Game Rules & Documentation
If you're not familiar with the Stock Market, and in particular the NYSE, a lot of terminology may be new to you. We'll try to build a dictionary as we go. So anyway, since you're reading this we assume that you're interested in Politics and/or the Stock Market, but first and foremost in helping to improve the decision forming process in politics through involving the people more directly. Please keep in mind that the subtitle of this site says that this site is 'Under Development'. Even though you may already try signing up we cannot guarantee that everything will work as you expect until that subtitle has changed to anything other than 'Under Development'. However, we will do our best to keep the user logins so you should not be losing any of your user settings after you sign up. We develop PolitiCap this way so we can get immediate feedback, which means some basic means of communication and contributing will be set up as soon as possible.
  • May 16th, 2012: rewrote some pieces with keeping in mind that at least at launch we will be allowing only signups through facebook fredleeflang
The first thing you should do when you're interested is to sign up. This means that you will create your own login on PolitiCap which gives you a lot of extra privileges. Many of the pages on this site will be password protected and if you don't have your own login you cannot access those pages. Signing up for PolitiCap is free of charge, so it does not cost you a single penny.
For the time being we have decided to make the signup process go entirely through Facebook. This has some huge extra benefits down the line.
After you've clicked on the Facebook app link above you should get a confirmation email at the email address you use on Facebook. We do this so we have at least some guarantee that you can be reached electronically. One of the planned features at the time of updating this document is that you will also automatically get a 'trading' email address on our webmail. This will make sure that trading mail reaches you timely so you can act quickly.
The confirmation email will have a link in it which you need to click to confirm your newly created account. After you have done this you should see a page that tells you your login is now ready. The email will also tell you your username and your password so it's probably a good idea to file it somewhere for later reference.
After you have confirmed your signup you're ready to Log in. Logging in simply means that the webserver now knows who you are and you will get some special privileges. The login form looks like this:
So simply type in the username and the password from your confirmation email and hit the 'Log In' button. As Easy as can be! On the login page you will also see some links for those of you that have agressive email spam fighters and for those of you that accidentally tossed the email themselves and now don't remember their password anymore. One word of warning on the last part: PolitiCap can not send you your password! This is because we keep passwords only in an encrypted form and there's no way for us to retrieve it. This is good because it also means that no hacker can retrieve it! So what we do when you forgot your password is to ask you for your email address. If your email address is in our user database we will send you an email with your username and a new password. Later on you should be able to change your password into anything you like again.
And ofcourse, for those of you that have a hard time remembering your passwords, there's also a 'Remember Me' checkbox. If you check this checkbox when you log in, PolitiCap will remember who you are for a whole month!
At the time of updating this documentation we're also working on a button that will allow you to login directly from Facebook. This currently does not yet work :)
PolitiCap is about Politics. But Politicians are also just humans (no, really!) who also like to play games. And remember, anybody can sign up, so also Politicians! Since we will be trading those poor politicians as some sort of a commodity, we might as well give them a chance to voice their political opinions!
Now, you may have noticed the Politicians link on the left menu. Yes, indeed, this is a link only intended for real politicians! Later on you will learn about 'Tickers' or 'Symbols', which are the things we will be buying and selling on PolitiCap. A Ticker looks like JORRIA for example. Those people from Almere that may stumble upon this site will wonder to themselves... JORRIA... JORRIA... Jorritsma? And indeed, this ticker is Mayor Annemarie Jorritsma's stock ticker! While Mayor Jorritsma may sign up to PolitiCap if she likes to play games, her login is something different than her stock ticker! However, if she so chooses, she could sign up, and then fill in a Form 1 that she wants to be associated with the stock ticker JORRIA. This way she could enter her political opinions, proposals etc. and attach those as information on her stock ticker.
Now we come to some technical terms as well. On the stock market we speak of an IPO or 'Initial Public Offering' when a company decides to be traded on the stock market. Such an IPO usually means that the company needs cash to operate and has decided to sell a small portion of the company to investors. Together with an underwriter, which is usually a bank, they try to figure out how much cash they need and how big a part of the company they need to sell to get it. They then decide on a number of shares and an initial price per share or PPS. Together they will make a prospectus for investors which indicate the risks to investors etc. and after this is done, the underwrite will take care of disseminating the shares to the stock brokers for the IPO. The number of shares that will be sold on the free market by the brokers in the IPO is sometimes referred to as the 'float'.
