stock Exchange (Beta) to date, works on the Honor System. That is participants, both the holder and issuer of equity agree to follow the Virtonomic Stock Exchange rules faithfully and not try to conduct themselves in an manner that is not in the best interest of either the shareholder, share issuer, both, or the Virtonomics Stock Exchange. In order for the Virtonomics Stock Exchange to function as of now, participants are bound to publicly acknowledge their ownership of shares and any trades conducted.
Contents
Foreword 1
Introduction 1
Purpose 1
The Virtonomics Stock Exchange 3
Trading 3
Method of Payment 3
The Exchange 4
Initial Public Offering
The Virtonomics Stock Exchange
The Virtonomics Stock Exchange (Beta) will be the forum where participants buy and sell shares. The exchange will be done privately through the Virtonomics Private Messaging system with a public announcement via Private Message at the end of each trading day.
Trading
Trading will commence Monday through Friday, between the hours of 10:00 and 24:00 GMT. At 24:00 GMT, the stock exchange will close and all trading must halt. Any trades posted but not executed within the hours of operation shall resume the next trading day. The Virtonomics Stock Exchange will be closed in observance of major international bank holidays. Participants are expected not to engage in trading while the exchange is closed.
When trading, the prospective buyer will notify the market with a BUY ticket of how many shares the buyer wishes to purchase, the ticker name of the stock the buyer wishes to purchase, and at what price the buyer wishes to bid for the shares.
Ex.
a_smith: [BUY] 100/XYZ @ $24.36
Here the player a_smith is seeking to buy 100 shares of XYZ at the price of $24.36 a share.
If a shareholder wishes to sell their shares they will notify the market with a SELL ticket of how many shares the shareholder wishes to sell, the ticker name of the stock the shareholder is selling, and at what price the seller is asking for the shares
Ex.
j_keynes: [SELL] 100/XYZ @ $23.36
Here the player j_keynes is seeking to sell 100 shares of XYZ for the price of $23.36 a share
When a seller finds a bidding price they would like to sell for, the seller will notify the potential buyer through a private message their intent to sell their shares to the prospective buyer. The message should read:
Ex.
j_keynes > a_smith/100/XYZ @ 24.36
Here, j_keynes is selling 100 shares of XYZ to a_smith for $24.36 a share.
Method of Payment
The exchange will be conducted privately. Due to a lack of a monetary transfer component in the game engine, the seller of the share will sell their shares in name only. The financial transaction will be conducted privately between the buyer and seller, in which the seller will sell a quantity of goods in the form of gold from (Independent Supplier, Cape Town) roughly equal to the amount of shares sold to the buyer at the value of the cost of the gold plus the price of the share, which will be referred as the pound sterling £ ( £ = Price of share + Price of Gold).
Ex.
price per share of XYZ = $24.36 price of gold = $389.62
Buyer will pay $413.98 per share or £24.36 per share
The Exchange
The exchange of money from the buyer to the seller and vice versa will consist of a complicated series of events that must be followed through. The steps are as follows:
1- When a seller decides to take a buyers bid, then the seller will notify the potential buyer and offer the price the potential buyer has bid.
2- If the buyer decides to agree to purchase from the seller, then they will continue with the financial transaction.
3- Using a separate warehouse exclusively for stock trading, the financial transaction will commence
3.1- The seller will set their warehouse sale offer to [Only to Certain Companies] the cache should be empty. Then the seller will add the name of the buyers company to the cache and set the price to that of the buyers bid plus the current price of gold.
3.2- The buyer (in their stock trading warehouse) should then be checking for the seller's offer and purchase the total amount of gold offered.
4- Once finalized, the buyer should have purchased the gold in the total amount the final offer was and the buyer should have the gold, while the seller should have the cash.
5- After the transaction is completed successfully, the seller must send a message notifying the buyer that they are now the new owners of the shares. Then they must remove their ask post on the forum, unless they still have stock they are selling, they must edit the post to reflect the change in amount of shares offered. Simultaneously, the buyer must remove their bid post on the forum, unless the buyer has not received the desired amount of shares, then they must edit the post to reflect the change in amount of shares desired to bid for.
6- Both the buyer and the seller then must notify the company in which the stock was traded about the transaction, so the company can offer a prospectus to the new shareholder and add the information to their records. The letters must detail: Who traded the company stock, how many shares were traded, the price the shares were traded, and the amount of shares the party holds in stock.