A company will usually register the AS or Authorized Shares as part of the IPO. The AS is the largest number of shares the company can issue but there may be far more shares authorized than they will be selling at the IPO. The excess shares are held in the 'Treasury' and may be used at a later time to raise more cash, or to give such treasury shares to employees for example. The shares that remain in the treasury are also sometimes referred to as 'Restricted Stock'. The SEC, or the Securities and Exchange Commission must give permission to trade any of this 'Restricted Stock'.
Let's look at JORRIA. Before there's an IPO of JORRIA , you will not be able to buy or sell any JORRIA shares. What we would like to do is to try and get politicians to participate in their own IPO. So let's assume Mayor Jorritsma signs up, fills in a form to get linked to the stock ticker JORRIA and this is approved. When Mayor Jorritsma logs in and click on the 'Politicians' link, she will get to see her 'Share Structure'. This means that there's a number of Authorized Shares there and she can decide on how many of her AS to release in the float with the IPO. She could then decide to hold a controlling interest of her stock, but she might also decide on collecting as much political capital as possible. Indeed, it would be possible to completely buyout JORRIA if she release too many shares into the market.
No doubt you've heard of 'the Dow Jones index', maybe even the 'S&P 500 index' or perhaps even the 'NASDAQ' index. An index is composed out of a group of tickers that are in some way related. The NASDAQ index for example is composed out of 'high-tech' companies while the Dow Jones index is composed out of 'industrial' companies. These are only some of the better known indices but there are FAR more indices, each 'indexing' a particular branch or sector of the market. Even the Dow Jones index itself is made up out of several other indices like the Dow Jones U.S. General Mining index, the Dow Jones U.S. Gold mine index etc. etc.
In PolitiCap we will have a similar indexing mechanism. To go back to the example of JORRIA, Mayor Jorritsma is the mayor of Almere, and because of that she is part of the index BWALME, the 'College van Burgemeester en Wethouders Almere'. However, Mayor Jorritsma is also member of a political party PARVVD the VVD. In the same way, BWALME and the 'Gemeenteraad' GEMALME are part of the index STADALM, the city of Almere.
You have noticed the mention of the form that a politician will have to fill out to request being linked to a certain ticker. Forms are incredibly important! A lot of people don't like them, but one key to investing is to keep a close eye on what forms companies, or in our case politicians, submit to the market authorities. Ofcourse this is pretty obvious when a company is supposed to release auditted financial records. What are the profits? What's the revenue? Did the revenue and profits meet the expectations of market analysts? These are core numbers which are of great importance, but what about a form to split the amount of shares and make people suddenly have twice the amount of shares but at half the price per share? Why would a company, or in our case a politician, do something like that? Are they trying to create liquidity? Does that mean they think they need more liquidity?
Also, remember the number of outstanding shares and the float? Remember that the outstanding shares is composed of the float and the restricted shares and that selling of restricted shares needs to be reported and approved by the SEC? Well, what if JORRIA decided to ask the PolitiCap authority if she can sell some of her restricted shares on the free market? This is called insider trading and they're very important indicators! Insider trading gets reported through forms!
So forms will play an important part in PolitiCap. Politicians will need to be smart about their political capitalization, but investors must pay close attention to the forms they submit.
You may see some 'news' in the left column already that says 'Almere IPO'. When you clicked on that link you have seen an announcement that several politicians will 'soon' have a PolitiCap IPO. Mind you, there's no date on that news yet so it's really worthless news for now. This is locally created news but in the future there will also be real newsfeeds as public interest grows. PolitiCap news editors will sift through the local news, Politicians will submit their own news bits, and maybe we'll even hook up to some press agencies, who knows.
The news is what makes the stockmarket vibrant and unpredictable. For example, what if the PARPVD would announce that it is strongly in favor of biofuels because it's good for the environment but unfortunately bad for the economy? Would that make the index PARPVD go up or down?
Each PolitiCap news agency will have it's own quality rating. This quality rating gets determined by the users! News Agencies can make D€'s by releasing news onto PolitiCap but how much they make is determined by their quality rating. You may have noticed some of the links on here that link directly to politicians' and indices' tickers. One of the things PolitiCap news agencies will need to do is to replace name of politicians or political parties or groups with these PolitiCap ticker links. Doing so will link the news release to that politician or political group's stock ticker as well. If a News Agency doesn't do this job correctly or reliably for example, you could give this news agency a ding, affecting their quality rating and thus their income per release!
One thing which is easily forgotten but which is of sometimes crucial importance is time. Stock markets are not open 24/7, most of them are in fact only open during business hours. As PolitiCap is a game, we will assume that most people may be playing games from home. Some may be playing from work or don't work during business hours. We want to give everybody an equal opportunity to trade PolitiCap stock, but still keep the time aspect of the markets.
Every ticker will have a timezone attached to it, which will determine between which hours it can be traded. So for our JORRIA example, Mayor Jorritsma is a Dutch politician. The Netherlands are in TZ GMT+1. We will keep a rule that stock can be traded 9 hours per day, with 4 hours overlapping business hours and 5 hours overlapping non-business hours. In this example this would mean that JORRIA would be traded between noon and 9pm, GMT+1.
On most stock markets there are only authorized individuals or companies doing the actual transactions. Some still have the romanticized notion of floor trading, where many excited people run around buying and selling, screaming on the top of their lungs etc. In reality on a lot of markets this has long been replaced by massive computer centers and electronic commerce networks or ECN's doing the millions of transactions that happen every day.
However, entering those transactions on the market still needs to be done by authorized companies, we call these companies brokers. Good examples of stock brokers on the Dutch market are for example Alex and Bink Bank. Other examples for the American markets are TD Ameritrade and E Trade. These are all online stock brokers, investors can sign up with them, which means they create an account which they can fund and using those funds these investors can let their broker buy or sell securities for them.
On PolitiCap we will also have brokers. Initially, PolitiCap will be the only broker, but through forms, even regular investors can apply to become brokers. Stock brokers obviously have some advantages in the market. If they're good stock brokers with low execution times or low transaction fees, they will get many customers. Having many customers means that you could for examples analyze the orders your customers send through you and anticipate the market. There's no law that says that stock brokers can't trade stock themselves and make a profit off of it!
You can download a piece of software called the BCP (Broker Client Package) from this page. You will need it when you get approved to be a PolitiCap broker as the Broker interface will have fairly minimal functionality; Nobody in their right mind would be matching trades manually all day, so that's why you let your computer do that for you.
So when you have a proven track record as a PolitiCap investor for example, you could apply and get approved to become a stock broker yourself. This would give you ways to earn even more political capitalization! And since also politicians can be political investors this means that even politicians themselves could become stockbrokers, which is where the real gaming element would kick in.
While a broker has considerable extra information, a stock broker still needs to send the actual orders to 'the market'. This is where the 'market maker' concept comes in. A market maker does just that, they 'make a market'. They are the actual persons (or computers!) that match the trades. They see bids coming in from broker A, and asks from broker B and they then decide to match the trades (or not!). Usually this is a pretty algoritmic task, it is after all logical that when an investor, through his broker, says "I want to buy 100 JORRIA shares for D1.20! and another investor yells to his broker that he wants to sell 50 shares of JORRIA for D1.20 that the market maker says 'OK! I'll sell those 50'. It is logical indeed but not always the reality.
Sometimes the market maker may say 'I'll hold these 50 for a bit until I see another 50!'. Or sometimes he may even say 'I'll give the first buyer a 100 shares now for that money, BUT I DON'T HAVE THEM!'. Indeed, legal counterfeiting, because this is market maker's perogative. They need to make the market and create liquidity. A liquid market 'flows' and gives investors and brokers fast execution times and the sensation of a moving market. In the above example the market maker might have decided to wait and the trade might have taken a long time to happen. A non-liquid market is like water sitting quietly in a pond; it starts to smell bad when there's no flow and people stay away from smelly places.