If the price £ exceeds what the game will allow due to the game engine's anti-jobbing system, then the quantity of goods must increase so the final sale is equal to the amount agreed upon
Initial Public Offering
An Initial Public Offering is a company's first attempt to raise capital for expansion by offering ownership of its equity to potential investors. When a company decides to go public, the company must notify the Virtonomics Stock Exchange board. The company then must offer the last four fiscal reports for the board to determine the stock price and the amount of shares the company will offer in the IPO. Afterwards the Virtonomics Stock Exchange board will list the company and trading in that stock can commence
Going Public
When a company decides to go public, they first must notify one of the five board members of the Virtonomics Stock Exchange about their desire to go public. The board member will then notify the director of the board about the company's desire for an IPO. Once the director gives approval, both the board member and the director will message the company notifying that they have been selected for evaluation for the next board meeting. After receiving the message, the company then must message the board member a document consisting of the last four fiscal reports in article formation and the reasons the company wishes to go public.
Board Meeting
During the next board meeting, the company will be evaluated and will be decided if they are accepted or denied to have an IPO. The board will determine the companies viability based on the information provided for them. During this meeting the board will determine the: stability, profitability, and the intentions of the company in question. The board will then decide whether to approve or deny the company an Initial Public Offering.
If approved, the board will notify the company of the board's decision and will continue with the underwriting process.
If denied, the board will notify the company of board's decision and the reasons thereof. The company may reapply for an IPO to the board after thirty days.
Underwriting
If the company is approved by the board, a board member will be appointed to underwrite the security to be issued for the company. The underwriter will determine the amount of shares the company will issue at the IPO, and the best price for the shares.
During this process, the company must not be in contact with the underwriter, however they may request that portions of the IPO be allocated to certain investors. The board member must faithfully execute the priority orders on behalf of the company issuing the IPO. If shares are to be sold prior to the IPO to the certain investors, then the underwriter must change the amount of shares that will be offered in the IPO to reflect the amount of shares already sold prior.
After the underwriter has decided the amount of shares and price that will offered at the IPO and sold any shares prior to the IPO to any investors the company requested, the IPO will be sent to the board for final evaluation and approval. If there appears to no form of illicit activity during the underwriting process, the board will approve the IPO and the IPO will be held fourteen days after board approval.
Quiet Period
Once the board approves the IPO after evaluating to make sure the underwriter has faithfully executed all the needed requirements and no illicit activity during the underwriting process, the board will vote to approve the IPO for sale.
If denied, the board will review the situation and may restart the underwriting process with a different board member, if illicit activity is found, the board shall cancel the IPO altogether and notify the company of their IPO cancellation and the reasons for. If the latter happens, the company may try again after thirty days
If approved, the director of the board will seal the IPO with stamp of approval and will make the announcement of the IPO on the next public forum. After this announcement, the company and board members are restricted from discussing the upcoming IPO until one day prior to the IPO. If either the company or a board member are charged with breaking this rule, the director may cancel the IPO and may take action towards the board member and/or company
Initial Public Offering
After the “quiet period” of fourteen days, the company stock will be listed on the Virtonomics Stock Exchange for the first time and investors will be able to purchase shares in the stock.
After the Initial Public Offering
After the Initial Public Offering, the issuing company must keep in contact will all of its shareholders both new and old. All shareholders of the company stock must receive a weekly prospectus offering shareholders information detailing the Financial Reports of the company, along with the opening, closing, or selling of subdivisions, and any additional comments the company wants to let their shareholders know.
The company also has the responsibility of gathering all the information on all of the current shareholders and must message the board on these matters.
The Board
The board of the Virtonomics Stock Exchange are the regulatory body of the Virtonomics Stock Exchange. They are responsible for handling Initial Public Offerings, overseeing and enforcing the rules of the Virtonomics Stock Exchange, and making public announcements regarding the stock market.
Board Members
The board will consist of four board members and one director of the board. The board members are permanent positions unless they are expelled. Board members have voting rights on issues regarding the Virtonomics Stock Exchange. They are also responsible for responding to inquiries, complaints, or questions. They may be appointed to underwrite IPOs, to which they must execute to the best of their ability or resign and appoint another board member. Board members are also responsible for gathering information from companies listed to post on the stock exchange and for the monthly reports.