However, you may have noticed that a market maker has quite some privileges, even the privilege to fabricate shares in order to create liquidity. At the end of the day the market maker must still try to balance everything, sometimes this goes over longer periods even.
So when PolitiCap brokers get real ambitious or good at what they do, they can apply to become a market maker themselves. This will give them the right to have a computer algorithm of their own making to match trades, pull shares out of a high hat, analyze all the bids and asks that come in etc. to their own advantage.
Initially the PolitiCap matching algorithm will make the market but resourcefull individuals will prove to be far more effective at doing so.
As you can imagine, all of these stockbrokers typically have their own datacenters, their own networking facilities, their own staff and offices etc. So it's not like everybody involved with the stock market is always at the same location. Still, 'the market' appears like one big market place where thousands of securitues, hundreds of brokers and many millions of investors all participate at the same time.
All transactions that people enter through their online broker websites, or through a phone call to their stock brokers will eventually have to be 'advertised' as a bid or an ask on a central location. These days this all happens through so called Electronic Commerce Networks, also known as ECN's. So when an investor places a bid on a security on his broker's website, the broker will route this bid through the ECN to end up on the market.
PolitiCap will also intensively use the concept of ECN's because there are MANY politicians in the Netherlands where this all starts. There are many MORE politicians in the European Union. There are also a lot of politicians in Asia, in North America etc. etc. We do not believe that PolitiCap needs to remain limited to any of these areas in specific. People all over the world like to play games! However, even though servers can be made bigger and faster, why not adopt the same model as the current markets and assume that at some point somebody might start a PolitiCap in Asia for example. Should it then be impossible for Dutch investors to invest in Asian politicians? Ofcourse not! This is why we will try to use the ECN concept to make PolitiCap servers talk to each other through their ECN, the internet. Ofcourse this is a future development as PolitiCap has one investor at the time of writing this documentation, which is the author himself :)
For investors it is ofcourse of essential importance to have accurate information. If, for example, we don't know the current PPS of a security, it would not be very wise to put a blind bid out there. So the PPS is one of the things we absolutely MUST know in order to invest / trade.
It would be helpfull, although not much, to have so called 'delayed data'. Delayed data is often freely available data that lags behind the market for some 20 minutes or so. When you don't sign up with PolitiCap and you check on a security you will get this delayed data.
Other information which is usefull to know is the lineup of bids and asks that the market makers have received. This is often called 'Level 2'. If for example the current PPS of a security is D€ 1.20, but lots of investors have orders in to sell their holdings in this security at D€ 1.21, then we speak of 'resistance' at D€ 1.21. Knowing this level 2 information is obviously very important for investors contemplating if they want to put a bid in at D€ 1.20; If they do, they should not expect the PPS to go very high very quickly because there's resistance at D€ 1.21.
When you don't sign up for PolitiCap, you will not get level 2 information while you will get this information when you do sign up.
Either way, this market information has to come from somewhere! When you watch your stock chart ticker on Ameritrade for example, the data that you see is not generated by Ameritrade itself. It is data that Ameritrade purchases from Market Data vendors.
These market data vendors get their information from various sources and they typically sell it to brokers, but anybody may qualify as a customer for this sort of data.
Typically, Brokers and Dealers are united under so called SRO's or Self Regulating Organisations. The Market authority has given these SRO's certain rights to regulate themselves.
On the North American market it is actually perfectly legal for brokers to trade among themselves without involving the DTCC (Depository Trust and Clearance Corporation, a central Clearing company). The SRO will register these transactions and provide the information to market data vendors.
Transfer Agents, or TA's are companies or individuals that keep track of which individuals and entities hold stock in a certain security. They typically act in the interest of the company that issued the security but companies may also act as their own Transfer Agents.
Transfer Agents also act as intermediary between the company and the SEC/DTCC and they are responsible for issuing and cancelling shares for the company and letting the clearing companies and brokers know about cancellations of shares or newly issued shares.
It goes without saying that the role of Transfer Agent requires strong regulations regarding record keeping for example. Forms are very important once more.
So TA's keep track of actual ownership of shares. In order to prevent fraud, when transferring shares to a new owner, the TA will often demand a 'Signature Guarantee' by which share owners can prove that they really are who they claim to be. Often signature guarantees are demanded to reduce a TA's liabilities. Getting a signature guarantee is often a timeconsuming process which most investors really have no clue about. An often used way to avoid for every single investor to get a signature guarantee is to have shares held in 'street name', which basically means that your stock broker is the registered owner of the shares. This means that your stock broker must have a signature guarantee with the TA. As an investor you have an agreement with your broker that they're not really his shares but in fact yours.
You might want to review the description of short trading below with this in mind. Interestingly enough, a great deal of many securities traded on the US Stock Markets are registered to a company named 'Cede & Co.', which is the nominee name for the Depository and Trust Company.
The clearing companies are basically the beancounters that check if the market is still intact and whether not too many shares have been pulled out of the high hat. The clearing companies verify and transfer securities from one individual to another. This is a fairly elaborate process which typically uses the T+3 criteria; transfer of ownership will take 3 days to 'clear'.
The clearing aspect will not be prominently present in PolitiCap because it's often very invisible to investors anyway. However, we will implement some of it's functionality because somebody will need to reign in the powers of the market makers. The clearing companies and the market authority are it!
While everybody is entitled to make a D€ or two on the PolitiCap market, there needs to be some authority which checks whether the rules are being obeyed and which has the enforcement power to act when this is not the case.
We've chose to use the SEC, which stands for the 'Securities and Exchange Commission' because they're a great example to demonstrate what can go wrong when an authority doesn't, and often can't, do what it's supposed to do.
Real examples of SEC lack of enforcement will be used in full for PolitiCap in order to create the 'game' effect. You WILL scream at the SEC when your highly speculative stock suddenly gets halted by the SEC on suspicion that there are trading irregularities!
Investors can buy shares hoping that they will go up in value and sell when they do. But investors can also 'borrow' shares from their broker to sell them into the market when they expect that a stock will go DOWN in values. At this lower value they then pay back their broker the lower PPS, also known as 'covering', thus locking in profits on the PPS going down. Typically such a transaction costs a little extra in broker fees because you get a 'favor' from your broker, being that you can borrow shares from them.
A broker would need to check whether he actually HAS the shares he's borrowing. He could for example say 'well client A has so many shares, you can borrow those for a while'. This is still perfectly legal. But what if client A suddenly sees the PPS go down and ALSO wants to sell his shares? Then the shares which have been borrowed are suddenly gone. Or alternatively, a broker MIGHT borrow you shares he doesn't really have. This is an illegal activity known as 'naked shorting'. The only ones allowed to do naked shorting are the market makers but there are rumors that this naked shorting or NSS for short happens on a large scale on the American stockmarket.
At the end of the day this might result in an FTD or 'Failure to Deliver' for a broker, which means that he sold more shares into the market than he actually had. The SEC has issued regulation SHO, which mandates that FTD's get reported and that a broker may only have so many consecutive days of FTD's on a certain security. Obviously, FTD's create 'extra' shares into the market, which means 'dilution' will occur, so there's the motive right there for NSS; if lots of shares are sprung at the market, the market will become diluted, the PPS will go down and short traders get to cover at a lower PPS and make profits this way.
This would be a typical instance where a market authority SHOULD act, but there's more. An important task of the market authority is to try and prevent a market phenomenon called volatility. Volatility means that the PPS of the whole market goes nuts. Rumor has it when the SEC would force all brokers to resolve their FTD's according to the rules they made themselves that intense market volatility would occur. Every broker which has FTD's on their name would need to cover those FTD's by buying shares on the free market and when investors get a hold of that info they'll sell their shares only at premium value and brokers may go bust over that. So the SEC doesn't act so much after all.
The PolitiCap SEC will pull similar tricks on the investors community. You think you've seen it all? Think again!
Underwriters assist in IPO's. When a Politician will be IPO'ed, it is obviously important to try to predetermine the IPO value as well as possible. When a Politician files for an IPO, then can indicate which underwriter they wish to use. Initially there will be only one underwriter, PolitiCap, but eventually other individuals may find it rewarding to assist Politicians with their IPO.