Being a board member carries responsibilities failure to carry out those may result in expulsion from the board if they are guilty of either of the following:
1- Absent for an extended period of time without prior notification
2- Refusal to partake in meetings, or any of the responsibilities of a board member
3- Failure to refrain from discussing an IPO during its quiet period
4- Conspiracy
5- Engaging in insider trading
6- Threatening any board member, the director, company, or trader
7- Conducting themselves in an unprofessional manner
8- Tampering with reports
If a board member is charged with any of these crimes, the board will hold a special meeting without the accused to evaluate the case and the evidence brought against the board member in question. This meeting will determine the severity of the claims brought forth and the board will determine whether to place the board member on trial for expulsion or settle the case in private.
If the case is proved to be a minor offense, then the board will bring the accused board member in for explanation. The accused will plead their case and the board will decide. If the accused found guilty, the board will punish the accused board member with suspension.
If the case is proved to be a major offense, then the board will hold a trial and will decided upon expulsion from the board, suspension, or acquittal of the charges
Director
The director of the board is a board member elected by the board to head the board. There are no term limits and the election for the director of the board is every three months, unless otherwise specified. The directors' responsibilities are: presiding over board meetings, managing the board members responsibilities and duties, and acting as the figurehead and spokesperson of the board.
Issuing Stock
When issuing common stock, a company must adhere to the following rules.
1- The company may not issue shares of more than forty percent of their total assets
2- The company must offer a weekly prospectus to all shareholders, including those shareholders who purchased company stock before, during, and after the Initial Public Offering. Notifying shareholders of the company’s finances, the purchase, sale, creation, or closure of subdivisions, and an optional comments section for the CEO to speak to their shareholders.
3- The company must hold a quarterly shareholders meeting, in which the company will discuss the company’s corporate plans for the shareholders to vote.
4- The company may offer dividends to their shareholders, however the company must notify the market on the third Friday of the month, if a holiday is on the Friday, then the company will notify the market on the third Thursday of the month.
5- Once a dividend is declared by the company it cannot be revoked.
6- The company must act in the best interests of the shareholders.
Dividends
Dividends are an excellent way for blue-chip companies to compensate for their low growth, as some investors prefer dividends to capital appreciation, and dividends act as a guaranteed income.
Any company may issue dividends in these forms:
• Cash Dividends – Where the shareholder is offered cash for each share they own
• Stock Dividends – Where the shareholder is offered additional stocks for a proportion owned
• Property Dividends – Where the shareholder is offered in specie either product or property
Declaration Date
If a company decides that it wants to issue a dividend, the company must notify the board and its shareholders of its intention to issue a dividend. The third Friday (or third Thursday if the third Friday falls on a holiday) of the month is the only time a company can declare a dividend payment. If the company decides to declare a dividend, it must include: dividend's size (payment type, and amount per share), ex-dividend date and payment date.
Ex-Dividend Date
After declaring a dividend, the company must take note of all the shareholders on a date before the ex-dividend date, this is known as the Record Date and can be any day the company chooses. The ex-dividend date is the date on which the seller, and not the buyer, of a stock will be entitled to a recently announced dividend. The ex-date is usually two business days before the record date.
Payment Date
Is the day the dividend is dispersed to all the shareholders on the record date
Frequently Asked Questions
Q: Why have a stock market?
A: Why Not? Stock markets are an important tool for companies to gain access to capital and provide investors with a slice of ownership in the company and the potential of gains based on the company's future performance. Since Virtonomics lacks a banking section, this is a way to help out the little guy
Q: This seems confusing and complicated. Why is it confusing?
A: We apologize if it sounds a little confusing, however since we have to work within the parameters of the Virtonomics game this is how it has to be done. We will try and simplify the stock market as much as we can, but until the Virtonomics admin offers a Financial section to the game engine this is the best we can offer for a stock market
Q: Why do I have to open up a warehouse and buy gold from the Independent Seller, and do all this nonsense and gobbledygook in order to trade?
A: Well you have to open up an account before you can trade in real life right? But honestly Virtonomics doesn’t offer any form of monetary transaction between players, so this is the only way we can transfer money from one player to another.
Q: Why are payments in gold? It’s so expensive. Why not use sugar, wheat, ect. To trade?
A: Well in all fairness gold is cheaper than diamonds. We use gold, because gold has been used as a currency for thousands of years. So it just sounds right. Also there is a serious problem with too much money in the Virtonomics system and no way to remove it. By using gold as a currency, we can pull money out of the Virtonomics system and hopefully it can solve some problems Virtonomics has been having. Sure we could use a cheaper material to trade but gold helps pull the most money out of the game, while still making it cheaper than other materials, and it’s just right.
IPO price = Average Profit / Total Shares |
You have done a great job! 