A good underwriter will help Politicians maximize the income of their IPO and earn credit by doing so. This also means that they can up their rates.
An underwriter also guarantees a politician to buy the shares for which there is no interest in the market so an underwriter needs to be as accurate as possible in predicting the demand for a stock.
In a real market, there's real money involved. Investors put their money where their mouth is and while investors often get yields out of their investments that far exceed the interest rates they'd get when putting their money in the bank, there are ofcourse also people that fall victim to the predators on the market. This is how it has always been and how it'll probably always be. But more importantly, investors invest money that they earn elsewhere into the market. The market benefits from this as companies get operating cash to work with and build their companies with.
But people also cash out their profits from their investments every day, so there's a flow of money going into and out of the system every single day.
Here in lays the problem for PolitiCap, as we can 'give away' D€'s to people that sign up, but this will always keep the amount of D€'s in the system constant. So while we will 'give away' D€'s at the initial sign up, we will also give those that want it the possibility to pay real money for extra D€'s. This means that D€'s might actually get a real monetary value. The 'D' or 'Dutchie' is the currency unit used in PolitiCap by the way.
So when don't see a need to actually 'buy' a few electrons spinning around in somebody's computer, you might consider that when you do buy them and by buying them you can get higher profits, somebody might actually want to buy D€'s from you too!
Besides the possibility to simply 'buy' Dutchies, there will be plenty of other incentives for people through which they can earn D€'s. We're thinking about, for example:
So what would you do with those excessive D€'s you're making with all your smart trading? Well, to give investors and traders alike some real incentive, we will also be trading some special shares at PolitiCap. These special shares will represent shares of prizes! We will try to attract sponsors and ask those sponsors to put prizes up for trading. A special index, PRIZE is made especially for this.
While we will try to keep PolitiCap free of charge for as long as we can, software development is a time consuming occupation. You may have noticed the advertizing on the site, hopefully this will cover the expenses.
Additionally, if you really enjoy PolitiCap and believe that the political aspect of PolitiCap serves a greater purpose than just gaming, you might want to consider giving a donation. Donations can be made through PayPal using the 'PayPal Donate' button on the left top of the screen.
Last but not least, we will eventually add 'paid' accounts, where members get certain privileges such as extra posting ability on the PolitiCap forums, ad-free pages and lots more.
Well, you may have noticed something strange during the startup of PolitiCap; Everything on the website is written in English, while the first politicians up for an IPO are actually Dutch politicians in Dutch cities. It just so happens to be that the author of the PolitiCap software lives in one of the first Dutch cities that's 'under the hammer'. On top of that, the author is also a fluent English speaker who lived in the United States for nearly 7 years.
So while for the author it's not an extra effort to write pretty much everything related to the site in English, there's also some rationale behind it. While PolitiCap is, and will remain, a game, the author realizes that at some point there may be enough people enjoying the game and participate in it. It will then become a game which will reflect the public opinion of a population. By using English, the author feels that this public opinion of a population will then become comprehensible to other populations through the use of a language that's spoken by a majority of internet users.
The above does not make use of the English language mandatory. On the contrary, we realize that not everybody speaks English fluently and that people should be given the opportunity to discuss and read about their local politicians in their own native language. Every user, but also every news agency for example, should consider for themselves if a post they make on the message boards, or a news article that's released by a newsagency, or a political opinion posted by a politician on their profile should be posted in English or in their native language. English is encouraged but not mandatory.
Additionally, a feature that's in progress on PolitiCap, Electronic Commerce Networks will enable linking up multiple regional PolitiCap websites to each other. This will make tickers and news etc. local to that PolitiCap node but you still have the possibility to connect to other sites seemlessly and also to buy stock on other regions with your local account.
Enjoy your game!
Well, that's a LONG document! If you're reading through all this as an absolute beginner, you must be getting dizzy. Let's not forget that PolitiCap is a game! Games are there to be played and sometimes people don't play by the rules. This is what will make the game unpredictable and fun!